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Virtual reality

Whether they like to hear it or not, the Financial Ombudsman Service is edging further and further away from being a balanced alternative dispute resolution service and ever closer to becoming a consumer champion.

I can say this from a position of knowledge in that I am currently defending a mortgage complaint of no virtue but one that the FOS adjudicator has decided to uphold.

In September 2008, I arranged a fixed-rate remortgage for a client who was also looking to consolidate £20,000 of credit. Due to his property losing value, the maximum loan only enabled an additional £8,500 to be raised, something he grudgingly acceded to.

Four months then elapsed before the mortgage completed and, revealingly, this timespan corresponded with bank rate falling from 5.75 per cent to 1.5 per cent. During this period, the client was constantly chasing the offer document and, in January 2009, was gratified to hear from me that the lender had issued the offer and had emailed a copy to me. Two weeks later, the solicitor confirmed to me that the remortgage had completed.

At this point, it began to unravel. The client telephoned, asking why he had only received £8,500 additional borrowing. I reminded him of the down-valuation but he was adamant that I had told him he could still raise £12,000. Rather than prolong what was becoming a fruitless conversation, I referred him to his mortgage offer and the basic maths involved.

He responded that he had not received an offer. I then referred him to correspondence and the completion statement from his solicitor and he explained that he had not received any contact from the solicitors whatsoever.

Although I smelled a rat, I agreed to approach the lender to see whether they would agree to unwind the remortgage. They refused, stating that the completion was the sole responsibility of the solicitor.

Shortly after this I received a formal complaint, which I investigated and rejected. The matter was then escalated to the FOS. The complaint questionnaire showed that his allegation had changed and his concern was that the remortgage had proceeded without his approval.

After nine months, I became concerned that the FOS had lost the file and two months later I was advised that the adjudicator had left and the replacement required further information.

In June this year, I received a formal adjudication upholding the complaint and requesting that I pass the princely sum of £14,300 by way of compensation.

I subsequently received a copy of the adjudicator’s file within which were four copy letters from the solicitor to the complainant, dated January 2009, confirming that the remortgage date had been arranged and asking that he contact them if he had any concerns.

So, why do I believe that the FOS is a consumer champion? First, the complaint is clearly about the solicitor and not myself. I am not legally able to advise a lender to release funds. Second, even though the adjudicator is in possession of lucid evidence in support of this fact, he has chosen to allocate responsibility to me.

The reality, as any sane reader will realise, is that the impact of falling interest rates led the complainant to rethink the strategy of fixing his mortgage for two years at 6.6 per cent. For reasons unclear, he allowed the remortgage to proceed as opposed to cancelling it, something he was easily able to do.

The FOS cannot investigate solicitors and it seems they cannot distinguish fantasy from reality. The case is now with an ombudsman and it is to be hoped that he or she is able to divine the truth of what went on. If not, their already poor reputation will fall still further. I will be sure to advise readers of the outcome.

Alan Lakey is partner at Highclere Financial Services

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