By Gareth Vaughan
Complaints to the Banking Ombudsman from bank customers are rising, up 13% in the first four months of the 2011-12 year, with the Ombudsman saying she's unclear exactly why they are increasing.
Banking Ombudsman Deborah Battell told interest.co.nz complaints rose by 38, or 13% between July 1 and October 31 to 324 compared with the same period of last year. This comes after the Ombudsman's annual report for the year to June 30 showed complaints and enquiries holding at historically high levels.
Battell said it was unclear why the number of disputes was remaining so high.
"We thought we probably reached a peak at about July-August last year (2010-11)," Battell said. "New dispute numbers were at historically low levels for the first six months of last year and then they began to climb again."
"It's a little unclear as to why that's happening. Some of it seems to be the lag in terms of hardship type issues, loan defaults and the consequences of loan defaults, and the fact the banks have been trying to manage customers more effectively through defaults," Battell added.
She said recently there had been a spate of complaints about early repayment costs, which she suspected is driven by people who entered into five-year fixed term loans just before the global financial crisis hit and interest rates dropped dramatically. Some customers are now looking to exit those long term deals early.
In the year to June the Ombudsman scheme completed 1,857 cases (down from 1,974 the previous year) and helped resolve about 4,000 disputes between bank customers and their banks. A total of 1,587 cases - defined as any enquiry, complaint or dispute - were received in the 2010-11 year. That's down 337, or 18%, from the 2009-10 year when complaints reached record levels thanks to the ANZ-ING frozen funds issue. The 2010-11 cases figure also trails 1,888 in 2008-09 but is well ahead of the figures for the 2001-02 to 2007-08 years.
The Ombudsman facilitated about NZ$3.8 million in compensation payments to customers in the 2010-11 year, well down on the ANZ-ING frozen funds driven NZ$14.5 million the previous year. The Ombudsman can seek compensation for customers of up to NZ$200,000 with complaints coming primarily from small businesses and trusts. Battell said several recent disputes have stemmed from tough times in the wine and property sectors.
'Customers should ask questions & banks need to provide all the necessary information'
Asked what customers could do better Battell suggested they ought to ask their bank lots of questions.
"I think they need to understand that banks will not always provide advice, they'll provide information. Ultimately the decisions customers take they (customers) are responsible for."
"In that respect it's often helpful for customers, if they're not sure, to seek advice from experts. Particularly in situations where they're unsure if they can sustain the borrowing, where they might be over stretched. I think the other thing is customers do need to make sure they understand all the terms and conditions of what they're signing up for," Battell added.
As for banks, they could lift their game by making sure customers have all the information they need to make decisions.
"That's a very broad statement, but it includes making sure they fully understand the customers' circumstances when they are talking to that customer. So for example if the customer is fixing rates on a mortgage, making sure the customer understands that interest rates can move and that could have quite a significant effect on the early repayment costs they have to make if they choose to break that fixed-term loan," said Battell.
Bank staff need to make sure customers understand the pluses and minuses of the products and services they're paying for and to ensure customers are made aware of alternative options.
Big four banks behind the lion's share of complaints
In the year to June there were 1,435 combined enquiries, complaints and disputes, up 45, or 3%, year-on-year. Of these 1,237 involved the big four banks - ANZ, ASB, BNZ and Westpac. Complaints about the big four were up 48, or 4%.
Excluding the ANZ-ING frozen funds cases, ANZ - the country's biggest bank - was the subject of 96 enquiries (up from 70), 315 complaints (down from 322) and 75 disputes (down from 109) giving a total of 486. That's down 15 year-on-year and leaves ANZ the subject of 34% of the combined enquiries, complaints and disputes, down from 36% in the previous year. ANZ holds about 31% of the country's banking assets.
Total enquiries, complaints and disputes related to ASB rose 59 to 254 making it the subject of nearly 18% of all enquiries, complaints and disputes, up from 14% a year earlier. Enquiries rose to 52 from 22, complaints to 159 from 135 and disputes to 43 from 38. ASB has about 19% of banking assets.
BNZ enquiries more than doubled to 66 from 31, complaints about BNZ fell to 128 from 138 and disputes fell to 41 from 59 leaving a combined total down 7 to 235, or 16%. BNZ has about 19% of banking assets. The total enquiries, complaints and disputes involving Westpac fell 3 to 298, giving it 21% of the total. Westpac holds about 20% of the country's banking assets.
The next biggest source of enquiries, complaints and disputes was Kiwibank at 96, although this was down 31 year-on-year.
A complaint is described as a matter that appears to fall within the Banking Ombudsman's terms of reference but hasn't been considered by the bank participant's internal complaints process. A dispute is defined as a complaint that has been considered by the participant's internal complaints process without reaching a resolution satisfactory for the complainant. An enquiry is a complaint that is banking related but is viewed as clearly outside the Ombudsman's terms of reference or isn't about a participant in the scheme.
The scheme's 17 participants, who fund it through levies, include all the country's major banks, some building societies and credit unions. The Banking Ombudsman scheme's board is chaired by University of Auckland law professor Ron Paterson and includes BNZ chief executive Andrew Thorburn, his Westpac counterpart George Frazis, Consumer New Zealand chief executive Suzanne Chetwin, and personal finance columnist Mary Holm.
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