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ombudsman news

issue 12

December 2001

current accounts

Here are a few recent examples of complaints we have dealt with concerning problems with current accounts, affecting both private individuals and business customers.

cheque lost in clearing - after five months

Mr D paid a cheque for £500 into his account. It had been given to him by one of his tenants. The cheque was actually a tax refund cheque, which was made out to the tenant, but which the tenant had endorsed over to Mr D in order to pay rent arrears.

The firm passed on the cheque to its clearing agents for collection - as it usually did - and credited Mr D's account. But five months and four days later, the clearing agents told the firm that the cheque had been lost "in the system" and had therefore not been paid out of the account it was drawn on. So that same day the firm debited Mr D's account with the £500, and wrote to tell him what it had done.

Mr D was furious - even more so when he complained to the firm and it told him it had no responsibility whatsoever for the lost cheque, even though it did not dispute that he had paid it in. The firm said Mr D would have to get a replacement from the person who gave it to him. But Mr D couldn't do that - the tenant had died the month before. The firm insisted that Mr D had no comeback - and it quoted law to reinforce what it was saying. So Mr D came to us.

We decided that because the firm was responsible for dealing with the cheque after Mr D had paid it in, it should be held accountable for its loss. Not only was a delay of more than five months unacceptable, but the implication of the legal statement the firm was relying on was that if a banker is at fault in these circumstances, then the loss will fall on it. We thought it made no difference whether the firm or the clearing agent had lost the cheque. The agent was acting on behalf of the firm, which had chosen it, and not on behalf of Mr D. So the firm should accept responsibility for any failings of the clearing agent.

The firm fought the case all the way to an ombudsman's final decision, when we awarded Mr D the value of the cheque plus another £200 for inconvenience. Although the firm paid up, it wrote to the ombudsman afterwards saying that, in its opinion, the decision was "fundamentally flawed" and that the matter would be taken up at the "highest levels" at some future date.

delayed/wrongly processed international transfer

While Mr and Mrs C were on holiday in Africa one Christmas, they were offered the chance to buy some land next to the holiday home they already owned. The people who owned the next-door holiday home were selling the land and wanted a quick sale. Mr and Mrs C were able to negotiate a very good price, on the basis that they paid £1,000 there and then and sent the rest of the money to the sellers immediately they got back home.

On the first working day after their return to the UK, Mr and Mrs C hand-delivered a letter to their branch of the firm, asking it to transfer £7,250 in sterling to the sellers' agent's bank account. They did not fill in the usual international transfer form - but they said they told the cashier what the transfer was for, and how urgent it was. They had used that type of transfer before and the money had usually arrived in three or four days.

The branch had filled in an international transfer form, attached Mr and Mrs C's letter to it, and sent it off to its international department for processing. But the branch had not marked the transfer as "urgent". It had ticked the "standard transfer" rather than the "urgent transfer" box. And it asked for the transfer to be made in local currency, not in sterling.

A week after their visit to the branch, Mr and Mrs C received a letter from the firm to say the money had been transferred. That was when they discovered it had been sent in the wrong currency - and had not been sent "urgently". They told the firm of its errors - and stressed that it had been essential that the money was sent in sterling because the agent's bank would not accept anything else. The firm then "re-called" the currency transfer and sent the money in sterling (from its own account - rather than from Mr and Mrs C's account) and this time marked "urgent".

In the meantime, the sellers got in touch with Mr and Mrs C to say someone else was interested in the land, at a higher price. If the money did not arrive within two days, they would sell to this other party. It did not arrive in time, so Mr and Mrs C lost the deal.

All the money eventually came back into Mr and Mrs C's account and the firm made good any exchange losses. However, Mr and Mrs C put in a substantial claim for "loss of value and loss of profit" - saying that the loss of the land meant they could not now develop another property on the site and let it out to supplement their retirement income, as they had planned.

The firm rejected their claim as being too speculative, but it did offer the couple £5,000. They rejected this and brought their complaint to us. We decided that, although the firm's errors had meant that the money arrived in Africa too late, its offer was reasonable to compensate them for the "loss of chance" they had experienced. So we told the firm to renew its offer.

mail sent to the wrong address

Mrs A and Mrs G bought a hairdressing salon, which had not been doing too well, with the intention of re-launching it under new management. Mrs G was, at the time, still managing a competitor's salon in the town so they wanted to keep her involvement quiet until they were ready to re-launch the business. They were also keen to prevent the staff from learning of the salon's current financial problems. They therefore asked the firm to send all correspondence about the business to Mrs A, at her home address.

The firm knew all about Mrs A's and Mrs G's concerns. But, despite that, it sent a paying-in book to the salon with both their names on it. A few days later, three stylists handed in their notice - they felt their new employers had acted behind their backs and could not be trusted. So when Mrs A and Mrs G came to re-launch the business they did not have enough staff. This meant that, until they were able to recruit and train new staff, the takings were much less than they had forecast.

Mrs A and Mrs G estimated that the firm's error cost them over £35,000 - the difference between what they thought they would make in the first six months and what they ended up making. The firm accepted that it had made an error, but did not accept that a loss as big as £35,000 had come about as a result. It offered Mrs A and Mrs G £1,000 - which they rejected.

We decided that, given the sensitivity of the situation and the fact that Mrs A and Mrs G had made this extremely clear to the firm, it should have taken much more care than it did. But even so, it could not have been expected to foresee losses of the scale claimed. In any event, we were not convinced that Mrs A and Mrs G had actually lost as much as £35,000. We decided that, in the overall circumstances, the firm's offer of £1,000 had been fair.

international transfer request - genuine or not-

H Ltd is a company incorporated in the Isle of Man but operating from Nigeria. It has its main bank account in England.

One morning, the firm received a letter:

  • asking it to transfer over 50,000 US dollars from H Ltd's dollar account to an account at a bank in Chicago;
  • asking it to transfer £16,000 from H Ltd's current account to its dollar account, to ensure there would be enough in the dollar account to cover the transfer; and
  • telling the firm that H Ltd had moved.

Although the letter was apparently signed by H Ltd's authorised people, the firm was wary - partly because it knew there had been previous fraudulent attempts to withdraw money from H Ltd's accounts. So the firm phoned H Ltd in Nigeria and spoke to one of the authorised signatories, Mr J. Mr J confirmed that the letter was genuine, so the firm went ahead with the transfers.

It was only when H Ltd contacted the firm some while later, to ask why so much money had been transferred from its accounts, that it became clear that the letter had not been genuine and the firm had not spoken to the real Mr J at all - he had not been in the office that day. H Ltd asked for its money back. The firm refused, saying it had done all it could to verify that the letter and the transfer instructions were genuine.

When we looked into the matter we noted that, even at first glance, the letter looked suspicious. The letterhead was nothing like the one H Ltd normally used, and the signatures looked suspect too. The legal position is that a forged authority is of no effect. And we decided that, even though the firm had tried to get in touch with H Ltd, it had not gone far enough to make sure the letter was genuine. There were enough grounds for suspicion to suggest it was insufficient just to telephone the Nigerian office and take the word of the man they spoke to that he was who he said he was.

We told the firm to give back to H Ltd the 50,000 US dollars, and to add another 2,500 US dollars for lost interest and inconvenience.

bankers' draft

Mr S saw a second-hand Mercedes and decided to buy it - even though the car's service record was incomplete. The seller said that he would give Mr S all the missing service information when he returned to collect the car.

When Mr S went to the firm to draw out £18,000 in cash to pay for the car, the firm recommended that he should pay by bankers' draft instead. That way, he was told, he'd have 24 to 48 hours to cancel the draft if there was any problem.

Mr S handed over the draft, was given an envelope apparently containing the missing service information, and drove the car home. He then discovered that the envelope did not contain any service information. The following day a local Mercedes dealer told him that the car appeared to have done many more miles than its clock showed - and was only worth £15,000 maximum.

Mr S asked the firm to stop the draft. However, it told him it could not do this as the draft had not been either lost or stolen. A draft could not be stopped just because of a customer's change of mind, however reasonable that change might be.

We sympathised with Mr S. It was obviously a big disappointment to him. But because there are only very limited circumstances when a draft can be stopped, we decided the firm had not misrepresented the position to him. Rather, he must have misunderstood what he had been told. We did not uphold his complaint.

internet banking - whose fault is it when it stops working-

Because she is disabled and cannot get to a branch without help, the ability to run her accounts from home is very important to Mrs L. So she opened an account with the firm that could be run either via the internet or over the phone.

A few months later, Mrs L contacted the firm to say she was having problems downloading information from the firm on to her computer. The firm said the problems were probably with her machine, rather than with its own system. Mrs L did not believe that. She could get similar information from other companies, so she thought the problems had to be with the firm.

Many emails went back and forth between Mrs L and the firm, as it put forward a number of suggestions to try to resolve the problem - all of which involved Mrs L checking her own machine. Some of the suggestions were wrong, and would have caused her further problems if she had tried to implement them. But, overall, it turned out that the firm was not at fault. However, the emails continued to and fro. In the end, Mrs L told the firm that she expected compensation for her "time and inconvenience" at £5.00 per email. The firm was not prepared to offer her anything - mainly because it did not think it had done anything wrong.

We decided that, although not all the firm's answers to Mrs L's questions had been right, it had tried very hard to help by making a number of suggestions. The problem was down to her using an old version of the necessary software package. So we did not think the firm had any reason to pay Mrs L any compensation - even though she had clearly had a difficult time trying to run her account.

when it might be right to discuss a customer's account with someone else-

Mr K has learning difficulties and is unable to manage money himself. Some of the time, he lives at home with his widowed mother. At other times, he "lives rough". Often his mother does not know where he is, or if he will ever be coming home.

One day, Mrs K found in the post an envelope from the firm addressed to her son. She opened it and, to her horror, discovered he had opened an account and applied for a loan of £1,500. She phoned the firm to tell it of her son's problems, and to ask it not to lend him the money. But it would not discuss the matter with her - even when she said that if the firm lent her son money, she would end up having to pay it back when she could ill afford to do so.

The firm went ahead and lent Mr K £1,500. He spent all the money and then defaulted on the first repayment. So the firm started writing to him to chase repayment. Mrs K saw the firm's letters and she phoned again but the firm would still not talk to her about the situation. She then came to us for help.

We told Mrs K that, strictly speaking, the firm was right not to discuss her son's financial affairs with her. But clearly these were special circumstances. We contacted the firm, pointed out the special circumstances, and explained that all Mrs K had tried to do was to save everyone unnecessary bother - and loss. The firm agreed to write off the money it had lent to Mr K.

and finally -


In mid-1999, Ms N read a magazine article that said:

If Kate pays £50 a month into a "high interest" account with [the firm] for the next 2 years, she'll earn £700 in interest on top of the £1,100 nest-egg, as long as she doesn't take any money out. If she pays the same amount into another firm's account, she'll only earn £120 in interest.

So Ms N opened a high interest account with the firm and paid in what the magazine suggested. But at the end of the two years, all she got back in interest was a few pence over £70. Understandably upset, Ms N complained to the firm on the basis that she had opened her account because of misleading information - which, she said, the firm must have supplied to the magazine.

The firm did not agree - and neither did we. The journalist may have misunderstood how the account worked, or perhaps there had just been a printing error. But either way, to get that sort of return would have required an improbable interest rate of just under 50% a year.

Walter Merricks, chief ombudsman

For printed copies of this or any of our publications, phone 020 7964 0092 or email publications.

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.