Bank customers see red

Banking Ombudsman Liz Brown. Photo / Mark Mitchell

Complaints to the Banking Ombudsman have doubled year on year as customer frustration with banks' failure to deal sympathetically with their financial hardship boils over.

Banking Ombudsman Liz Brown says she received 1900 complaints in the year to June 30, compared with 949 the previous year.

And the number of cases investigated by the Ombudsman's office has trebled over the same period from 269 to more than 600.

Brown says the office is so overloaded with complaints that for the first time there is a waiting list - and all the banks' complaints sections are overloaded as well.

The office has doubled its investigation workforce to deal with demand.

Misrepresentation was the largest complaint category for the year at 27 per cent of the total, driven by "two big waves of single-issue complaints".

One relates to investment product advice given by ANZ about subsequently frozen ING funds with exposure to the United States sub-prime market. The other related to complaints about the cost of repaying a fixed mortgage early.

In previous years, the highest proportion of complaints has been about transaction errors and maladministration, followed by fees and charges.

"The complaint level is so high this year because of the numbers of complaints about break fees on fixed-rate home loans," Brown says.

"That is related to the credit crunch because it's related to drops in interest rates."

Beneath those issues, she says is a rise in general debt-related complaints, such as where investors who have fallen on hard times try to sell a property, but find the bank wants to take more of the proceeds than the customer expected.

"When people buy two or more properties, they think one loan belongs to each property and, if they sell one, only that loan has to be repaid," she says.

"But normally the bank will have taken security over all their properties for all of their debt. And, particularly if they don't have much equity left in the properties, the bank is within its rights to ask the customer to reduce that debt as well as pay back anything they took out in the first place to buy the property they have now sold."

Brown says while this is legitimate, she is concerned that banks are failing to tell people they plan to do this until long after they have made their plans and commitments based on the expectation of getting more from the sale than the bank leaves them.

Brown says 18 per cent of complaints for the year were about bank fees and charges, making this the second-largest single complaint category.

BNZ last week axed hated $35 overdrawn account penalty fees, often incurred when customers have payments coming out early or their salary going in a day late.

The bank said the fees generated a large number of customer complaints and were a source of frustration for customers and staff.

Brown says dishonour fees are high compared to other account fees, people often incur them by mistake, and they take a substantial amount from the weekly budget of someone on a low income.

While the Ombudsman can't influence the amount banks charge in fees, Brown says that doesn't stop people making complaints about fee fairness. The Ombudsman can investigate complaints of fees wrongly charged.

The Ombudsman's office also finds people complain that the bank hasn't given them enough assistance when they're in financial hardship.

Small businesses have complained that banks are withdrawing support that they're entitled to expect.

Complaints about general unfair treatment comprised 11 per cent of the total number.

"We're getting complaints across the board that you can sheet back to people in financial difficulty, and more of them than we have had in the past few years," says Brown.

But if a borrower advises the bank they are in strife before they fall into arrears, the bank is required under the Credit Contracts Act to consider helping them, either by extending the loan term to bring down repayments or offering a mortgage "holiday".

The Code of Banking Practice also prevents the bank moving straight to recovery action if the customer approaches it early and keeps it informed.

The Ombudsman is empowered to require a bank to put the customer back in the financial position they would have been in if the bank hadn't done something wrong, and Brown says she has a good success rate.

How to complain
* Dissatisfied customers must follow their bank's internal complaint process before lodging a complaint with the Banking Ombudsman.

* If the customer is not happy with the bank's decision, or if the bank takes more than three months to reach a decision, the bank must tell the customer they can complain to the Banking Ombudsman.

* To make a complaint to the ombudsman you can:

* Call freephone 0800 805 950

Email help@bankomb.org.nz

* Write to Freepost 218002, PO Box 10573, The Terrace, Wellington 6143

* Fax (04) 471 0548

* Fill in the Online complaints form: https://www.bankomb.org.nz