THE FINANCIAL Services Ombudsman (FSO) has strongly attacked the culture in some Irish banks, and in particular Anglo Irish Bank.
Joe Meade said that if what had been reported about the secret loans to former Anglo Irish Bank chairman Seán FitzPatrick was true, it was “no wonder” his office had seen a 36 per cent increase in complaints.
Publishing his annual report yesterday, Mr Meade also issued a blunt warning to tax dodgers, saying they can not use his services to gain compensation.
“Those who come to my office seeking equity must come with clean hands,” Mr Meade told The Irish Times. He would not compensate anyone for tax unpaid, concealed or understated, or for distress caused by an appearance on the Revenue Commissioners’ list of defaulters.
The recession has led to a big increase in consumers availing of the FSO’s services. Complaints by consumers about financial institutions grew by over one-third last year, Mr Meade revealed yesterday. Complaints about investment issues more than doubled as consumers increasingly alleged mis-selling of financial products.
On Anglo Irish Bank, Mr Meade described the culture surrounding the loan practices which took place as unacceptable and said he felt sorry for the ordinary bank staff who were now dealing with the flak. Mr FitzPatrick concealed the loans by transferring them to Irish Nationwide before the end of Anglo’s financial year and moving them back afterwards. Mr Meade referred to the fact that Mr FitzPatrick’s loans were given over an eight-year period and were facilitated by Irish Nationwide: “If this is the culture at the top of financial institutions then there’s clearly something wrong.”
The ombudsman said two Anglo Irish customers had asked him to investigate the bank but the matter was outside his remit.
Asked if he would like a broader remit to investigate the running of financial institutions, he said he was not looking for one, but would abide by whatever the Oireachtas decided. The ombudsman published the results of 11 significant complaints about banks and investment firms, including a €200,000-plus compensation claim by a couple who were wrongly identified by their bank as bogus non-resident account holders.
The couple complained to his office that they had no such account, though the subsequent Revenue investigation found they had a substantial undischarged liability caused by irregularities in their tax affairs.
They sought a refund of the €200,000 and compensation for the public humiliation suffered after being named on the defaulters’ list. The ombudsman said the couple’s tax liability was caused by failures in their own affairs. While the bank was negligent in saying they had a bogus non-resident account he awarded the couple just €12,500.
Of the 11 significant findings relating to the second half of 2008 and published yesterday, nine were upheld and two rejected.
Last year, he received 5,950 complaints, an increase of 36 per cent on 2007; 2,620 of these were against credit institutions such as banks and building societies and 3,330 concerned insurance companies. The ombudsman said the upward trend in complaints was likely to continue, with 1,600 complaints filed in the last quarter of 2008 alone.
The largest award was for €500,000 to a credit union which made a “worthless” €1 million investment in an insurance bond recommended by its broker.
Since the FSO started in 2005, it has received over 17,400 complaints, of which 15,100 have been resolved. Over 60 per cent of cases are resolved in favour of the customer.
Case Studies
- Mr Meade warned about a growing number of complaints concerning disputed transactions on credit cards occurring when people are in nightclubs, particularly overseas.
Many of these are rejected. In one example, he ordered the repayment of €1,850 to a reveller after €4,300 in credit and debit card transactions occurred while he was in a lapdancing club in Brussels in the early hours of the morning. The man, who said he had "a few beers and paid for two dances at the club at € 50 each, claimed he was a victim of credit card fraud. However, his bank suggested he had negligently revealed his Pin numbers himself and pointed out that were no unsuccessful Pin attempts at the time of the transactions.
- A man invested €1 million in a bond but lost the lot after it became worthless. He sought through the ombudsman to have the money restored to him on the ground that he had been misled by his intermediary.
The ombudsman found that it was clear the customer knew there was an element of risk to his investment. While it was understandable that he was aggrieved about the unmitigated disaster of his investment, this was not a case of mis-selling because the customer knew that, however remote the possibility, he was at risk of total loss.
The ombudsman rejected the case.
- A pensioner opened a deposit account with a bank and put her life savings of €7,500 in it. Although she did not want one, the bank official insisted she take an ATM card.
Six months later, her card was stolen and the account was emptied over 11 days. The bank refused to accept any responsibility because it had not been notified that the card had been stolen.
Mr Meade ruled that the sudden pattern of withdrawals should have alerted the bank that something was wrong. He held that the bank could not be liable for the first two days withdrawals but was liable for subsequent withdrawals. It was ordered to repay the pensioner €6,100.
- A bank customer who was on weekly social welfare benefit of €185 got into debt which he claimed was the result of an overdraft facility of €1,000 he had not asked for. The bank admitted it could not find any overdraft application but insisted the facility could not have been set up without an instruction from the customer. The ombudsman ruled that the customer had got into debt as a result of a credit facility he had not asked for. He held the bank 60 per cent responsible and told it to write off the remaining €600 due on the account.