Fais Ombud refuses home loan firm leave to appeal ruling

FAIS Ombud Charles Pillai has refused a national home loans company leave to appeal against his ruling that it must pay a Durban widow the balance owing on her homeloan because it had provided "shoddy service and minimal advice".

Pillai, the Ombud for Financial Services Providers, said in attempting to make out a case for leave to appeal, SA Home Loans (Pty) Ltd did not appear to appreciate what the real inquiry was that led him to make the adverse finding against them in the determination. The company raised issues and drew conclusions which had no bearing on the rationale for the determination.

In January this year, Pillai ordered the company to pay an unemployed widow, Saroja Naidoo, the outstanding indebtedness on her homeloan with effect from the date of death of her husband, Subramoney Naidoo.

The company had been found to have made disclosures to the client that were not provided in plain language, created uncertainty and were not comprehensive enough. Additionally, they were confusing and misleading. Most importantly, no disclosures were made to the husband who was a party to the contract in terms of which both their lives were insured.

Pillai found that while the company had in a 14-second telephonic conversation explained an exclusion clause pertaining to pre-existing medical conditions to Mrs Naidoo, it had not done so to Mr Naidoo who was allegedly a cardiac patient and who was also a party to the contract.

Mrs Naidoo had complained to the Ombud in her capacity as the surviving spouse and joint life assured after SA Home Loans had rejected a claim made by her in terms of a bond protection plan in which her life and that of her husband were insured.

In the bid to appeal the ruling, the company submitted that the Ombud had ignored the wording of the policy document itself and had relied entirely on the telephone conversation.

The company further argued that the Ombud had erred in not taking cognisance of the wording of a covering letter sent to the Naidoos which had requested them to ".examine the policy carefully to ensure that your personal information is correct and that you fully understand the terms and conditions and benefits that are provided by the policy".

In refusing the company leave to appeal, Pillai said: "The Respondent does not appreciate the focus of the inquiry which was clearly on the manner in which the financial services were rendered to the deceased and the Complainant.

"The Ombud is not merely entitled to assess Respondent's conduct in so far as the rendering of the financial service is concerned, but is obliged to investigate Respondent's conduct in order to establish and determine the real issues in dispute and pronounce thereon, paying due regard to the compliance or otherwise by the Respondent with the provisions of the FAIS Act."

Pillai dismissed the company's submission that if the telephone conversation between the Respondent and the Complainant had carried insufficient information, this would have been remedied by the covering letter and the policy document.

"The Respondent clearly ignores the fact that it did not at any stage communicate with the deceased and places reliance on the fact that the covering letter would have remedied such failure.

"The Respondent clearly shows a lack of appreciation of the fact that deceased, as a client, who was a party to the contract, ought to have had the disclosures made to him in clear terms as required by the FAIS Act.

"The Respondent's conduct which is undisputed in so far as this issue is concerned, fell short of the provisions of the FAIS Act".

"No matter how clear the terms of the policy document may be to the Respondent, it does not detract from the necessity to comply with the provisions of the FAIS Act".

"What Respondent fails to appreciate is that disclosures have to be made in order that clients to whom financial services are rendered can make an informed decision about the proposed transaction".

"No value or purpose will be served if providers were to rely on apparent clarity and unambiguity of terms in a policy document, whilst completely ignoring or merely paying lip service to the requirement to make proper disclosures to the appropriate parties, prior to the conclusion of the contract," said Pillai.

Denying the application for leave to appeal, Pillai said it was unlikely the Board of Appeal would come to a different conclusion on the various issues raised by the Respondent.