Banking Ombudsman Nicola Sladden. Photo / File
The latest report from the banking industry watchdog has revealed a heavy volume of complaints related to financial hardship applications, a 21 per cent increase in scams, and a 6 per cent rise in complaints overall.
Overall complaints numbered 3149 and the report noted that financial hardship was a recurring theme in the Banking Ombudsman Scheme's latest annual report released this morning.
Ombudsman Nicola Sladden received 319 complaints related to financial hardship or debt collection in the year to June. These complaints were usually associated with credit cards, home loans, or KiwiSaver.
Covid heightened the need to give customers financial hardship support and other forms of help, she said.
"Banks are expected to look out for, and take particular care with, customers experiencing vulnerabilities – including financial hardship, which was a recurring theme last year," Sladden said.
The report said when hardship complaints started to rise with the Covid outbreak, the Banking Ombudsman developed new policies that saw half of hardship complaints resolved within 20 working days.
At times, banks have fallen short in the way they handle hardship requests, the report said. It gives the example of "Naomi" who lost her job and requested hardship assistance for her $10,000 bank credit card debt.
The bank said she was ineligible for help because she was already in arrears and was applying to withdraw money from KiwiSaver on hardship grounds.
When Naomi missed a repayment, her bank referred her credit card debt to a debt collector, listed a default on her credit file, and closed her bank accounts. Naomi complained that the bank had not properly considered her hardship request.
The Ombudsman pointed out to the bank that the Credit Contracts and Consumer Finance Act 2003 (CCCFA) requires lenders to consider requests for help on the grounds of unforeseen hardship, provided the customer is no more than two months in arrears.
Naomi was only six weeks in arrears.
Her KiwiSaver hardship application was irrelevant. We also suggested to the bank's communication and response to Naomi's concerns was inadequate. The bank then agreed to remove the default listing, refund the collection fees, and reduce the debt by $2500 in recognition of stress and inconvenience.
The report highlights another case where a customer was awarded $300 by the Ombudsman after it was ruled his bank id not properly informed of his rights under the CCCFA.
In a third case, "Corinne owned a property with her friend 'Amy'". They had a loan with the bank, secured by a mortgage over their property. They fell out and were unable to agree on what should happen to the property. Corinne kept up loan repayments while she and Amy negotiated through their lawyers about what to do with the property.
Corinne applied for and received a three-month mortgage holiday while she assessed her options - but was not told this would result in a hardship flag being applied to her credit report. She was awarded $2000 compensation.
The report records that ANZ was the most complained about major bank, but it is also the largest.
Of the big five, complaint numbers tracked market share, bar for KiwiBank - the smallest by assets - which came in fourth.
The Banking Ombudsman has recently introduced an online dashboard tracking complaint numbers.
The Scheme has also added an online hardship guide plus a new whistleblowing service.
NZ Bankers' Association chief executive Roger Beaumont told the Herald, "All banks can offer options for customers experiencing hardship. We've been particularly conscious of this through the economic impact of Covid-19.
But he qualified that, "While it's true there are some people experiencing financial hardship because of the current lockdown, we're not seeing the same demand for help we saw with the first lockdown in March last year."
Last year the banking industry introduced a loan repayments deferral scheme with the support of the government, Reserve Bank and credit rating agencies, Beaumont said.
"Through that scheme around $70 billion in household and business loans had repayments fully deferred or reduced for up to six months. We're not seeing the need to bring back the scheme at this stage but deferring or reducing repayments remain potential options for people in hardship, on a case-by-case basis."
Other options may include extending the term of the loan to reduce repayments, consolidating loans, or providing access to short-term funding, Beaumont said.
"The sooner you contact your bank, the better placed they are to help."
"Inadequate or unclear communication is at the root of many complaints," Sladden said."
Complaints involving financial hardship or difficulty should be responded to promptly, and with clear and careful communication. Delays can create further uncertainty and financial harm. We look forward seeing further improvements in hardship responses."
Consumer NZ chief executive told the Herald the issue could, in part, be pegged on a "hot labour market."
"It's not too surprising to us that communication is being raised by customers as a big problem. We're seeing it across all sectors, not just the banks. It's a particularly regular complaint with telcos and electricity retailers, too.
"And a lot of it, as we understand it, comes down to the difficulty in staffing contact centres.
That's not necessarily an excuse for poor customer service.
"But it does go some way to explaining why these big industries that are running large call centres may be struggling to meet the expectations of their customers at the moment."
Duffy added, "It's a pretty hot labour market. So for service industries, workers are able to chase the money. So the sectors that are willing to pay more are attracting the talent, while others are having to catch up.
"It's great for call centre staff but obviously not so good if you're a customer. From what we hear, there's a fair bit of quite aggressive recruitment and poaching going on between major industries with a finite labour pool."
Duffy said Covid border and immigration restrictions had contributed to the situation.
For the Bankers Association, Beaumont responded, "Banks do all they can to ensure contact centres are staffed to meet demand. The current labour market certainly provides some recruitment challenges. Managing contact centre customer demand in the face of events like lockdowns, which necessarily happen at short notice, can also present issues. This might mean fewer people in contact centres, and some staff having to work remotely where possible."
Elsewhere, the Ombudsman's report notes a 21 per cent rise in online fraud complaints, which hit 330.
It said that in the case of a scam part of the onus fell on a bank, but that a customer also had to take reasonable precautions to ensure communications were genuine.
It illustrates this point with the case of "Ralph", who only received partial compensation after being scammed.
"A scammer, pretending to be from a telecommunications company, asked Ralph for remote access to his computer and phone for the fibre installation Ralph was expecting. The scammer then made 11 internet banking withdrawals totalling $125,000 from Ralph's home loan revolving credit facility," the report said.
Five of the transactions required two-factor authentication via text message. The scammer instructed Ralph to open and delete the text messages. Ralph discovered he'd been scammed and the bank recovered $15,000.
Ralph asked the bank to reimburse him for the remaining $97,000. The bank declined because Ralph had given someone remote access to his computer and mobile.
"Banks are required to reimburse unauthorised transactions unless customers have
acted fraudulently or negligently, breached the bank's terms and conditions or
failed to take reasonable care to protect their banking details," the report said.
"We considered it was reasonable for Ralph to believe the scammer was legitimate, especially since he was expecting to be contacted about the fibre installation.
"However, we thought a reasonable person would have been concerned about text messages from the bank. Banks are required to provide their service with reasonable care and skill, which means looking out for potential problems. In this case, the bank failed to pick up a series of out-of-character transactions from a previously unused account."
Ralph and the bank agreed to split the loss equally.
The Herald has covered a number of online banking fraud cases, which have seen mixed results for customers seeking compensation.
In one, a west Auckland couple who paid a series of fake invoices after a scammer hijacked their bathroom renovation company's real-email address, had the full amount they had lost - $21,000 - paid back by their bank, Westpac.
But in a second case, involving an ex-army officer who transferred around $14,000 from a Westpac account to what turned out to be a fraudster's account, as he thought he was buying Starlink shares (the Space X subsidiary is not listed and has no plans to list) no funds were recovered and the soldier lost all of his money.
Both banks said they would have had more chance of resolving the situation if the retired army officer had contacted them immediately. In the event, it was more than seven days after he transferred the money that he realised he had been conned.
Reserve Bank says leaving banks to their own devices hasn't worked.