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Ombudsman to tackle &#39inadequate&#39 payouts to borrowers

The Financial Ombudsman Service is scrapping the way that complaints over mortgage payment miscalculations are handled amid fears that lenders are failing to compensate borrowers adequately.

Compensation guidelines issued by the Building Societies Ombudsman Scheme and Banking Ombudsman Scheme are being suspended following a rise in the number of cases where lenders have calculated mortgage repayments wrongly.

Such mistakes leave borrowers potentially unable to pay off the loan in time. They then face steep increases in repayments or an extension to their mortgage term.

The FOS says complaints rarely reach the two ombudsman schemes because the guidelines encourage banks and building societies to handle compensation claims themselves. But it says this often results in an unsatisfactory outcome for borrowers as lenders fail to provide appropriate levels of compensation.

The FOS says it needs to adopt a single consistent approach to such complaints by N2, when it is due to acquire its powers. It is consulting with the industry with the help of the Council of Mortgage Lenders and Financial Services Consumer Panel to see what approach would best benefit borrowers.

Principal ombudsman David Thomas says: “Not unnaturally, customers expect financial firms to calculate figures accurately. Mortgage underfunding complaints would not arise if firms had simple checks in place to ensure the initial calculation was right. But, regrettably, the number of mortgage underfunding cases we receive is not diminishing.”

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Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.

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