Ombudsman forces banks to pay compensation

THE Financial Ombudsman has forced a number of banks and building societies to pay out thousands of euros to settle disputes with customers.

The ombudsman, Joe Meade, yesterday published details of some of the largest disputes to come before his office between October and December last year.

In one of the biggest settlements, a building society was made to repay €29,000 to a couple who had a commercial mortgage account with the society but decided to change to another financial service provider.

When they applied to change institutions, their original building society charged a redemption fee of €59,000. The couple paid the fee under protest, but lodged a complaint with the Ombudsman that it was unfair and unreasonable.

The Ombudsman ruled the payment was a “penalty” rather than a fee for releasing the couple from the loan early, that it was invalid and the society should reduce the payment for the couple to €30,000.

Mr Meade directed the society to change its fixed fee policy and has informed the Financial Regulator following similar complaints.

In another case, the ombudsman awarded a couple €6,500 in compensation from a bank. The couple had invested €80,000 in a short-term guaranteed bond which the bank claimed would earn a return in excess of deposit rates over its three-year duration. The investment was based on derivatives but the customers were not informed of this. In the event, the investment produced a nil return.

The ombudsman found the nature of the investment was never explained to these customers and was of the opinion that if it had been known, they might not have made the investment in question.

A number of large cases were also rejected by the ombudsman’s office.

A sporting body, which allowed some of its members to use its credit card to hire cars at the Olympic Games in Athens, said it had sanctioned the hire of cars amounting to €4,740. However, it received a bill for €9,400 when the credit card statements came in.

The organisation said the bank should be liable for the difference. It emerged during the investigation that the additional car hire was undertaken by members of the sporting body, but the extra hiring had not been authorised.

The ombudsman said that it was a failure of the sporting body to the conduct of its own affairs and that there was no negligence or breach of contract or failure of duty on the part of the bank.