Gripes to bank ombudsman at record high

Photo / Herald on Sunday

A record number of complaints flooded into the office of the Banking Ombudsman in the past year driven by the failed ING investment funds and concerns over mortgage finance.

Deborah Battel, who became the ombudsman in August last year, received 1924 complaints in the year to June 30 - up from 1888 in the previous year. The office also completed 715 investigations - more than double the 338 investigations made last year, its annual report shows.

Battel said the record number had been a result of the flow-on effects of the economic downturn and complaints about the ANZ Bank over the way it had sold ING's frozen investment funds.

Complaints about the ING funds related to 349 of the investigations and made up $13.7 million of the $14.5 million paid out in compensation.

Battel said its was too early to draw all the lessons from what was clearly the "most serious investment product failure" the Banking Ombudsman had ever dealt with. But she said the ING/ANZ situation served as a warning to all banks to ensure their staff fully understood the nature and risks of the products they sold.

"Customers invest through banks because they trust them. Banks must hold themselves to the highest standards if they wish to maintain their customers' trust."

NZ Bankers' Association chief executive Sarah Mehrtens said the report would be read with interest by the industry.

"The ombudsman scheme is good for customers. It provides an effective dispute resolution service which helps build confidence in the banking sector," she said. "All of our member banks are committed to working with government to implement the new regulatory regime for financial service providers and advisers."

Meanwhile, Battel said it appeared complaints relating to the global financial crisis had now peaked although she expected those relating to financial hardship to continue growing.

Battel said complaints relating to mortgage finance had also changed during the 2010 financial year.

"At the start of the year, the majority of complainants alleged either that they were unaware that they might be liable to pay a fee if they broke their fixed term mortgages early, or that they were unaware that the fee could be substantial if mortgage rates fell.

"By the end of the year, complaints were more likely to have originated from customers who had fallen into arrears, sold their homes and been required to pay an early repayment cost, adding to losses already sustained on the sale of the property."

The ombudsman's report also reveals other systematic issues in the sector involving credit cards, concerns about irresponsible lending and verbal offers to lend.

An investigation of a complaint into the accuracy of a particular bank's credit card terms and conditions by the office found the wording to be "at best ambiguous and at worst misleading".

The bank, which was not named in the report, reworded the relevant paragraph, but a wider investigation across all the banks found in general credit card terms and conditions were "exceptionally dense, complex and difficult to understand".

"Greater care needs to be taken regarding the terminology that is used to explain when interest will be charged and on what amounts. Banks need to ensure that if the interest-charging method is described in more than one place it is described consistently."

The ombudsman also received complaints from people upset about being sent a credit card without asking for one. The cards were sent out as "companion" credit cards to existing credit card account holders. Customers were told about the cards before they came out but had to ring a number to stop them being sent out.

The additional card did not increase the users credit limit, or fee costs. The ombudsman ruled that although unsolicited cards were not best practice, the bank had done nothing wrong.