Are you a business wanting to reduce your customer base?

Take a tip from Bank-Of-Ireland-owned Bristol & West... give them a "goodbye kiss" in the form of a financial incentive to leave!

Admittedly, "too many customers" is an odd conundrum that won't apply to many businesses.  It takes being a lender in a credit crunch to arrive at a situation like this. Bristol & West simply has too many loans on its book, all of which need to be properly balanced against capital (at least, that's the case now that a modicum of sense has returned to banking).

So in order to persuade 1,400 borrowers to take their loans elsewhere, BoI has offered to waive Early Repayment Charges of up to £5,000 on fixed-rate mortgages that are due to expire over a year's time.

It has also asked broker London and Country to assist these customers by taking them through their options!

Generosity or pure pragmatism? 

Undoubtedly this move is sensible and probably not that costly to Bristol & West.  It helps parent company Bank of Ireland avoid thorny funding problems, and it wouldn't have expected to collect those fees anyway.  However, it will lose out on the interest on those deals, which would have been up to 5 per cent above the base rate.

Some borrowers will be delighted to get the chance to switch without penalty at a time of remarkably low rates.  Just one caveat, though: that assumes that new lenders will value their homes at least ten per cent, preferably twenty per cent higher than their loans.  Otherwise this golden opportunity might have to pass.

And if you're convinced this is a generous move from Bank of Ireland, compare this move with GMAC-RFC's £25,000 farewell gesture to some of its customers trapped on awful mortgages a year ago!

There's no clear moral of the story for borrowers, but for lenders it's obviously been bad news to take on more customers than their parent operations can comfortable support. 

. . . and Lloyds, Barclays and Abbey aren't far behind.

As promised in Spring, the Financial Ombudsman Service (FOS) has just released its "name and shame" list of banks and financial institutions based on how well they resolve customer complaints.

The list tallies only the cases referred to the Financial Ombudsman Service, not total complaints to an institution.  FOS referrals are situations where a customer wasn't happy with the response to their complaint, and there's a wide variance in the numbers of complaints that the FOS upheld on the customer's behalf.  For this reason, the list makes interesting reading for mortgage lenders and borrowers alike.

We'll focus on: 

1. figures for mortgage complaints only—not banking, pensions or insurance;
2. percentages of cases upheld by the FOS, not the overall number of cases (since this depends on the size of the institution, amongs other things).

First thing to note: the industry average for mortgage-related cases is 41 per cent resolved in favour of the customer.  That means that in nearly six out of ten customer complaints, the FOS thought the lender was in the right.  That's not bad for the industry as a whole, compared to the percentages for banking and credit (61%) and insurance (70%). For figures like these, remember lowest means best.

So, who scored worse than average?

GMAC-RFC scored badly on the mortgages list: 75 per cent of complaints to the Ombudsman were upheld.  This typically means that in 3 out of 4 cases the Ombudsman judged that they had either sold the borrower the wrong product, charged them unfairly or done something else that left their customer out of pocket. In each of these cases, restoration means putting the customer back to the position they were in beforehand—for example, repaying charges or interest and moving them to the deal they should have qualified for in the first place.

That 75% figure puts GMAC out in front by quite a long way.  Any comments would be welcome as to why you think this is :)

GE Money (61%) and Preferred Mortgages (58%) came in second and fourth on the list, but they're mingling with three High Street lenders who won't be at all pleased to appear in such company: Lloyds (58%), Barclays (55%) and Abbey (52%).

The only High Street lender to look good out of all of this is Nationwide, whose figure of 28% is lowest on the chart.  However: there are many other lenders who don't chart at all because they had fewer than 30 complaints in the six-month period.  This includes most of the building societies (Skipton, Yorkshire, West Bromwich among them) and some even more surprising omissions: for example, Halifax isn't on the list at all.  Surely some people must have complained about the UK's biggest mortgage lender?

Let us know what you think — especially if you're as unsurprised as we are to see GMAC up there!