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ombudsman news

issue 28

May 2003

banking case round-up

selection of some of the banking cases we have dealt with recently

banking - firm mishandled temporary Euro deposit

Mr A, who lived in Portugal, had a sterling current account and a sterling deposit account with a UK firm. He faxed the firm, quoting his existing current account number as identification, to say the firm would be receiving the proceeds of a house sale amounting to 150,000 Euros. He told the firm he wanted to put this money in a separate interest-paying account for one month.

Some days later, when the money reached the firm, it converted the Euros to sterling and credited the sum to Mr A's sterling deposit account. A month later, Mr A asked for this money and the firm converted it back to Euros. But the exchange rate had changed, so the resulting amount was significantly less than the original 150,000 Euros. Mr A complained that he had neither asked the firm to convert the money to sterling nor authorised it to do this.

complaint upheld
The firm's own international payments guide, and its internal procedures, said it would check with the customer before it converted any Euro payments that amounted to the equivalent of over £25,000.

Mr A's fax had made it clear that the deposit was only a temporary one. If there had been any doubt about his intentions, the firm would have had time to contact him before the payment arrived. But although it had Mr A's phone and fax numbers, it had made no attempt to contact him - either before or after the money arrived.

We required the firm to make good the exchange-rate loss, with interest.

mortgage - delayed application led to lost purchase

Mr and Mrs H found a house they wished to buy and they applied to the firm for a mortgage. They needed to arrange this as quickly as possible to secure the purchase, as the seller had set a time limit for exchanging contracts.

The firm preferred to use the same solicitors as the borrowers, provided the solicitors were on the firm's approved panel. Unfortunately, Mr and Mrs H had already appointed solicitors who were not on this panel. There was a delay before the firm pointed this out to them. And although the couple then immediately switched solicitors, the delay meant that the mortgage offer did not arrive until just after the seller's time limit had expired. He then sold the house to someone else.

When the couple complained to the firm, it said it would refund their £220 survey fee. Annoyed that the firm was not prepared to do more, Mr and Mrs H came to us.

complaint settled
We considered that the delay was, in the main, the firm's responsibility. It agreed to pay Mr and Mrs H a further £750 to cover their wasted legal fees and their disappointment.

mortgage - transferee liable for whole balance

Mr J bought a house with a £30,000 mortgage from the firm. His mother lived in the house and made the monthly mortgage payments. Later, in order to pay off some personal loans, Mr J took out a £20,000 further advance on the mortgage. He made the monthly payments on this himself.

However, Mrs J became worried about her son's financial difficulties and he agreed to transfer ownership of the house to her, subject to her continuing to pay the mortgage. Shortly after the transfer had gone through, Mr J became bankrupt.

The firm held Mrs J responsible for making payments for the £20,000 advance, as well as for the original £30,000 mortgage. She complained to the firm about this, saying it should have written off the £20,000 when her son became bankrupt.

complaint rejected
The firm was not aware of Mr J's financial arrangements with his mother. It was still entitled to receive payments for the total mortgage, which included the additional £20,000. Mrs J knew the total amount of the mortgage when she took it over. We therefore rejected the complaint.

mortgage - defective valuation - inconvenience

After seeing a 1920s house that she was interested in buying, Ms T applied to the firm for a mortgage. She had been concerned about some cracks in the property, but she was reassured by the mortgage valuation prepared by one of the firm's staff valuers. He said that the cracks were of long standing, typical for a property of that age, and that they did not indicate a serious problem.

Ms T completed the purchase and moved in. But she soon noticed that the cracks were widening. Further investigations revealed that extensive repairs were required. Luckily, the property insurers agreed to pay for these repairs, but they said Ms T would have to pay an excess of £1,000.

Since she had gone ahead with the purchase on the strength of the firm's valuation and its assurance about the cracks, Ms T held the firm responsible. She thought it should pay her some compensation as well as the £1,000 excess required by her insurers. When the firm refused to settle the case on any basis that was acceptable to her, she referred the complaint to us.

complaint upheld
We noted that Ms T would suffer major inconvenience while the work was carried out, and that a number of the attractive period features of the house would be destroyed. In the circumstances, we felt the firm should make a total payment to her of £4,000, to cover the excess on the insurance and compensation.

Walter Merricks, chief ombudsman

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.