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ombudsman news

issue 85

April/May 2010

banking, insurance and investment complaints from consumers living in rural communities

Our research into levels of consumer awareness of the ombudsman across the UK shows that people living in rural and more remote areas tend to know less about the ombudsman service - and their right to complain - than people living in urban areas.

The nature of much of the rural economy - traditionally involving low-paid employment, seasonal jobs and less skilled work - can mean disproportionately more people in poverty and unemployment. And our monitoring across socio-economic patterns shows that people from "DE" backgrounds (for example, agricultural workers) know less than other groups about their rights as consumers and about the role of the ombudsman.

These lower levels of awareness in more rural areas may also reflect more limited access to the consumer-advice agencies and other support networks that can play a key role in advising and guiding consumers with financial problems. The impact of poorer communication in remote areas is also evidenced by lower levels of internet access outside more populated areas - especially broadband "connectivity" levels, which are generally lower in more isolated locations.

However, as shown by the cases referred to us from people living and working in more remote areas, there is no stereotypical set of circumstances. We look at each case individually, taking into account the very different factors involved in complaints brought, for example, by a migrant worker, a traveller, a farmer or someone with a second home in the country.

equine insurance - insurer refuses to pay claim because policyholder did not disclose earlier illness suffered by her horse

Mrs C's horse, Acorn, died after suffering a serious bout of colic. Mrs C put in a claim under her equine insurance policy for related veterinary fees but her insurer refused to pay out.

The insurer said Mrs C had failed to comply with the terms and conditions of the policy. This was because Acorn had suffered an earlier episode of colic, during the first year he was covered by the policy. Mrs C had not mentioned this when she renewed her policy. The insurer said that if she had "made a proper disclosure of all relevant facts" then it would have renewed her policy but excluded any future claims for colic.

Mrs C did not think this was reasonable. She said that Acorn's previous bout of colic had been very minor and she had not needed to make any claim. She had therefore not thought it worth mentioning when she came to renew the policy.

complaint upheld
The terms and conditions stated that the policy did not cover the insured animal for any illnesses suffered before the policy was taken out, unless the insurer had specifically agreed otherwise, in writing. And similarly, the policy would not cover any illnesses that occurred more than once after the insurance had begun, unless the insurer agreed otherwise, in writing.

In our view, this put a significant restriction on the policy. The restriction should have been clearly brought to the policyholder's attention, in accordance with good industry practice. However, we saw no evidence that the insurer had highlighted the significance of this restriction, either before Mrs C took out the policy or when she later renewed it.

We thought it highly likely that if Mrs C had known the insurer would not cover future bouts of colic, she would have sought insurance elsewhere.

Given that Acorn's earlier episode of colic had not been at all serious, we did not think another insurer would have refused to cover him for this condition. So we were satisfied that if Mrs C had changed insurers she could have recovered the veterinary fees she eventually claimed for. We upheld the complaint and told the insurer to pay the claim.

farmer disputes amount paid by insurer under a "total loss" claim, after his horse trailer was stolen

After Mr B's horse trailer was stolen he put in a claim to his insurer. He complained that the amount the insurer offered to pay him was "by no means a fair representation" of the trailer's value.

The insurer insisted that the amount it was offering was fair. It told Mr B that its estimate of the trailer's value was based on recent advertisements in the press for similar trailers. Mr B pointed out that the advertisements in question were for trailers that were far older than his own. When the insurer refused to reconsider its offer, Mr B brought his complaint to us.

complaint upheld
We looked at the details of Mr B's policy and, in particular, at the section relating to claims such as this one, for "total loss". We thought the wording of this section was so unclear that it would have been difficult for any policyholder to know how their claim would be settled.

Mr B produced convincing evidence to support his view that the insurer's offer did not reflect the value of his stolen trailer. We said the insurer should not have based its offer on newspaper advertisements. It should instead have obtained accurate information from a specialist trailer manufacturer or dealer.

We upheld the complaint and told the insurer to pay Mr B a sum equivalent to the market value of his trailer, at the date when it was stolen.

health insurer tells policyholder in rural area to travel to nearest city for treatment as local clinic not on "approved list"

Mrs K, who was in her late 70s, was unhappy with the way in which her private health insurer dealt with her claim for a cataract operation.

Several years earlier her husband had undergone the same operation. He had been very pleased with the care he received at a small clinic, conveniently situated near their home in a rural part of Scotland. So Mrs K told her insurer she would like to have her operation at that same clinic.

She was very disappointed when her insurer said the clinic was not on its "approved list". The insurer suggested that Mrs K should instead be treated at a hospital over 80 miles from her home.

Mrs K was anxious about the awkward journey she would have to undertake, travelling to and from the recommended hospital. She was also concerned that a large hospital might not provide the same standard of care that her husband had experienced in the local clinic. So after much thought, she decided to go ahead and have the operation at the clinic, at her own expense.

Several weeks after her operation her son, who was based abroad with the army, came home on leave. He advised Mrs K to contact the insurer again, as he thought it should have made at least some contribution towards the cost of her operation. However, the insurer was adamant that it could not reimburse any of Mrs K's expenses. She then brought her complaint to us.

complaint upheld
It is not unusual for insurers to state that they can only meet claims when medical treatment is carried out at a hospital on an "approved" list. However, it is not always the case that a listed hospital is the closest, or most convenient for the policyholder.

Under some policies, the insurer offers to provide treatment at specific hospitals, and will arrange payment direct with the hospital and consultant concerned. In this case, however, the terms and conditions said that the insurer would reimburse policyholders for the costs incurred in obtaining treatment at an approved hospital.

So it was clear that if Mrs K's operation had been carried out at an approved hospital, her costs would have been reimbursed in full. We upheld the complaint. We said that in the particular circumstances of this case, the insurer should pay Mrs K the amount it would have paid, if her operation had been carried out at the city hospital. This was slightly less than the total amount she had paid for treatment at the local clinic.

commercial insurer refuses to pay claim from hay merchant after fire destroys season's crop

A hay merchant, Mr M, supplied a number of farms in the surrounding area with horse hay. When a serious fire in one of his barns destroyed most of the season's crop, he claimed under his commercial insurance policy for "restoration costs" and "business interruption" losses.

The insurer turned down his claim. It said it had concluded he was the "only person with the means, motive and opportunity to have started the fire". It also said it would invoke the "fraudulent claim" clause and "avoid" his policy (treat it as if it had never existed).

Mr M then complained to us.

complaint not upheld
We noted that the terms and conditions of the policy said that a policy could be "avoided" if "a claim made by you or anyone acting on your behalf to obtain a policy benefit is fraudulent or intentionally exaggerated, whether ultimately material or not."

The insurer sent us details of the information it had obtained before concluding that Mr M had started the fire himself. It had commissioned forensic experts to investigate the claim. Their report stated, among other things, that the fire had been started deliberately; there were at least three separate "seats of ignition"; and "an accelerant" had been used to encourage the spread of the fire.

After receiving this report, the insurer had interviewed Mr M and his employees. It had also looked into Mr M's financial situation. And it had obtained further evidence that called into question Mr M's credibility and integrity.

Mr M told us he objected strongly to the insurer's view that he had started the fire himself. But he refused to comment on the evidence that had led the insurer to that view, other than to confirm that he was in very serious financial difficulties.

We noted that the "fraudulent claim" clause in Mr M's policy reinforced the common law position that an insured person is unable to benefit from their policy if they have intentionally brought about the loss for which they have claimed.

The insurer had carried out a careful and thorough investigation and produced convincing evidence to support its actions in this case. We did not uphold the complaint.

farm partnership in financial difficulty complains that bank substantially reduced their overdraft limit

Mr and Mrs O complained about their bank after it substantially reduced the overdraft limit on the business bank account for their farm - which they ran as a partnership. For some while they had a £75,000 overdraft facility on the account. However, the bank eventually decided to reduce this to £25,000.

At the time the bank did this, Mr and Mrs O's account was around £50,000 overdrawn and they had applied to transfer their business account to a different bank.

The reduction of their overdraft facility resulted in their incurring a number of charges for unpaid direct debits and returned cheques. It also meant they were charged a higher rate of interest on that part of the overdraft that was now unauthorised. This adversely affected the partnership's credit rating - which in turn caused problems in the transfer of the account to the other bank.

The transfer eventually went ahead a few months later. In the meantime, however, Mr and Mrs O had severe difficulty getting access to enough money to meet the farm's running expenses. They said that by reducing their overdraft in "a sudden and arbitrary manner", their original bank had "ruined" their farm's credit rating.

They thought the bank should pay £20,000 to compensate them for the difficulties it had caused them. When the bank rejected their complaint, Mr and Mrs O came to us.

complaint not upheld
The bank sent us copies of its correspondence with Mr and Mrs O, stretching back for more than a year before it had reduced their overdraft facility. It was clear from these letters that the bank's actions had been far from "sudden and arbitrary".

The bank had given the couple several months' warning that it might reduce their overdraft facility and it had reminded them on several occasions that the entire overdraft was repayable on demand.

The bank had been concerned about the farm's financial position for some while and had called in a specialist firm of agricultural consultants to review the farm's business performance. However, Mr and Mrs O had not been willing to cooperate with these consultants and had refused to provide any of the financial details they had asked for.

While we were sympathetic to the difficulties Mr and Mrs O had experienced, we saw no evidence to suggest that the bank had acted improperly or arbitrarily.

In the circumstances, we thought it had been reasonable for the bank to conclude that the partnership was an increasingly poor credit risk. The bank was entitled to call in some or all of the overdraft at any time, and it had given reasonable notice of its intention to do so. We did not uphold the complaint.

dairy farmer says he was incorrectly sold a whole-of-life policy at the time he took out a business loan

A dairy farmer, Mr A, took out a bank loan of £75,000 to buy an additional milk quota. This quota would enable him to increase the amount of milk that he could produce and sell without incurring a levy.

The bank set up the loan to be repaid over 10 years. It also sold Mr A a whole-of-life policy. He later told us the bank had explained that the policy would "ensure the loan would be repaid" if he died before the end of that 10-year term.

Ten years later, the bank wrote to Mr A about the policy. It told him that, following a recent review, it had concluded that to maintain the same level of cover he would have to increase his monthly premiums.

Mr A asked the bank if it had made some mistake. He had not been expecting to continue paying premiums at all after he had paid off the loan. He said he had certainly not been warned that he might need to start paying larger premiums at that stage.

The bank told him the increase was necessary because "the performance of the underlying investment" had not been "as good as was expected" when the policy was taken out.

Mr A was confused by the bank's response and he complained that he had not been given a "proper explanation".

The bank simply repeated what it had already told him, so he brought his complaint to us.

complaint upheld
Mr A said that when he took out the loan he had told the bank he was anxious about what would happen if he died before he had paid off the loan. He said the bank had told him to take out a whole-of-life policy, which would cover his loan repayments in such circumstances.

We were satisfied, from the information we obtained about Mr A's situation at the time he took the loan, that he had no obvious need for a whole-of-life policy. There was nothing to suggest the bank had properly explained to him how the policy worked. And the bank was unable to tell us why it had thought this policy was suitable for his needs.

We said that because the loan had a fixed term, a term-assurance policy would have been more appropriate for Mr A. We told the bank to calculate how much Mr A would have paid in premiums if he had taken out a 10-year term-assurance policy instead. We said the bank should then pay him the difference between this figure and the amount he had paid for the whole-of-life policy.

farm worker with limited understanding of English says he was given an unsuitable current account that incurred high charges

A Lithuanian farm worker, Mr D, complained about the poor service he received from a UK bank. He had opened an account with the bank shortly after arriving in England to work as a mushroom picker.

He said the company he worked for had presented him with a completed application form for an account with a specific bank. He had been told that his wages would be paid in to this account, and he was shown where to sign his name on the form.

He said he felt he had no option but to sign. He was not offered any choice of bank and had not been aware that the bank in question offered different types of current account.

In due course, Mr D was alarmed to discover the high charges and other fees that the bank deducted from his account each month. He asked the bank to explain the charges, but his knowledge of English was limited and he was unable to understand what it told him.

Eventually, after several unsuccessful attempts to obtain more information from the bank, he decided to close his account and to open a current account elsewhere.

With the help of a community worker, Mr D then complained to the first bank. He had discovered it offered a basic current account that would have been far more suitable for him, in view of his low level of income.

When he asked why the bank had not told him about the basic account, it said that account was only available to customers who were "not eligible for a fee-paying account". He, apparently, "did not fall into that category". He also asked the bank to refund the charges but it refused to do this.

The community worker then helped Mr D to refer his complaint to us.

complaint upheld
We saw evidence confirming that, at the time he signed the application form for his first UK bank account, Mr D had only just arrived from Lithuania. He had no written English and only a very limited understanding of spoken English.

There was nothing to indicate that the bank had taken any steps to establish whether the account for which Mr D had applied was right for him - or indeed that it was what he actually wanted. And there was nothing to indicate the bank had dealt properly with his queries about the fees and other charges on his account.

The bank told us it had "made every effort" to assist Mr D, including suggesting that he should contact a Polish-speaking member of staff at one of its nearby branches. It said Mr D had "chosen not to take up this offer". We pointed out that this was not surprising, given that Mr D spoke Lithuanian, not Polish.

The bank said it refused to refund the charges because these related to Mr D's "overdrawing the account without permission". However, we noted that the bank had never explained to Mr D how the account worked or when charges might apply. And it had started deducting fees and other charges from the account as soon as it was opened, even though it was several months before his wages began to be paid in to it.

We upheld the complaint. We told the bank to refund all the charges and interest it had deducted from Mr D's account. We said the bank should also pay Mr D £150 to reflect the distress and inconvenience it had caused him.

farmers wanting to buy property for holiday letting complain of delay in processing mortgage application

Mr and Mrs T applied for a mortgage so they could buy a barn conversion. The property was close to the couple's farm and they thought it would make ideal holiday accommodation to rent out in order to supplement their income.

The initial valuation report on the property identified issues with the roof, a retaining wall, the conservatory, and the damp-proofing. The lender therefore asked Mr and Mrs T to commission a specialist report from a structural engineer.

The couple later said they were expecting a decision on their mortgage as soon as that report was available. However, once the report was ready, the lender told them it would be sent to its head office and considered by a senior underwriter.

Several weeks later, the lender made Mr and Mrs T a mortgage offer. By that time, however, the seller had taken the barn conversion off the market.

The couple complained that the lender's "unreasonable delays" had "lost" them the property. They asked for a refund of all the costs they had incurred in applying for the mortgage and commissioning the reports. When the lender turned down this request, the couple brought their complaint to us.

complaint not upheld
We noted that the lender had taken just over four weeks from receiving the mortgage application to making an offer. We did not agree that this was unreasonable, in view of the lender's concerns about the property.

We saw nothing to back up the couple's assertion that the lender had "promised to make an offer" as soon as it saw the specialist report. We told Mr and Mrs T that the lender was entitled to ask for whatever information or checks it thought necessary, before making a mortgage offer. We did not uphold the complaint.

farm partnership complains that bank's refusal to honour agreement contributed to the farm's failure

The farm that Mr and Mrs J ran as a partnership became insolvent. They said this came about largely because of problems they encountered after transferring their accounts to a new bank.

The transfer of their current account had gone ahead speedily. However, difficulties arose over how the partnership's borrowing should be managed.

Before the bank had concluded its discussions with the couple over this issue, the partnership found it had insufficient funds to pay the wages of its employees. Soon afterwards it became insolvent.

Mr and Mrs J then complained that the bank's failure to "honour its original agreement" had played a significant part in bringing about the insolvency, as it had "exacerbated existing difficulties and damaged the partnership's reputation locally".

The partnership's existing borrowing was secured against Mr J's personal property. Mr and Mrs J said they had only moved their accounts because the new bank had agreed to change this arrangement, providing them instead with a business loan and an overdraft facility totalling nearly £500,000.

The bank denied having made any such agreement and the couple eventually brought their complaint to us.

complaint not upheld
The bank insisted that it had never agreed to extend any finance to the partnership. It said it would only have done this after making a thorough assessment of the partnership's accounts. It had never been able to complete such an assessment because, despite a number of requests, Mr and Mrs J had not provided up-to-date, audited accounts.

We obtained details of the partnership's finances. These showed that the farm had already been under severe financial pressure before the bank accounts were transferred. It appeared to us that the partnership would shortly have become insolvent in any event.

We could not find any evidence that the bank had agreed to provide the level of finance that Mr and Mrs J were seeking. And we thought it unlikely that the bank would have agreed to funding of almost £500,000 without making some mention of this in its records.

We were satisfied, from the evidence provided, that the bank had not misled Mr and Mrs J about the level of funding they could expect. We did not uphold the complaint.

bank refuses to let a member of the traveller community withdraw money from her account

With the help of a community advice worker, Mrs L complained about her bank's refusal to let her withdraw money from her own account.

Mrs L was a member of the traveller community and unable to read or write. She said she had opened a bank savings account around 25 years earlier. She had only twice attempted to withdraw money from it. On the first occasion, around twenty years after opening the account, she had withdrawn £50,000 in cash.

When asked for proof of her identity she had shown the cashier a recent letter the bank had sent her at the address registered for her account.

On the more recent occasion, when she had attempted to withdraw a similar amount, she had produced an up-to-date bank statement as proof of her identity. However, the bank refused to let her have any money. It said she had failed to provide adequate proof of her identity.

Mrs L had returned to the bank a few days later. She handed over several documents that she thought would satisfy the bank about her identity. However, the bank still refused to give her any money. It said these documents had not only failed to establish her identity - they had raised further doubts about it.

complaint upheld
Mrs L told us she had opened the account shortly after separating from her husband. She had been staying with her sister in Wales at the time, and had given that address when she opened the account. She still used that address for her bank statements and other correspondence about her account - even though she had only actually lived there for a few months.

She said she had used a different name when she opened the account as she had been anxious to try to prevent her husband from tracing her. She had called herself by the new name for several years before reverting to her earlier surname. It had never occurred to her to inform the bank about this or to change the name on her account.

The bank said it was concerned about Mrs L's inability to provide the "normal documents" used for proof of address and identity, such as recent utility bills. And it said she had not been able to explain satisfactorily why her surname differed from the name on the account.

The bank had thought she appeared uncertain when she was asked to state her date of birth. She had subsequently produced a driving licence but this showed a slightly different date of birth to the one she had given when she opened the account.

We noted that one of the documents Mrs L had shown the bank was a statutory declaration, explaining why she had changed her name when she opened the account. This declaration had been drawn up for her, and witnessed, by a solicitor at a neighbourhood law centre.

Mrs L would have been aware that it is a criminal offence to make a false statement and that the document was legally binding. We thought that, in the circumstances, the bank should have accepted this declaration as sufficient explanation for why Mrs L used a different name to open the account.

We thought Mrs L's stated reason for continuing to use her sister's address for correspondence was entirely plausible. As is usual for members of the traveller community, Mrs L frequently moved from place to place and had no permanent address of her own. And it was evident that - over the years - she had never had any difficulty in receiving the statements and letters that the bank sent to her at her sister's address.

We noted that one of the documents Mrs L had taken to the bank was her birth certificate. This gave the same date of birth as the one on the bank's records. It was true that the birth date on her driving licence differed slightly. However, in the circumstances we did not agree with the bank that this was a matter for concern.

It is not uncommon for members of the traveller community to be unaware of their exact date of birth. And in any event, because she was unable to read or write, Mrs L would have relied on someone else to complete the paperwork for the licence on her behalf.

Mrs L had not been able to produce a utility bill when the bank asked for one as proof of her current address. However, she did have what we considered to be acceptable alternatives, including a letter from the local council and several letters from the Department of Work and Pensions.

We fully accepted the need for the bank to exercise caution and follow certain procedures, not least as part of its obligation to try to prevent fraud and money laundering. However, it was clear that Mrs L had gone to considerable lengths to provide evidence of her identity and of her entitlement to the money in question.

We thought that the bank should have been more sensitive to the circumstances of this particular case and that it should have been more flexible in its approach. We upheld Mrs L's complaint and told the bank to allow her access to her money.

smallholder complains of inappropriate investment advice

Mr G ran his own smallholding and had been a member of a local farming cooperative for five years, until the partnership was bought by a private company. He then received a lump sum of just over £10,000 - representing the value of his shareholding at the time.

Mr G later told us he planned simply to leave his lump sum in a high-interest account with his building society. However, he was contacted by a business that said it specialised in providing investment advice to people working in agriculture. He took advice from the business and invested a total of £10,000 in three companies that were listed on the Alternative Investment Market (AIM).

Less than two years later, the combined value of Mr G's investment in these three companies had fallen to below £1,000. He asked the business to compensate him for his losses, which he said were the "direct result of poor advice". However, the business refused, telling him it was "common knowledge" that all share investments were "liable to fluctuate, according to the state of the market". Mr G then brought his complaint to us.

complaint upheld
We looked into Mr G's circumstances at the time he was advised to invest in the shares. It was clear that he had little knowledge of investments. Until the opportunity to invest in the farm cooperative had arisen, he had kept all his money in bank and building society deposit accounts.

His aim in investing in the cooperative had not been to turn a profit on his funds but to help benefit his own business and that of neighbouring farms.

The shares that the business had recommended represented a high risk. However, the business was unable to produce any evidence that it had established his attitude to risk or assessed his needs. We upheld the complaint. We told the business to compensate Mr G by returning him to the position he would have been in, if he had left his money in the high-interest deposit account rather than investing in the shares.

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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.