Complaints to financial services watchdog double

COMPLAINTS to the Financial Services Ombudsman by people sold disastrous investments more than doubled last year as more dissatisfied customers sought compensation for poor advice on how to grow their money.

Overall, the office received just under 6,000 complaints about banks, building societies and other financial institutions — a 36% increase on 2007 — but the biggest jump was in the area of investments which saw the number of cases rise from 400 to over 1,000.

Most of those cases involved out-of-pocket individuals who were unhappy with the way the risks were explained to them. In several cases ombudsman Joe Meade ordered substantial refunds of the lost money.

However, he also highlighted the case of a credit union which lost €1 million of members’ funds in what he described as a “worthless investment”.

The unnamed credit union was awarded a refund of half the money and Mr Meade ruled the investment broker who sold them the product, a high-risk insurance bond, had failed to advise them that it was an unusual investment for a credit union and they risked losing all of their money.

But he also reserved strong criticism for the credit union and its investment committee which signed off on the bond: “They blindly signed it and did not read any of the documentation.

“If this is how members’ funds from the ordinary folk of Ireland are managed and invested, it’s a sorry state.”

Mr Meade said he had referred the credit union to the Registrar of Credit Unions, the regulatory body which has the power to investigate internal practices, but he added it was only one of several credit unions about which he had received complaints.

He suspected others had made similar unwise investments but did not want to complain to him for fear of revealing their mistakes.

“If this is how they are operating, then God help the plain people of Ireland,” he said.

Almost two-thirds of all the cases finalised by the ombudsman last year were resolved to the benefit of the customer who made the complaint. In one case, a couple who lost €111,000 in a high-risk investment after specifically requesting a low-risk product were refunded €70,000 by the broker.

Not all complaints were upheld, however. A man who lost all €1 million he put into a potentially high-yield investment got no joy from the ombudsman after it emerged he had rejected safer options offered to him.

Mr Meade said the investment was “an unmitigated disaster” and it was understandable that the man would feel aggrieved about the loss of his money but there was no breach of duty of care by the intermediary who offered it to him and the product had not been mis-sold.