Financial firms forced to compensate poorly advised clients

Banks, insurance firms, credit unions and a stockbroker have been forced to compensate scores of poorly advised clients in the last six months, it was revealed today.

And a mortgage broker is facing legal action over a conflict of interest in a property deal.

The pay-offs, which range from €1,500 to €140,000, follow 3,800 complaints made to Financial Ombudsman Joe Meade last year.

In one case, a mortgage broker, who owned an apartment in England, arranged finance for a couple who wanted to buy the property as a rental investment.

But they were not told he owned the flat. The couple went ahead with the deal only to have problems letting it out and also trying to sell it on.

They complained to the Ombudsman that the broker recommended an unsuitable investment and wrongfully assured them the market rent available would cover mortgage repayments.

During his investigation he uncovered the conflict of interest which he said tainted the deal at all times. The broker was ordered to pay compensation of €16,500 and is facing court action to ensure the payment is made.

The Ombudsman also detailed several other cases. A couple who lost €90,000 of a €320,000 stock market investment were awarded €40,000 compensation.

The stockbroker was found to have been negligent in buying a high proportion of high risk/high-tech shares - far beyond what had been agreed with the clients.

A bank was ordered to compensate an 80-year-old woman €1,500 after she lost thousands through ATM fraud. She had never used her card or PIN but over a 10-day period €700 per day was taken out of her account

There was no finding of negligence, but the Ombudsman said he was alarmed that there was no system in place to alert the bank that a fraud may be taking place.

A man was awarded €3,000 after a bank wrongly recorded him as a defaulter and his name ended up with the with the Irish Credit Bureau. He cancelled a direct debit after the recipient reneged on their side of the deal.

Despite being assured it was the right move, the bank passed his details on to the bureau.

The Ombudsman also dealt with several insurance claims. In one, the company agreed to increase its offer in a death benefit case to €140,000 after an administration error left a widow without the payment she had expected on the death of her husband.

The Ombudsman praised the firm for increasing the payment even though there was nothing concrete to say they should.

In all, 3,800 complaints - 2,229 relating to insurance and 1,566 concerning credit institutions - were received by the Ombudsman during 2006, a 14% increase over 2005.