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ombudsman news

issue 128

September 2015

complaints from younger people

Our own research shows only one in ten people aged under 25 say they have experienced a problem with a financial business - compared with four in ten people in the next age group up. It would be easy to assume that, given their age, younger people haven’t come into contact with as many financial products and services.

But under-25s are at a stage where their increasing independence - moving out, going to college or university, having a job and a social life means they’re increasingly using financial services in their own right, on and offline. And while only 1% of complaints we received last year came from people aged under 25, that still represents a significant number of young people who’ve encountered difficulties or confusion.

Last year under-25s were more likely than any other age group to complain to us about their bank account. And another significant proportion of complaints from under-25s related to car or motorbike insurance. Both these areas may involve products that are tailored or attractive to younger people. For example, we see complaints about student bank accounts, as well as car insurance involving “telematics” or “black box” technology monitoring people’s driving - which younger people may use with the aim of reducing their typically higher premiums.

At the very beginning of their life-long relationship with financial services, it’s understandable that someone may have a less developed knowledge of how things work - and how problems can be avoided. Depending on the situation we’ve been called in to resolve, this may be something we need to consider when deciding on a fair way forward.

index of case studies

  • 128/7 - consumer complains after insurer rejected his mobile phone claim - because he'd left the phone unattended
  • 128/8 - consumer complains that car insurer unfairly settled third party claim - causing premiums to rise
  • 128/9 - consumer complains that payday loan was "illegal" because he was under 18 when he took it out
  • 128/10 - consumer complains that bank's errors left her without a student account when starting university
  • 128/11 - consumer complains that his bank didn't warn him about the consequences of agreeing to a repayment plan
  • 128/12 - consumer complains that insurer voided his policy for "fronting"

consumer complains after insurer rejected his mobile phone claim - because he'd left the phone unattended

After a night out with friends, Mr V went to call a taxi from outside the club they’d been to. But his phone was no longer in his jacket pocket.

The next morning, he called his insurer to report his phone as stolen. He gave some details of what had happened over the course of the night, and waited for the insurer to investigate the claim.

When the insurer got back to Mr V, they said they weren’t going to pay out because they believed he’d left his phone unattended - against the terms and conditions of his policy.

Mr V complained, saying he’d kept his jacket and phone with him all evening. But when the insurer maintained he’d breached the terms of his policy, he brought his complaint to us.

complaint upheld

We asked the insurer for a copy of the terms and conditions of Mr V’s policy. These said that the insurer wouldn't pay out where a gadget had been “left unattended” or where “reasonable precautions” hadn’tbeen taken to prevent a theft or loss.

The insurer said that when Mr V contacted them to report the theft, he’d told them he and his friends had been sitting in a booth in a club. But he’d apparently gone to the dance floor during the evening, leaving his jacket, with the phone in the pocket, back in the booth.

The insurer pointed out that “unattended” was defined in the policy as “not within your sight at all times and out of your arm’s length reach”. They felt that since the dance floor was out of arm’s length reach of the booth, Mr V’s phone had been “unattended”.

The insurer also argued that the nightclub would have been dark and busy - so Mr V should have taken extra care.

We asked Mr V for his side of the story. He told us he had briefly left the booth to say hello to a friend on the dance floor, but had returned within thirty seconds. He said that while he was gone, he’d left his jacket and phone in the booth, where his small groups of friends were still sitting.

Mr V sent us pictures of the nightclub and showed us where he’d been standing when he spoke to his friend. Although the dance floor wasn’t within arm’s reach of the booth where he’d left his jacket, it was very close - a few feet away, and well within sight.

Given this, we didn’t agree that it was fair to say Mr V had left his phone unattended - or that he’d acted carelessly in leaving it for a short time with people he knew. So we decided that the insurer should have paid his claim.

It appeared that Mr V had bought a new phone in the meantime, so we told the insurer to pay him the cost of the replacement phone.

consumer complains that car insurer unfairly settled third party claim - causing premiums to rise

Mr K drove to college each day in a car with a telematics “black box” - which measured how he drove to help him get lower premiums. A few months into his insurance policy, the insurer received an accident claim against Mr K, which they agreed to settle “without prejudice”.

Mr K denied being involved in the accident - and asked to see the evidence the insurer had received. The insurer explained that a third party had said Mr K had hit and damaged their car. According to the insurer, data from Mr K’s black box showed he’d been driving on that particular road at the time.

The insurer then sent an engineer to inspect Mr K’s car. While the engineer found no damage to the car, the insurer told Mr K that the accident wouldn’t necessarily have caused any damage.

Having lost his no-claims discount and now paying a higher premium, Mr K complained about the insurer’s decision. When they wouldn’t change their position, he contacted us.

complaint upheld

Mr K wasn’t sure what it meant for an insurer to settle a claim “without prejudice”. We explained that it meant the insurer had offered to settle the claim without accepting Mr K was legally at fault. And the offer couldn’t be brought up in court later on.

But it still meant Mr K would have a “fault” claim on his records because the insurer had paid out a claim without being able to get that money back. And as a result, he’d lost his no-claims discount - and his premiums had increased significantly.

We accepted that the terms and conditions of Mr K’s insurance allowed the insurer to settle, or defend, any claims made against him. But we told the insurer that we’d need to check that their actions were reasonable - in light of all the evidence about what had happened.

We asked the insurer to provide data from the black box. This confirmed that Mr K had been at the roundabout where the accident supposedly happened.

When we asked Mr K about this, he explained - and we checked - that the roundabout was on his route to college, so he went over it every day. The black box hadn’t recorded any incidents on the day of the accident. And an independent engineer had found no signs of damage to Mr K’s car.

We asked the insurer for the account of the accident they’d received from the third party. The statement, from a learner driver, was one sentence long - simply saying Mr K had run into the back of their car. There was no statement from the driving instructor - and no diagram or further details about the incident.

Given the lack of evidence for what had happened, we didn’t think it was reasonable for the insurer to have settled the claim as they had. There had also been long delays in notifying Mr K about what had happened - and then in dealing with his complaint.

To put things right, we told the insurer to remove any reference to the accident from Mr K’s records, to restore his no-claims discount, and to refund him the extra money he’d had to pay in premiums, adding interest.

And, in light of the unnecessary delays, upset and inconvenience the insurer had caused Mr K, we also told them to pay him £300.

consumer complains that payday loan was "illegal" because he was under 18 when he took it out

After Mr E’s credit card application was turned down, he found that a marker had been placed on his credit file by a payday loan company he’d used a couple of years previously.

Upset about now finding it difficult to get credit, Mr E complained to the payday lender. He accepted he’d got into difficulties with the loan, but argued that the lender shouldn’t have given him the money in the first place - as he’d only been 17 at the time. Mr E felt that, because the loan had been “illegal”, the lender should refund the money and remove the marker from his credit file.

The payday lender said that according to their records, Mr E had told them he was 18 when applying for the loan. They said they’d relied on the information Mr E had given them - as well as making appropriate credit checks - when making their decision to lend to him. So they refused to agree to his request.

Unhappy with this response, Mr E complained to us.

complaint resolved

Mr E told us that when he was 17, he’d needed to repair his car so he could get to work. The loan application form had said you needed to be 18 - and as he needed the money urgently, he’d decided to lie about his age.

Mr E explained he’d been an apprentice engineer at the time and had managed to repay half the loan before he’d begun to struggle and miss payments. His story matched the payday lender’s records - which also showed that he’d arranged to repay the loan in smaller amounts over a longer period, and had eventually repaid it in full. The marker on his credit file related to this arrangement.

When we spoke to the lender they told us that they relied on the accuracy of the information in application forms and the results of credit reference checks to decide whether to lend to someone. And based on the information they’d had, the payday lender had lent Mr E the £350 he’d asked for.

We looked at the questions the lender had asked - and could see they’d carried out the credit checks they’d mentioned. We thought it was reasonable for them to rely on the information Mr E had provided about his age - without necessarily investigating further.

We also explained to Mr E that, although most financial business don’t lend to under-18s, it’s not illegal for under-18s to take out a loan. Instead, under-18s can cancel the loan - and therefore the contract - before they turn 18. So they wouldn’t have to pay any remaining debt - but wouldn’t get back what they’d already paid.

Taking everything into account, we didn’t think it was fair to ask the lender to refund Mr E the money he’d already spent on his car and had already paid back.

However, following our involvement, the payday lender said they’d reviewed Mr E’s situation. They said that given his young age and the future impact it might have they’d remove the marker from his credit file.

consumer complains that bank's errors left her without a student account when starting university

Ms J already had a current account but a few weeks before she went to university she tried to open a student bank account. But the bank told her that she couldn’t have both her existing current account and a student account open at the same time.

The bank told Ms J to open a new current account with them - which they would change to a student account once her existing current account had been closed. But a week later - and having closed her account with the other bank - Ms J’s new account still hadn’t been changed to a student account.

When she phoned the bank a different adviser told her that the request to change her current account to a student account had been declined. They told her they’d try to make the change again on their system - but it didn’t work.

After several more phone calls and a trip to the bank in person, Ms J still couldn’t resolve the problem. And it still hadn’t been resolved by the time she went to university. When she visited the university bank branch, she was told the original information she’d been given was wrong. She shouldn’t have been told to open a new standard current account - as it wasn’t possible to change the account she had to a student account so soon after it had been opened.

Frustrated, Ms J made a complaint. Several phone calls later, she received a letter apologising for the problem, which had apparently been caused by “human error” at the bank.

Ms J didn’t feel that an apology was enough, so she brought her complaint to us.

complaint resolved

When we asked the bank about what had happened, they accepted their customer service hadn’t been good enough.

It seemed that Ms J had made more than ten phone calls and made two separate trips to the bank to try to sort things out. Looking at the bank’s internal notes, it appeared there was a way of upgrading the account - but no one had taken this forward.

Ms J told us she’d wanted that particular account because of the discount cards it came with. She explained that these extras would have saved her money while living away. So when it seemed she couldn’t get the discount cards from the bank, she’d had to buy them herself.

We pointed out to the bank that, while they’d apologised, they hadn’t made up for the stress and inconvenience their errors had caused Ms J. Not only that, but she’d also lost out financially - spending her own money on the discount cards that she would have had for free with the student account.

During our involvement, the bank said they’d like to offer Ms J £200 - to cover the cost of the extras and to recognise the trouble she’d been put through. They also arranged for her account to be upgraded to a student account immediately.

Ms J was happy to accept the offer.

consumer complains that his bank didn't warn him about the consequences of agreeing to a repayment plan

After graduating from university the previous summer, Mr Q still had a student account with a free overdraft facility - and was around £900 overdrawn.

He knew that his account was due to be converted to a regular account - without a free overdraft - a year after he graduated. Worried that he wouldn’t be able to clear his overdraft in time - and that he’d have to start paying interest or charges - he got in touch with his bank.

The bank offered to set up a “payment plan” and extend Mr Q’s free overdraft facility for 18 months. Mr Q agreed to go ahead with the plan. But a few months later, he got a free credit report and found his bank had put “default” and “arrangement to pay” markers on his file.

When Mr Q questioned this with the bank, they accepted they’d made a mistake recording the default marker and agreed to remove it. But they said the “arrangement to pay marker” was an accurate record that he’d agreed a payment plan with them.

Mr Q complained, saying that if he’d known the consequences of going on the payment plan, he would have asked his parents for the money instead.

But the bank refused to remove the marker. Mr Q didn’t think this was fair, so he contacted us.

complaint upheld

Mr Q told us he was certain that his bank didn’t warn him that being on a payment plan would affect his credit record. And when we asked the bank for their records of their contact with Mr Q, we couldn’t find any evidence - from call recordings, notes or letters about the arrangement - that he’d been told about the impact on his credit file.

The bank argued that the terms and conditions of the account allowed them to record information like this without having to warn Mr Q. But we disagreed. We pointed out to the bank that the Lending Code says that, when reaching arrangements for repaying debt, businesses should tell their customers whether any information will be passed to credit reference agencies.

Since this hadn’t been explained to Mr Q, we didn’t think that he’d been able to make an informed decision about his options for repaying his overdraft. He also sent us information about his parents’ finances, which confirmed that they could have covered the money.

In light of this, we decided that if Mr Q had known the full implications of agreeing to the payment plan, he wouldn’t have gone ahead with it. We told the bank to remove the “arrangement to pay” marker from Mr Q’s credit file - and to record his debt as being paid when he first contacted them about his overdraft.

We explained to Mr Q that this meant he was in the position he would be in if the bank had given him the full facts in the first place - and he’d chosen to borrow the money from his parents instead.

We also told the bank to pay Mr Q £150 for the worry and inconvenience they’d caused.

consumer complains that insurer voided his policy for "fronting"

After the car he drove was stolen and burnt out, Mr L - a student living at home - contacted his car insurer to make a claim. The insurer said they’d look into the claim, sending out a loss adjuster and providing a hire car in the meantime.

A few days later, the insurer phoned back to speak with Mr L’s mother, Mrs L - who was the policyholder - to say they’d be withdrawing the hire car and investigating further.

They told Mrs L that throughout the claims process, Mr L had repeatedly referred to the car and insurance policy as his own. But on the application form, Mrs L had said that she was the main driver - and Mr L was just the “named” driver.

Mrs L told the insurer that she didn’t think it should matter who drove the car more often - because it was still her car. But the insurer said if Mr L drove the car most of the time, then he was the main driver - meaning Mrs L had given the wrong information when buying the policy.

The insurer told Mrs L that, because of this, they’d be “voiding” her policy - refusing to deal with her claim and refunding all the premiums she’d paid. Maintaining she hadn’t done anything wrong, Mrs L then asked us to step in.

complaint not upheld

The insurer told us they believed Mrs L had been “fronting” - that is, she’d bought insurance in her name, rather than her son’s, to get a cheaper premium for him.

We asked the insurer for recordings of the calls from the claims process. Listening to these, it seemed Mr L had consistently referred to his car. He’d mentioned several times that he was the main driver - at one point explaining that while everything was in his mother’s name, it was actually his car. Looking at the insurer’s records, it appeared he’d also confirmed this to the loss adjuster.

We looked at the online application that Mrs L had filled out. In our view, the insurer had asked clear questions about who owned and drove the car - which had been answered as if Mrs L was the owner and main driver.

Mr L told us that it was possible he’d been driving the car more often over the last month or so because it had been raining a lot. But we explained that, based on what we’d seen and heard, we thought it was more likely that he was the main driver. And in the circumstances, the insurer hadn’t acted unfairly.

ombudsman news

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.