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Bank of Ireland L&C deal "not TCF"
Brokers have accused Bank of Ireland of going “a step too far” and breaking TCF rules after discovering it will pay their clients £1,000 to remortgage with another lender – but only if they use London & Country.
Melanie Bien, director at Private Finance, said: “Brokers who have recommended that clients take out a deal with Bank of Ireland may now be regretting that decision.
“This is no level playing field: even if the broker gets a chance to talk to their client before the £1,000 cash incentive is offered, it will be very difficult to propose a better alternative.”
Matt Fleming-Duffy, a Bournemouth-based broker who quit Abacus Financial in May this year, was furious.
He said: “Straightaway, how is that treating customers fairly? Equally, as an industry standard that is pretty low. £1,000 is a heavy incentive forcing customers to use a particular broker. What would you do as a consumer? Say no to ready cash?
“It calls into question the whole transparency that lenders should adhere to and it doesn’t bode well for brokers if this type of thing goes on. For small brokers and IFAs client loyalty is their life-blood and this is more bad news.”
Andrew Montlake, director at Coreco, also questioned whether the deal was TCF compliant.
“Whilst London & Country are undoubtedly a fine, upstanding brokerage it does seem a little amiss to in effect restrict choice by pushing clients down one particular route,” he said.
“It does not really sit comfortably with treating customers fairly and whilst there is no issue with them suggesting a preferred broker, actually paying an incentive to do so is one step too far.”
Phil Alvey, principal at Derbyshire-based Redwood Financial Management, called the lender “untrustworthy” and warned Irish brokers against submitting new business.
“If Bank of Ireland has a total disregard for introducing brokers in the UK where they no longer lend, I’d question whether they might do this to Northern Irish brokers in the future,” he said.
“It smacks of this lender being totally untrustworthy. If clients want to go elsewhere then that’s fine but lenders shouldn’t be deliberately incentivising them.”
Yesterday Bank of Ireland confirmed it was running a pilot scheme with Bristol-based DA London & Country to try and entice a select group of back book borrowers to remortgage with another lender by offering them a cash incentive of £1,000.
The lender has since admitted the incentive is only payable to borrowers remortgaging through London & Country, meaning that if that borrower wishes to go back to their original adviser they must forgo the cash.
Bank of Ireland did say it would waive borrowers’ early repayment charges if they chose to remortgage with their originating broker.
A statement from the lender said: “Customers who decide to switch their mortgage from Bank of Ireland to another lender through London and Country will receive £1,000 and their Early Repayment Charges waived.
“Within all customer correspondence we confirm that the customer may wish to speak to another mortgage broker or originating broker.
“Bank of Ireland UK is committed to ensuring that our existing customers receive excellent service and that all decisions made impacting our customers have been made on a fair and consistent basis.”
Yesterday Robert Sinclair, director of the Association of Mortgage Intermediaries, said: “Given the current difficulties encountered by a number of lenders which used to be in the mortgage market, it’s possible we’ll see more of these schemes trialled.
“AMI would ask that any lenders considering this approach first of all offer this opportunity to the broker who introduced the deal before packaging up and using a single other broker.”
However not all brokers were up in arms.
Chris Gardner, director at Obligo, said he could understand the practicality of restricting distribution of the pilot to London & Country.
But he admitted it was symptomatic of unfairness in the market.
“I don’t see that this is any different from dual pricing or exclusive access to products,” he said. “There is clearly a precedent in the market for unfair distribution.”
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chris gardner wrote:
further to my comments in the article. What concerns me is that the broker community (if the comments in the article are a representative view) seem to believe that the customer is theirs and is somehow captive and that they have a god given right to future business. I suspect that those complaining wont be piping up about how unfair it is when they get a best buy rate exclusive to them?
11 August 2011 11:42:33 GMT
Recommend? (0)Steve wrote:
How is giving them a grand to leave treating customers unfairly?
11 August 2011 11:50:15 GMT
Recommend? (0)Les wrote:
Chris, I agree that brokers do not have a 'God-given right' to the customers they have developed and worked with, perhaps for many years. That relationship can only continue if the clients are satisfied it is in their interests. However, to incentivise customers to use a specific brokerage cannot be considered TCF. It would be better and fairer to offer the incentive to customers who use the services of a broker to move away and for the lender to 'suggest' the customers might wish to use the services of the originating broker!
11 August 2011 12:10:14 GMT
Recommend? (0)Phil Alvey wrote:
In response to Chris Gardner who seems to have missed the point, no broker should expect that they have an exclusive right to any future client business however, they have every reason to expect that the lender to whom they have introduced a client should then not offer an inducement for the client to go and use a competitor. If all lenders believed that this was acceptable practice we would have great difficulty in entrusting clients to any lender. The value within any business is based upon its client bank, this will become more apparant to the likes of Chris when RDR becomes a reality, an incentive offered by the lender to use an alternative broker clearly suggests that building client relationships are worthless, and the value of your business is therefore devalued.
11 August 2011 12:23:08 GMT
Recommend? (0)chris gardner wrote:
Les, my other problem is that often in these situations, where brokers feel aggrieved, they will use compliance issues as a smokescreen to cover over what is nothing more than commercial jealousy. I am certainly not saying that is you, but its a common theme. When in doubt cry "TCF". As steve said in the comments thread, how is giving a customer a grand unfair? For the hell of it, i have just had a look at Trigold and it seems that many of the best buys are exclusives to AR networks. That means my customers cannot enjoy those deals if they deal with my DA firm.
11 August 2011 12:23:26 GMT
Recommend? (0)Phil Alvey wrote:
Chris, once again you seem to believe that this is an issue over exclusive deals, as director of a DA IFA firm I can also see that we can get access to many exclusives through mortgage clubs etc, we also note that many lenders offered direct deals, these all provide competetion however, the issue here is that a lender, Bank of Ireland, who relied upon the intermediaries to submit mortgage clients to them in the first instance, have now decided to pay an incentive for your customers and mine to go and use another broker, regardless of how happy the client may or not be with the services you have provided, regardless of what other deals are available. If all lenders thought that was acceptable practice, how will you continue submit business in the future?
11 August 2011 12:45:10 GMT
Recommend? (0)Chris Gardner wrote:
Phil, whats the difference between a lender offering my customer a grand to use another broker, or giving another broker other than me a better product than those i am able to offer?
11 August 2011 13:13:22 GMT
Recommend? (0)Les wrote:
Chris, I understand where you are coming from but I think it is dangerous to mix dual or multi-pricing with TCF. I hate not having access to deals that others can get; I abhor the process where lenders selectively offer special deals or deal direct. However, I doubt we will ever change that because, at the end of the day, these are commercial decisions taken by the lenders. We have to live with that. My issue is with this lender incentivising customers to abandon their existing relationships in favour of one specific brokerage. Not only might this be in contravention of TCF but it might also conflict with the Anti-Bribery Law.
11 August 2011 13:43:18 GMT
Recommend? (0)Dave Power wrote:
I don't think TCF is the issue here as Bank of Ireland are saying you can use a different broker. There is a bigger issue at play though and this is really who owns the client? Is it the introducing broker or is it the lender? I can see why Bank of Ireland want to reduce its mortgage book but I think it should have made the offer available to introducing brokers as well as London & Country. Fair play to London & Country for securing this deal, fail for Bank of Ireland for doing it.
11 August 2011 13:48:47 GMT
Recommend? (0)Chris Gardner wrote:
Les, not sure about that. You are assuming that the customer believes they have a relationship with the broker. Here is how it looks a lot of the time. Broker - "that is my customer, i found them and they are mine - i have a relationship with him" Customer "errr, yes, thats the bloke who did my last mortgage - i think his name of Bob of something?" I am sure the customer will not give a hoot about abandoning Bob in pursuit of cheaper deal. i know my example is ridiculous and banale, but i am making a point that its not like it was even a few years ago.
11 August 2011 13:52:36 GMT
Recommend? (0)Les wrote:
Chris, I hope you are wrong. My clients seem to know whom to call when they need advice and they do so at any time of the day or night. I contracted with them to provide that service and, so far, most of them see it that way too. I never claim ownership od a client; I see it the other way round i.e. the client owns the broker. That way, the client knows what to expect from his advisor and a stronger relationship is forged. Encouraging a client to break that link by offering an incentive is reprehensible. If the client is not happy with his advisor, he will walk away, anyway. No claim of 'ownership' of a client will change that situation.
11 August 2011 14:09:58 GMT
Recommend? (0)Les wrote:
Chris, I hope you are wrong. My clients seem to know whom to call when they need advice and they do so at any time of the day or night. I contracted with them to provide that service and, so far, most of them see it that way too. I never claim ownership od a client; I see it the other way round i.e. the client owns the broker. That way, the client knows what to expect from his advisor and a stronger relationship is forged. Encouraging a client to break that link by offering an incentive is reprehensible. If the client is not happy with his advisor, he will walk away, anyway. No claim of 'ownership' of a client will change that situation.
11 August 2011 14:21:42 GMT
Recommend? (0)Les wrote:
Apologies to all. My latest response got sent twice in error.
11 August 2011 14:46:00 GMT
Recommend? (0)Chris Gardner wrote:
Les, thats great and what you do for your customers is obviously way beyond the transactional. I am contending however that is not the case in general within the industry therefore brokers should not expect loyalty from either consumers or lenders. Stickiness (ie customer retention) is going to be the challenge that defines our wonderful industry in the years to come.
11 August 2011 16:29:42 GMT
Recommend? (0)Roberto wrote:
This has been a great debate chaps - more to come by the looks of it too!
11 August 2011 16:36:40 GMT
Recommend? (0)Phil Alvey wrote:
Chris, you final point is exactly right - customer rentention and service will be the key - so what chance have we got if the lenders decide that the client will be paid an incentive to use a broker of the lenders choice?
11 August 2011 16:45:27 GMT
Recommend? (0)Chris Gardner wrote:
The market is full of distribution mis matches. Lenders regularly force my customers into the arms of other brokers by not letting me access their cheapest deals which they may decide to distribute only to ARs for example. Also, i bet if you had a case like this and called BOI, they would do the deal. There are a lot of the old mortgage brands who are no longer lending that will happily take a pill to see the back of a customer.
11 August 2011 16:58:39 GMT
Recommend? (0)C Jones wrote:
I'm a customer of BOI, just agreed sale of my flat and called BOI to see what they can do for us. Found out it was nothing. London and Country adviser who they asked to call me didn't even inform me of the £1000 incentive, I had to ask him and he told me to call BOI. I called and BOI refused to let me know the criteria for clients who are offered the cash incentive and even told it had probably expired. They told me to call London & Country to see if I qualify. Very Catch 22. Really confused and feel totally unsupported by BOI. Staff have been really off. I am the reality of this situation - with a mortgage lender who can't lend anymore and is totally disinterested in helping us. We have 10% deposit for where we wish to move and are both full time employed. Sad times.
19 September 2011 10:43:44 GMT
Recommend? (0)jayne wrote:
We want to pay our mortgage off completely and we are living in hope that BOI will allow this and completely waiver our early repayment charges what are the chances of this happening as we are not remortgaging ?? we are waiting a written response as we have been advised their office has been inundated with the same request.
05 May 2012 21:43:49 GMT
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