some banking 'termination' issues

There are certain circumstances where – even though a complaint is within our jurisdiction – we can dismiss it without considering its merits. This is sometimes called ‘early termination’.

Our rules set out a total of 17 sets of circumstances where we may ‘terminate’ a case. The circumstances listed below are those that tend to crop up most frequently in banking cases.

	The complaint clearly does not have any reasonable prospect of success.
	We can decide that we would not be justified in investigating a complaint if, on the evidence of the papers submitted to us, and taking account of everything the complainant says, we consider that the complaint is bound to fail.
	The firm has already made a fair offer of compensation.
	Where the firm has already offered the customer redress which, even if we upheld the complaint completely, we would not improve on, then we can decide that there would be no justification for our investigating the complaint.
	The complaint has previously been considered or excluded by the Financial Ombudsman Service or by a former ombudsman scheme.
	We do not re-open and re-consider a case, unless there is new material evidence that was not previously available and that is likely to affect the outcome.
	A court has already considered, or will be considering, the issue or issues in the complaint.
	We do not allow a conflict, or potential conflict, to arise between our findings and those of a court.
	The complaint is one that is more suitable for consideration by a court.
	Sometimes, a court may be much better placed than us to deal with a complaint. An example of this is where the dispute is really between the parties to the account (such as a married couple or business partners who have fallen out). If one of the parties to the account complained to us that the firm has favoured the other, and we agreed to consider the complaint, our decision would not bind the other party to the account. It would therefore be better for the complaint to be decided by a court, where the decision would be binding on both parties.
	The complaint is about a firm’s legitimate exercise of its commercial judgement.
	We do not interfere in how a bank or building society exercises its commercial judgement, as long as it does so legitimately. For example, it is not for us to second guess a firm’s decision to refuse a loan, if the firm has carried out its risk assessment properly.

case studies – some banking ‘termination’ issues

The following are all cases where we have had to decide whether the circumstances warranted our ‘terminating’ the complaint.

termination where the complaint clearly does not have any reasonable prospect of success

41/1
customer put money in a specific savings account without asking for advice – later complaining that the firm should have advised her about a different account that might have suited her better

After reading a newspaper article that mentioned a 30-day notice savings account, offered by a certain building society, Ms D decided to open an account. She went into a local branch of the building society, filled in the application form and handed it to the counter clerk with her cheque for the opening balance. Ms D did not ask about any other savings accounts, nor did she ask for any advice.

Some months later, Ms D discovered that the building society offered a 60-day notice account that paid a higher rate of interest. She complained, saying that the building society should have advised her to put her money into the 60-day account instead, as it was much better suited to her needs. When her complaint was rejected, Ms D came to us.

complaint terminated
In these circumstances, the building society had no duty, either in law or under the Banking Code, to offer the customer advice. Ms D had asked to put her money into a specific account, and the building society did not have to query her decision or offer her any advice about a ‘better’ option. We decided that the complaint clearly had no reasonable prospect of success, so we terminated it.

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41/2
firm unable to convince customer that his complaint is unjustified – when complaint brought to us, firm suggested we should terminate it

Mr B was certain that the bank with which he had a mortgage had been systematically overcharging him over a number of years. The bank had done its best to convince Mr B that he was wrong and, in particular, that it had legal justification for charging the sums that Mr B was disputing. However, Mr B did not accept the bank’s explanations and eventually he brought his complaint to us.

The bank said that Mr B’s concerns were not supported by any substantial evidence. It argued that it had already made every attempt to answer the points Mr B had raised and stated that since the complaint clearly had no reasonable prospect of success, we should terminate it.

complaint not terminated
It is for us to decide whether or not a case is suitable for termination. If we decide to terminate a case, we do not look into its merits at all. What the bank was asking us to do here was, effectively, to take a quick decision on the complaint’s merits.

But this was not a trivial case, nor one without any obvious substance. Mr B had taken great trouble in presenting his arguments and appeared sincerely convinced that the bank had been acting unlawfully in charging certain sums to his mortgage account.

We decided the case was not suitable for termination and it went forward to be investigated.

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termination where the firm has already made a fair offer of compensation.

41/3
firm compensated customer adequately for its failure to pay direct debits but could not explain why error occurred – customer hopes to obtain explanation by referring the matter to us

Mrs G was very annoyed when her bank failed to pay two direct debits from her current account. The amounts concerned were fairly small and Mrs G suffered no financial loss, even though she was caused some embarrassment, worry and inconvenience.

The bank was unable to give Mrs G a satisfactory explanation for why the direct debits had failed, but it offered her £150 compensation. Mrs G rejected this offer, not because she felt it was inadequate, but because she wanted us to investigate what had happened and provide her with the explanation she was seeking.

complaint terminated
We considered that the bank had made a fair offer of compensation for Mrs G’s distress and inconvenience. It was not for us to launch an investigation into the underlying facts when the complainant could be adequately compensated without it. So we terminated the complaint.

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termination where the complaint has previously been considered or excluded by the Financial Ombudsman Service or by a former ombudsman scheme.

41/4
several years after complaint settled by a former ombudsman scheme, customer brings it to Financial Ombudsman Service to see if larger amount of compensation payable

Mr A complained to the Building Societies Ombudsman scheme in 1998. His building society had been taking payments from him for the interest on his mortgage but not for the capital as well. It was five years before Mr A realised that his mortgage debt had not reduced at all, as it would have done under a properly conducted capital-and-interest repayment mortgage.

The Building Societies Ombudsman scheme ordered the building society to pay compensation into Mr A’s mortgage account, in line with its then approach to such cases. Mr A accepted the award, which became binding on him and the society. However, several years later he discovered that the Financial Ombudsman Service had a modified approach to such cases, so he made a complaint to us about the same events – to see if the amount of compensation would be higher.

complaint terminated
There was no reason for us to re-open Mr A’s case. His complaint had already been considered by a former ombudsman scheme, and he had accepted that scheme’s decision in full and final settlement of his complaint. There was no new evidence that was likely to affect the outcome.

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termination where a court has already considered, or will be considering, the issue or issues in the complaint.

41/5
building society obtains court order and re-possesses house – proceeds do not cover entire mortgage debt – customer disputes amount still owing and refuses to pay it

Ms E fell into arrears with her mortgage payments and eventually, following a court order for possession, the building society repossessed and sold her house. However, the proceeds of the sale were not enough to repay the whole mortgage debt, so the building society asked Ms E to pay the shortfall.

Ms E complained that the shortfall was larger than it should have been, and she said that the building society had wrongly added certain charges to her mortgage debt. When the building society refused to uphold her complaint, Ms E came to us.

The building society argued that we should exercise our discretion not to investigate the complaint, because the court had ruled on the validity of the mortgage debt when it ordered possession.

complaint not terminated
We did not agree. We are permitted to dismiss a complaint where we are ‘satisfied that the subject matter of the complaint has been the subject of court proceedings where there has been a decision on the merits’ [DISP Rule 3.3.1(8)]. In other words, we do not have to decide again something that a court has already decided.

However, from examining the court papers, it was clear to us that the court had not decided that the mortgage debt, as stated by the building society, was correct. All the court had decided was that there were sufficient arrears to justify repossession. So there was no reason for us not to investigate the complaint.

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termination where the complaint is one that is more suitable for consideration by a court.

41/6
dispute over ownership of a cheque after company is sold

Mr G was the managing director and main shareholder of a company called X Ltd, which he wound up in 1998. He then formed a new company – also called X Ltd – but sold it in 2001.

Shortly after the sale of the ‘new’ X Ltd, a dispute arose about who was entitled to a particular cheque, made payable to X Ltd, that Mr G had paid in to his bank. The bank credited the money to the ‘new’ X Ltd. But Mr G said the cheque was for the ‘old’ X Ltd and that, under the winding-up arrangements, he was personally entitled to the money.

complaint terminated
We decided that the case was better suited to a court. Whether or not Mr G was entitled to the money was really a dispute between him and the buyers of the ‘new’ X Ltd. We had no powers over the buyers, so we could not settle the dispute.

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termination where the complaint is about a firms legitimate exercise of its commercial judgement.

41/7
bank tells customer she cannot transfer her fixed-rate mortgage when her job is relocated to Jersey

The mortgage that Miss J took out with her bank enabled her to pay interest at a fixed rate for the first five years. Under the terms of the mortgage, if she paid off the entire sum during the fixed-rate period, she would also have to pay an ‘early repayment’ charge. However, she could transfer the mortgage to another property without incurring the charge, providing certain conditions were met. One of these conditions was that the new property must meet the bank’s lending criteria.

Quite unexpectedly, two years after she took out the mortgage, Ms J’s employers re-located to Jersey. Ms J thought she could simply sell her house, buy a property in Jersey and transfer her fixed rate mortgage to the new property. However, the bank told her this was not possible. It said that its lending criteria excluded properties in Jersey, or any of the Channel Islands. This was because the Channel Islands are outside the UK and have separate legal jurisdictions.

Miss J complained to the bank, saying its decision was unfair as it left her with no alternative but to pay off her existing mortgage and incur an early repayment charge. She argued that she had been a loyal customer of the bank for a number of years, and that it would do the bank no harm to make an exception in her case. However, the bank said it could not alter its decision, so she came to us.

complaint terminated
We considered that the decision whether to lend money to buy property in the Channel Islands was entirely, and legitimately, a matter for the bank’s commercial judgement. It was not for us to put ourselves in the bank’s position and decide what, if anything, we would have done differently.

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