The mortgage industry and their clients frequently seek resolution of their disputes on matters like clawback or inappropriate loans.
The disputes resolution body Financial Services Complaints Ltd (FSCL).regularly publishes the results of these disputes.
But in its most recent report, it declined jurisdiction.
The issue arose when a complainant, officially named Adam, asked a merchant banker to help him find finance for a property development.
That person then introduced Adam to an overseas lender who was willing to provide the money.
Adam’s business paid a fee of nearly $24,000 to the lender’s nominated account, after getting assurances that this was normal procedure for deals through the United States.
After the money was paid, Adam became concerned about the legitimacy of the lender, and asked for a refund, which did not happen.
He then concluded that the loan was a scam, and complained to FSCL.
FSCL then started an investigation about the merchant banking company.
But the merchant banking company believed it was not liable. It said the merchant banker involved in this case was an independent contractor, and the merchant banking company was not involved in the transaction.
Further, Adam had released the merchant banking company from liability before he proceeded with the transaction.
“We were not able to determine with certainty whether the loan was a scam, but it seemed very likely that it was,” FSCL said in its ruling. .
But it went no further.
“We started an investigation but subsequently decided to exercise a discretion not to further investigate the complaint,” it wrote.
“We concluded that the courts were the more appropriate place to deal with the subject matter of the complaint.
“Under our rules, known as our terms of reference, we can decide not to further investigate a complaint if we consider this course of action appropriate.
“We concluded that the courts were the better place to determine the facts of the case.”
FSCL said its investigation would be prejudiced by the fact it could not speak to or communicate with the merchant banker who had been directly involved in the transaction.. .
It argued if the matter was before the courts, it seemed likely that the merchant banker would be able or could be compelled to give evidence to the court.
“If there was liability in this case, the courts could determine whether it lay with the merchant banker, the merchant banking company, or both parties”
FSCL said it was rare for it to discontinue an investigation but it would do so if it concluded the courts were the better place to consider the matter.
“FSCL cannot compel third parties to give us evidence”.