A leading consumer representative recently asked what I thought about a financial firm taking a commercial decision to settle a complaint, while not admitting liability. I said there didn't appear to me to be much wrong with that. Making a gesture of goodwill to a long-standing customer, to avoid being drawn into an argument, can be beneficial to both sides - as well as helpfully reducing our own workload.
"But what", my questioner persisted, "if a firm systematically offers settlements to complainants in a series of similar cases, in order to dodge a contentious question of liability- Doesn't that mean the firm knows it is liable, and its failure to admit it is just cynical-"
By then I guessed she was leading me towards the issue of bank default charges. So I admit I ducked the question by saying that our aim is to resolve the disputes that come to us - and that wider questions about fair treatment of customer complaints are matters for the FSA (Financial Services Authority). Although the FSA regulates banks' deposit-taking and complaints-handling, its statutory remit does not cover the conduct of their lending. This is more a matter for the OFT (Office of Fair Trading), which has announced that it is investigating the issue of bank default charges.
Meanwhile, I know that banks are writing off default charges of customers who complain to us - with the result that we have not had to issue any formal decisions in complaints of this type. And the press say the banks are also not defending themselves against those consumers who adopt the more complex route of taking court proceedings.
Of course, the issue will become one for us - if the OFT's work does not result in a swift regulatory solution that deals with past charges as well as with future ones, and if the banks stop settling cases.
It's understandable that the regulators do not want to be accused of becoming price-fixers. Nor do we. But for certain charges, the law on contract variations and penalties demands a reasonable relation between cost and price, and requires those who seek to justify the price to produce evidence of their actual costs.
The FSA has rightly placed emphasis on the principle of "treating customers fairly". Treating them lawfully, and being prepared to stand accountable for that, is surely an important part of that principle.
ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.