By Amanda Morrall

Banking customers are being urged to smarten up and read the fineprint, with complaints against providers remaining at historically high levels.

The Banking Ombudsman, in its just-released 2011/12 annual report, reported seeing 1,587 cases - the bulk of which dealt with spats involving chequing and savings accounts and also mortgage financing.  While that's down from the peak of 1,924 complaints in 2009/2010, the office said overall numbers remain high.

Cases in which customers and their banks had reached an impasse and needed an independent party to review rose 20% in the past 12 months.

Banking Ombudsman Deborah Battell said in most instances miscommunication and disappointment over expectations and outcomes lay at the heart of the complaints.

She said while customers needed to be more vigilant about understanding the contracts they were entering into before signing them, banks also needed to do a better job educating their clients.

"We see customers distraught because they thought their banking service provider would prevent them from making poor investment, business or property decisions - or because it had changed its lending policies or products," Battell said in the report.

Among some of the frequent complaints cited were lag time between making money available after it had been deposited or transferred and limited service on weekends, along with banks not accessing pots of other money in separate accounts to spare clients penalties and fees due ostensibly to insufficient funds.

Battell said clients needed to take greater responsibility for ensuring they lived up to their part of the prescribed arrangements.

Banks meanwhile needed to be more proactive about addressing their customers' complaints and also making them aware of the dispute resolution mechanism (such as that offered by the Banking Ombudsman). She said many scheme participants continued to view referral to the Ombudsman "as a failure of their own processes".

"Banking service providers short change their customers if they fail to inform them about the scheme's existence," Battell said.

"Slavishly following internal process rather than thinking about how best to resolve a case puts the relationship between a banking service provider and its client at risk."

The Banking Ombudsman, which is an approved dispute resolution scheme under the new financial regulation, has been in existence for 20 years now.

New computer systems and a transition away from paper has significantly reduced the time it takes for the Ombudsman to hear and resolve a case.

The number of complaints resolved in 60 working days has gone from 15% to 51%. The Ombudsman completed 89% of enquiries and 88% of complaints within two working days, helped by the introduction of electronic referral of complaints to participants.

According to its report, the office has helped more 62,000 customers, resolved around 20,000 cases and facilitated NZ$36.9 million in compensation.

The Ombudsman has been particularly active with respect to complaints laid against the former ING NZ, which in 2008 froze two investor funds together valued at NZ$533.51 million.

Investors claimed the level of risk attached to the funds, which invested in so-called collateralised debt obligations, had been understated to them. The final dispute was concluded this year. The Ombudsman heard 684 cases in total and ordered compensation of NZ$26.4 million.

ING NZ, which had been 49% owned by ANZ, was subsequently taken over by the Australian bank and renamed OnePath.