| insurance
complaints after N2
Many
banks and building societies sell general insurance (such as loan
payment protection) as intermediaries. Complaints about such sales
are covered by the Banking Ombudsman Scheme or Building Societies
Ombudsman Scheme – whose cases are dealt with by the banking and
loans division of the Financial Ombudsman Service.
But
from N2, (1 December 2001 - the date when the new regime comes
into effect), complaints will be allocated to the Financial Ombudsman
Service’s case-handling divisions according to the product involved,
rather than the type of firm that sold it. So the insurance division
will deal with complaints that are solely about insurance. And,
when dealing with subsidiary insurance issues in banking complaints,
the banking and loans division will follow the insurance division’s
lead, to ensure a consistent approach.
So
(if they haven’t already done so) banks and building societies
may wish to look at the April 2001 insurance issue of ombudsman
news, to familiarise themselves with the Insurance Ombudsman’s
general approach to such cases. This focuses principally on the
responsibilities of the insurer, but there are also implications
for intermediaries. See the back page of this edition for details
of how to obtain our publications.
You
can get further guidance on our general approach to insurance
cases from our technical advice desk:
phone 020 7964 1400
email technical.advice@financial-ombudsman.org.uk
firms
not responsible for what their customers do
Banks
and building societies check up on people who open accounts with
them. But there is a balance to be struck between being overly
cautious and overly free-and-easy. A firm can’t necessarily be
held responsible for what its customers use their accounts for,
provided it acted reasonably and with an appropriate amount of
care. Here’s a recent case which shows what we mean.
| case
study – firms not responsible for what their customers do
06/04
Mrs
B replied to a national newspaper advertisement offering
‘business opportunities’ linked to betting on horses. The
advertiser had a banking account and Mrs B paid money into
that account. But the ‘opportunities’ were a scam – the
money was soon withdrawn and the advertiser disappeared.
Mrs B said the firm where the advertiser had its banking
account should pay her money back. Her reason was that she
had subsequently discovered that, at the time she paid her
money into the account, the advertiser had been under investigation
for fraud.
The
firm knew of the investigation – but the account had been
properly opened. At the time Mrs B paid the money over,
no prosecutions had been started and there was no freezing
or court order in place. The firm therefore had no authority
to refuse to accept money paid into the account, and was
under no obligation to do so. So we did not require the
firm to make any payment to Mrs B. |
minors’
accounts
Complaints
involving the accounts of minors don’t come up very often. But,
with more banks and building societies trying to encourage children
to open accounts, such complaints may well grow.
More
often than not, the law about what a minor can, and cannot, be
held accountable for is not always fully understood – especially
by parents or relatives, who invariably become involved in the
complaints which reach us. A recent case highlights some points.
| case
study – minors' accounts
06/05
Mr
C was 16 years old and had two current accounts (with different
firms) and a savings account. He managed these accounts
well.
He
recently paid in to one of his current accounts a £2,000
cheque from Mr D, and then withdrew most of the money and
gave the cash to Mr D. Shortly afterwards, the cheque bounced,
so Mr C owed the firm £2,000 and was unable to get the money
back from Mr D.
Mr
C’s father argued that his son had been ‘led astray’ by
Mr D. Up until then, his son had been careful with his money.
The father said the firm had failed to protect his son from
the effects of having a cheque bounced. He wanted the firm
to write off what his son owed.
If
this had happened in England or Wales, English law would
have provided that repayment of an overdraft cannot be enforced
against a minor. But Mr C lived in Scotland, where the position
is different. Ordinarily in Scotland, 16 year olds are liable
for what they do. But Scots law also allows a court to set
aside a transaction if it considers it to be ‘prejudicial’.
So,
in effect, Mr C (through his father) was asking us to consider
his withdrawal of the money as ‘prejudicial’. However, we
decided Mr C was well aware of the risk and effect of a
cheque bouncing – because it had happened to him before.
He paid the money to Mr D knowing what might happen, even
though he may have considered it unlikely. We did not uphold
the complaint. |
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