I used to think that the Financial Ombudsman Service was well-meaning but incompetent. Some things that i’ve seen recently have made me reconsider, Perhaps I’ve been naive.
This organisation claims to be impartial. It warns you not to think of it as an advocate for customers in their struggles with banks. It acts as a court of law would.
This raises a question. If you want to take a balanced position between a massively powerful and wealthy bank and a single individual, where do you stand? Do you position yourself midway between the two? Do you stand closer to the customer in an attempt to redress the balance? Do you cuddle up to the bank in the hope of a nice juicy job with them next year?
You’re getting good at this. It’s the last one.
The Ombudsman will always side with the bank, unless its actions have already been shown to be illegal, like PPI and, hopefully soon, interest rate swaps. In those circumstances, the Ombudsman may have the courage to find in favour of the customer. Enforcing the decision is another matter entirely. We all know how that goes.
The Financial Ombudsman Service is nervous about setting any sort of precedent. It leaves that to other, braver souls. It doesn’t want to rock the boat.
The case that got me thinking about this involves a mis-sold mortgage. When the bank, HBOS, processed the mortgage, it inflated both the value of the property and the size of the family income. This allowed the mortgage to be granted. If the bank had not used these fraudulent methods, the mortgage would have been refused. It would have been better if it had.
Times have been hard lately. The family income fell and the mortgage repayments couldn’t be met. This is where the bank’s brilliant strategy becomes clear. It was able to seize the house to re-sell it, and it has the added bonus of pursuing the family for the £200,000 shortfall. This provides it with both a capital gain and a long-term income.
I know that these aren’t the only people to have found themselves in difficulties in recent years. I know that the bank’s not to blame if your income falls. I know that we live in a world of ‘buyer beware’ but, apart from all of this, HBOS acted fraudulently to make sure that it sold this mortgage. Just because the bank isn’t responsible for every one of the family’s problems, does that make its wrong-doing disappear? Is it responsible for nothing at all?
Complaints to the bank ended as you might have expected, but it’s the Ombudsman’s behaviour that’s particularly telling. As part of the investigation, HBOS was required to present documentation detailing the mortgage assessment. This would show the dodgy dealing involved in that process.
HBOS hunted and hunted, looking in all the bins and behind the filing cabinets, but, surprise, surprise, the documents were nowhere to be found. So, HBOS failed to produce the required documentation by the deadline. What was the Ombudsman’s reaction? It was decided that, in fairness to the bank, the adjudication would continue without this information. You can imagine the outcome. It’s like the prosecution in a court case producing no evidence.
Having proceeded in this eccentric manner, the Ombudsman responded to the inevitable complaint in this way:
“Thank you for your email and attachment of 28 January 2014. As confirmed in my email of the same date I am responding to your attached letter.Having reviewed its contents I’m afraid I have very little to add to my position on your complaint, as outlined in my opinion letter of 13 November 2013. While I take into account all of the comments you have made, our service’s role is to concentrate on what we believe are the main and relevant issues in your case. As an impartial organisation we do not take instruction from either party as it is for us to decide what evidence we consider is necessary and relevant to our investigation.”
You couldn’t make it up.