MORTGAGE BROKING

Resolving Conflict
BY PETER ANDREWS, MBA, CPA, B.ECONOMICS, B.ARTS
Former lecturer at Macquarie University

U nfortunately, even with best professional practices, disputes may

arise between a mortgage broker (or lender) and the client. It is
important to be prepared for this by having an approach to handle
it.

The alternative to proper handling of a dispute, at best, may be loss of a

client. Beyond that, there is there is the time and expense invoved in
Internal Disputes resolution and, if that fails to work, external disputes
resolution.

CONTENTS
RESOLVING CONFLICT ...................................................................................2
THE CORRECT APPROACH ................................................................................2
Peter Andrews is a specialist trainer in HANDLING DISPUTES ......................................................................................3
Financial Planning.

After an early career in corporate finance

and banking, Peter became a lecturer at
Macquarie University.

He has also taught in the Graduate

School of Management at the University
of Sydney and the School of Banking and
Finance at the University of New South
Wales.

Peter has a Bachelor of Arts and a

Bachelor of Economics from the
University of Sydney and a Master of
Business Administration from the
University of Florida. He is also a
Certified Practicing Accountant.

Copyright 2015 © Mentor Education Group Pty Ltd

MB8 – Resolving Conflict PA 010615
 2 8. MORTGAGE BROKING
RESOLVING CONFLICT
Conflict can easily arise with clients over products or
2 to make the win win outcome happen.
services. It can be received by telephone as well as
letter, email, website etc. Sometimes it exists in the
2 form of concerns about the broker or reistance to
product terms such as the interest rate. At other times
it takes the form of a more formal complain. Either way,
there is reistance that needs to be overcome as best as
possible.
Even in the case of a formal complaint there is time to
resolve the conflict before more more formal dispute
resolution procedures are begun. This is because ASIC
allows five days to elapse before the application of
compulsory internal resolution procedures.
THE CORRECT APPROACH
The five days that ASIC allows to lapse before
compulsory internal resolution procedures apply
provides a relatively brief period for the dispute to be
resolved by the mortgage broker. This saves time and
resources, but it requires a powerful shift from
adversaries to co-operative partners. If this can be
achieved, each side may benefit, with a new level of
trust developing.
The first requirement, as with any dispute resolution, is
therefore to adopt the correct approach.
Adversaries or Partners
When conflict emerges, we can automatically find
ourselves in an adversarial position, with a sense that
we are in a “zero sum” game with only one possible
winner. The need is to change the situation from an
adversarial struggle to a situation in which both sides
can win. This is commonly referred to as a “win win”
situation.
This can take an effort, particularly if the client’s is
speaking in heated manner. Heated conversation
always involves more rapid speech. To avoid it, the
representative needs to make sure that he is NOT
following the same more rapid speech pattern. This is
not easy, particularly if the conversation is over the
phone. The trick is to recognise the situation that is
developing and immediately change the pattern by
developing a non-aggressive approach.
In adversial situations, is also volume of speech is also
important. So a good rule of thumb is to adopt a less
rapid speech pattern and keep the volume of your voice
underneath the other person's.
Copyright 2015 © Mentor Education Group Pty Ltd
MB8 – Resolving Conflict PA 010615
Once the need for a win win situation is recognised and
a more normal conversational tone and speech pattern
have been adopted, if that is required, the challenge is
Go Back to Needs
The most important win/win manoeuvre the mortgage
broker can make is to change course by beginning to
discuss underlying needs, rather than only looking at
solutions. This requires asking open-ended questions
once again.
Examples of questions that might be asked are:
 “Why does that seem to be the best solution to
you?”
 “What's your real need here?”
 “What interests need to be served in this
situation?”
 “What values are important to you here?”
 “What's the outcome or result you want?”
The answers to these questions significantly alter the
agenda on the discussion table. If you turn back to the
chapter on Principles of Professional Management to
read again what David Maister said about
communication you will find that the broker/client
contact has returned to effective communication. In
particular, conversation would have returned to
cooperative problem solving with the two sides learning
from each other.
An “Appropriate Assertiveness” Approach
An aggressive approach may have been avoided in the
initial response to the client but, equally, a passive
approach should also be avoided.
To understand why, return once again to what Maister
says about communication and in particular his
statement that with communication both parties are
engaged in joint problem solving. If the two sides are to
return to a situation of mutual co-operation they need
to approach each other as equals.
Psychologists describe the required approach as
“appropriate assertiveness”, which they define as being
able to state a case without arousing the defences of
the other person. With this approach, the
representative is concerned about the needs, and
wants of others, while at the same time assuring that
his/her own position will be respected.
 3 8. MORTGAGE BROKING
When there is clear aggression on the other side the
representative can express his/her own position with
what psychologists refer to as “I” statement. This avoids
3 the aggression that is inherent in “you” statements.
A common suggestion is that an aggressive approach on
3 the part of a client can be turned into an approach of
mutual co-operation by using a four-part “I” message:
1. “I feel like…… (expresses one’s feelings)
2. “I don't like it when……. “ (identifies the unwanted
behaviour)
3. “because………” (Identifies what it is about the
behaviour or its consequences that one objects to)
4. “Can we work this out together?” (Indicates a
willingness to resolve the dispute).1
With this approach an aggressive message sender
receives an impartial message about the feeling impact
of the aggressive message. The importance of the
feeling statement is that it keeps the focus on the
feeling of the speaker which is less likely to illicit a
defensive reaction and more likely to promote
effective communication.
The two sides can then decide to de-escalate the
aggression and continue on the basis of the “I”
statement and its meaning.
Show Empathy
The approach of demonstrating empathy, which should
have been present when the client relationship was
established, needs to be maintained in a situation of
conflict. This applies both to the five days “window of
opportunity” that is available before a dispute is
referred for IDR as well as to the period of the IDR itself
if the conflict is not resolved first.
The reader may recall that there are two external
dispute resolution schemes in the financial services
industry:
 The Financial Service (FOS); and
 The Credit and Investments Ombudsman (CIO).2
CIO has stated that many of the disputes it receives
would have been resolved internally if the correct
approach had been taken. Its first recommendation
towards improving the situation is:
1
The four-part ‘I’ approach is generally attributed to the Ohio
Commission on Dispute Resolution & Conflict Management.
2 Formerly the Credit Ombudsman Service (COS).
Copyright 2015 © Mentor Education Group Pty Ltd
MB8 – Resolving Conflict PA 010615
“Treat borrowers with empathy and courtesy.
Borrowers may refer their complaints to us simply
because they feel they are not being taken seriously, or
are unhappy with the way they have been treated, by
staff of the lender.”3
Treating the client with empathy and courtesy from the
start of the conflict situation may be a very satisfactory
way of resolving the dispute early so that more formal
disputes resolution is not required.
Going back to a client’s needs is a good way of doing
this.
HANDLING DISPUTES
Unfortunately, some conflicts are not avoided, or they
go to IDR or eventually EDR, no matter how much
empathy and courtesy have been shown. CIO has
advised that many of the complaints it receives reach
that stage because they have not been handled
properly during IDR.
As well as maintaining an attitude of empathy and
courtesy, CIO advises:
 “Let borrowers know when a decision will be
made” (under FOS rules it must be made within 21
days).
 “Provide the borrower with interim updates, if
practicable”.
 “Do not ask the borrower to provide unnecessary
information, particularly information that is not
strictly relevant or which the lender already has in
its possession”.
 “Allow a reasonable time for the borrower to
provide their financial information”.
These are not theoretical points. Instead, they
represent practical advice based on the reasons for
disputes being considered by CIO.
The reason for the borrower being provided with
updates is that CIO has found that “a borrower who
thinks, rightly or wrongly, that his or her application is
not making progress, is likely to refer the complaint to
us before the 21 days has expired.” In other words, the
worst way to handle the matter is to leave the borrower
uninformed. Likewise, unnecessary requests for
information lengthen the dispute resolution process
(and irritate the borrower).
3 Credit Ombudsman Service, Member News 32, November 2011.
 4 8. MORTGAGE BROKING

External Disputes Resolution
Unfortunately, a significant percentage of disputes are
4 not resolved through the IDR process. A mortgage
broker is required to advise the claimant of the
outcome of any dispute that is resolved internally, as
4 well as the reasons for the outcome and the availability
of the relevant EDR service.
In addition, if the matter has not been resolved within
forty-five days the disputant has a right to take the
matter to the EDR without waiting for the outcome of
the IDR process.
FOS investigated the matter and found that the
claimants’ partnership income was $45,000, not
$400,000 as stated.
As the lender had failed to make enquiries, the case
manager concluded that the FSP’s approval of the loan
was maladministration in lending. However, since Mr
and Mrs Z had deliberately misstated their income, FOS
did not consider that the FSP should be liable for Mr
and Mrs Z’s loss in its entirety. Accordingly, it concluded
that Mr and Mrs Z should bear two thirds of their loss
with the lender being responsible for one third of the
loss.4

The approach with EDR is that an attempt is first made

to allow the two parties to achieve a satisfactory
outcome through negotiation. If that fails, the EDR body
makes a determination.

If both sides are at fault, for example where the

borrower has provided false income information to
support a “low doc” loan, but the lender failed to follow
its policies and procedures that, if properly carried out
would have revealed the discrepancy, the EDR may
apportion liability (and reduce any compensation
accordingly).

Claimants have a stipulated time for accepting a

determination (for FOS this is 30 days). Once a claimant
has accepted a determination, it must be implemented
by the lender (or mortgage broker).

They may, of course, ignore the determination and go

no further if they find it unsatisfactory. As a further
action if they find the EDR determination
unsatisfactory, they may take the matter to court.

Example – Apportionment of liability

Mr and Mrs Z applied for a loan to:

 refinance an existing loan, and
 obtain additional finance of approximately
$200,000 to assist them in purchasing another
property.
In making their application Mr and Mrs Z disclosed a
partnership income of $400,000. The lender failed to
make independent enquiries to verify this information.

Mr and Mrs Z subsequently claimed that the lender’s

decision to lend amounted to maladministration as they
did not have the capacity to service the additional loan
of $200,000.

4 The Financial Ombudsman Service Circular, Issue 5 March 2011.

Copyright 2015 © Mentor Education Group Pty Ltd

MB8 – Resolving Conflict PA 010615