THE FINANCIAL Services Ombudsman has accused banks, building societies and insurance companies of failing to own up when confronted with evidence of mistakes with customers’ money.
Joe Meade called on the financial institutions to stop “defending the indefensible” and to rectify mistakes when they crop up.
He was speaking after the publication of new figures which show that complaints about financial institutions are up by 34 per cent so far this year.
Some 7,150 complaints were made to Mr Meade’s office to the end of November, compared to 5,350 in the same period last year.
“Financial institutions of all shapes and sizes must realise that it’s not their money they are dealing with, but the customer’s,” Mr Meade said.
“They should treat it as if they were a trustee of the funds.”
Mr Meade, who retires at the end of the month after over four years in the job, yesterday published 30 case studies which, he said, demonstrated that the institutions have a “long way to go” to regain the confidence of consumers.
The cases showed a “systematic pattern” of misdeeds and mistakes by the institutions, he said. Until recently, the practice was to obtain commission “at all costs”.
Although there was evidence of a lot of good practice, banks and other institutions still needed to do a lot to improve their handling of complaints.
The ombudsman does not name institutions against which findings have been made but has asked Minister for Finance Brian Lenihan for permission to do so in some cases.
Yesterday, he said Mr Lenihan had referred the matter to the Attorney General.
Asked if some financial institutions were worse than others for the frequency and handling of complaints, he replied that they were “all the same”.
More than €1.4 million was repaid by financial institutions to consumers as a result of the latest decisions issued by Mr Meade. Once again, mistreatment and bad advice given to elderly customers features highly in the latest case studies. In the biggest single case, the ombudsman ordered that the maximum compensation of €250,000 be paid to a retired farmer by a bank which was found to have dealt with his investment in a “cavalier” manner.
Mr Meade expressed anger that he had to intervene personally in two complaints taken by elderly couples after the banks failed to respond within the set timeframe.
Since his office was set up in 2005, Mr Meade has handled 25,000 complaints and at least €60 million has been made good to consumers as a result of his investigations.
Mr Meade, who retires at the end of the month, says that his decisions have had a knock-on effect on the wider financial services industry and have helped to get other matters resolved.
Case studies: redress ordered for customers
A farmer invested €2 million from the proceeds of a land sale in two bonds he understood to be capital guaranteed. Although the bonds proceeded to drop in value to €1.6 million, his bank said he had nothing to worry about because the fund was guaranteed.
Eventually, the bank admitted it had given wrong advice, and the bonds were cashed in at a loss of €540,000.
Joe Meade ruled the bank confused and even misled its customer and ordered the maximum award of €250,000 for treating the customer's investment in a "cavalier" fashion. He ordered it to make a formal written apology for "belittling" remarks by an official who told the farmer he shouldn't be complaining "having done so well out of the sale of your land".
** A 68-year-old separated woman invested €410,000, representing her share of the sale of the family home, in a bond on advice from her bank. In six months, the value of the bond fell to €186,000 and the woman was told there would be a €10,000 penalty if it were to be encashed.
The ombudsman found a series of errors in the "fact-find" drawn up by bank officials when the bond was purchased.
She had been identified as a widow and non-smoker, when she was separated and a smoker, and her home and contents were valued at €1.1 million when they were worth only €150,000, etc.
Mr Meade concluded the procedure followed by the bank was hurried and haphazard, and did not take account of her age and the concerns normally applying to a person working part-time and about to retire with no pension. He ruled the bank had failed in its duty of care and directed that it return the €410,000 invested to her.
** A man booked a two-week foreign holiday for his family for last January, but cancelled in mid-December 2008 after getting notice that a Supreme Court case in which he was involved was set to be heard in January, just a few hours after his scheduled return home.
He submitted a holiday cancellation claim under his travel insurance policy which the insurance firm repudiated on the grounds that the court case was not due to occur during the scheduled trip abroad, but after his return. The insurer offered to meet only €11,000 of the €22,000 loss he suffered on cancellation.
Mr Meade stated no sensible person would have gone on holiday due to the risk of delay. He found the need to cancel the holiday was a necessary result of attending the court case and directed the firm to refund the full €22,000 cost of cancellation.