Bank who overcharged interest is ordered to pay €35,000 compensation

Bank who overcharged interest is ordered to pay €35,000 compensation
Financial Services and Pensions Ombudsman Ger Deering

The Financial Services and Pensions Ombudsman (FSPO) upheld almost half of all complaints it formally investigated in 2019 issuing legally binding decisions in the banking, insurance and investment sectors.

Overcharging on loans, cancelling insurance policies and threats to close a bank accounts were amongst the issues the FSBO dealt with.

According to the decisions, a couple, Maitiú and Mary hired an audit firm to review the interest charged by a bank on their mortgage who found they had been overcharged €23,751.37 in interest. The bank responded that the audit firm’s interpretation was incorrect, and after performing its own recalculation on the account, that it had, in fact, undercharged the couple by €3,450.

In his decision, the Ombudsman stated that the bank had made it ‘entirely unclear what interest rate was applicable’ to the couple’s loan account. He upheld the complaint and directed the bank to pay €35,000 in compensation for the totality of the complaint.

Other decisions last year include an order to pay compensation of €15,000 to a company after a bank threatened to close its bank account due to ‘outstanding debt,’ which turned out to be an error. An insurance company who refused to cover treatment for a lame dog was also ordered to pay for the costs along with compensation.

Informal mediation was used to successfully resolve most of the complaints closed in 2019. Of the 439 complaints closed by way of a formal investigation which resulted in a legally binding decision, 201 were either fully, substantially or partially upheld, while 238 were not upheld.

The Ombudsman Ger Deering can direct a financial service provider to pay compensation of up to €500,000 to a complainant and to rectify the conduct that is the subject of the complaint. There is no limit on the value of the rectification that can be directed.

Decisions issued by the FSBO are legally binding on both parties and can only be appealed to the High Court.

“I believe it will be evident to anyone who reads these decisions that the work of my Office can have a very profound impact on many of those who use our services,” Mr Deering said.

“I believe that these decisions play a very important role in improving the conduct of financial service providers.”

The ombudsman will publish 25 legally binding tracker mortgage decisions separately next month in order to illustrate the breadth and complexity of the issues raised and given the interest in these particular legally binding decisions.

Earlier this month, AIB said it was setting aside an additional €300m to help compensate 5,900 more tracker mortgage tracker customers after some of the group brought and won their cases at the FSBO.

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