The Mortgage Offset That Wasn't Disclosed
Priya is a lending officer at a regional bank. A customer, Mr. Okafor, refinances an investment loan of $620,000 and applies for an offset account. During the interview Priya explains the offset's 0.15% annual fee and the fact that offset balances reduce interest but not the principal balance shown in statements. She marks the file 'verbal disclosure given'. Six months later Mr. Okafor complains to the internal dispute team that he was told the offset would 'pay down the loan faster' and that he never received a product disclosure statement. The file contains no signed product disclosure acknowledgement, no record of the fee discussion beyond Priya's one-line note, and a call recording that ends before the offset is discussed. Priya's manager asks her to write a file note before the complaint is escalated.
1. Assess whether Priya's disclosure and record-keeping satisfied her professional obligations. What should she acknowledge in her file note?
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Priya should separate two issues: what she said, and what she can prove she said.
Substance. Explaining the fee and the interest-only effect of offset is broadly the right content. But 'reduces interest, not principal' is not the same as explaining that the customer's stated goal - paying the loan down faster - is not achieved by offset in the way he expected. A professional adviser confirms the customer's understanding against their stated objective, not just the product mechanics.
Evidence. The one-line 'verbal disclosure given' note is inadequate. A defensible record identifies: what was disclosed, when, in what form (PDS supplied? version?), and the customer's response. No signed acknowledgement and a call recording that cuts off before the offset discussion means the bank cannot demonstrate disclosure occurred.
In the file note Priya should: state factually what she recalls saying and when; concede that the written record is insufficient to evidence the PDS being provided; avoid retrospective language implying certainty she does not have; flag the recording gap; and recommend the complaint be assessed on the basis that the disclosure is unverified, with remediation (fee reversal, re-disclosure) considered. She should not characterise the customer's recollection as wrong without evidence.
2. The manager wants to close the complaint by relying on Priya's note. What professional and conduct risks arise, and what should Priya recommend instead?
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Risks of closing on the note alone.
- Misleading conduct risk. Asserting disclosure was given when the evidence does not support it could itself be misleading in a dispute response - a conduct issue beyond the original sale.
- Conflict of interest. Priya is both the person whose conduct is in question and the source of the evidence; her note cannot be treated as independent verification.
- Consumer harm. The customer may have suffered a quantifiable loss (fees, and interest that would have been lower under a different structure). Closing without assessing that leaves harm unremedied.
- Systemic signal. A single-line disclosure habit is likely not isolated; closing quietly hides a process failure.
What Priya should recommend. Escalate rather than close: obtain the full call recording and check whether it truly ends early; retrieve the PDS version issued and any system log of it being sent; treat the disclosure as unproven; assess and quantify the customer's loss; consider fee reversal and re-disclosure with a signed acknowledgement; and refer the file-note practice to the compliance/quality-assurance function for a sample check. Priya should disclose her own involvement to the reviewer so independence is preserved.