The Financial Ombudsman has ordered the peer-to-peer lending company Assetz to refund fees to a customer after finding there should have been “consideration for [the customers] request to exit the contract without accepting the fee”.
The peer-to-peer lending firm Assetz facilitates the crowdfunding of secured property loans by members of the public. It announced a winding down of its peer-to-peer lending operations in December 2022 citing reduced investor demand following recent interest rate rises. A statement on the website said it aims to “become a 100% institutionally funded lender”.
The 0.9% per annum fee was introduced in 2020 as “a temporary measure whilst the current “Non-Normal Market Conditions” brought about by the Coronavirus (COVID-19) persist”.
The decision notice explains that on 31st March 2020 Assetz informed a lender known as Mr S that it would be introducing a fee from 1st May 2020. It is said Mr S sought to close his accounts immediately as he did not want to accept the fee.
We’re told Mr S raised a complaint which was not upheld by Assetz who referred to the terms and conditions Mr S agreed to. Assetz said these terms did allow it to introduce a lender membership fee.
Mr S responded raising further concerns claiming that Assetz were relying on what were said to be unfair terms to raise the price of its service unilaterally. Mr S said Assetz was denying his right to close the account rather than accept new charges.
We’re told that Mr S was not happy with the response he received and so referred his complaint to the Financial Ombudsman Service for an independent review.
In a preliminary decision Mr Daniel Little, the ombudsman dealing with the matter, explained that “it’s not for me to decide whether [the terms are] fair or not – that is something only a court can decide. But as a regulated financial business Assetz is under an obligation to treat its customers fairly.
“Taking into account the relevant guidance, I’m satisfied it would have been fair and reasonable for Assetz to ensure … they allowed those who didn’t want to pay the fee the opportunity to leave without penalty.”
Mr Little said he considered FCA guidance on the fairness of variation clauses which states:
“When drafting variation terms, firms should consider the consumer’s freedom to exit the contract if they do not accept the variation, and how they can actually do so. This should include the financial and practical barriers in the contractual terms which may prevent them from doing so. Examples of barriers could be exit charges or requiring the consumer to give a long period of notice.”
Mr Little said he was “satisfied Mr S sought to exit the contract when he found out about the fee… But due to the queuing system introduced by Assetz and prevailing market conditions he wasn’t able to exit until some months later and he did pay a loan servicing fee during the time he was waiting to exit.”
The ombudsman concluded: “In my view the way Assetz sought to vary the terms didn’t fairly take into account Mr S’s ability to exit.
“But having reviewed the circumstances – and taking into account the above FCA guidance – I’m currently not persuaded Mr S has been treated fairly. I don’t find it fair that because it took time to sell Mr S’ loans, he should be bound by a new fee for the duration of that sell down. Mr S has provided consistent and plausible evidence that he didn’t accept the fee and wanted to exit immediately to avoid paying it.”
Having given the parties an opportunity to provide further information, and having received additional comments and evidence from Assetz, the ombudsman concluded that he hadn’t “found reason to change the conclusion I reached in my provisional decision… To put things right Assetz should refund Mr S the [fees] he paid”.
It is not known how much was ultimately refunded or whether they had proactively refunded other investors who had been in the same position.
We asked Assetz if they would like to comment our reporting of the Ombudsman’s decision. They did not respond to our e-mail.
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