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Home / New Zealand

Complaints over banks on the rise

By Maria Slade
NZ Herald·
11 Mar, 2009 03:00 PM2 mins to read

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High mortgage break fees, two frozen investment funds and the general economic downturn have led to a large increase in complaints to the Office of the Banking Ombudsman.

Ombudsman Liz Brown said there was a dramatic rise in complaints in the second half of last year, culminating in
a record number of complaints and inquiries in January.

She currently has 240 complaints under investigation, compared with only 91 in January 2008.

Liz Brown said the flood of grievances had been caused by the global financial crisis. It began in March when fund manager ING froze two investment funds with exposure to the United States sub-prime market.

The ANZ bank, half-owner of ING New Zealand, had heavily sold the funds to customers through its financial advisory network. Around 60 dissatisfied investors who claimed the bank had inappropriately sold them the products took their case to the Banking Ombusdman.

In 37 cases, after facilitation by the Ombudsman, the bank agreed to buy back all or part of the investment, sometimes with other compensation.

The Herald reported last year that ANZ paid out more than $200,000 to an 87-year-old woman whose life savings were tied up in one of the funds on the advice of her ANZ financial planner.

In some other cases the bank accepted the Ombudsman's initial assessment in favour of the complainant, and in only one case did a formal recommendation that the bank pay compensation have to be issued.

The second main factor in the increased caseload was complaints about the cost of repaying a fixed mortgage early. Complaints began to roll in around November and had been increasing by the month, she said.

The Credit Contracts and Consumer Finance Act said that break fees had to be "reasonable", and if that was the only issue the complaint would be referred to the Commerce Commission, Liz Brown said.

However, many bank customers were complaining that they had been misled about the likely amount of the break fee, that they had not been warned a fixed rate loan might be unsuitable for them, and that the amount they were eventually charged was much greater than they were quoted, she said.

"As a general rule, I am unlikely to uphold a complaint ... when the loan has been made to an adult customer who is not under any sort of disability and who has requested the loan."

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