Jerome Reilly: Watchdog gets power to name and shame banks
With complaints up 27 per cent, William Prasifka says the figures speak for themselves
WHEN desperate people go to war with the banks, Financial Services Ombudsman William Prasifka is the last line of defence. And as the number of complaints against institutions, once respected pillars of the State, rose by a staggering 27 per cent in the last six months, he detects a rising wave of anger in this country against the banks.
From today Prasifka, the nation's watchdog over the financial institutions, gets new powers from Finance Minister Michael Noonan to name and shame the banks playing dirty with customers.
A new Ministerial Order means the Financial Ombudsman will be able to publish a league table of the worst offenders among the banks, the insurers and those who sell pensions and other financial products.
It's a seachange in the way his office will be able to tackle rogue behaviour, reflecting public outrage over the rough and ready treatment handed out by banks to individuals under pressure.
In an exclusive interview with the Sunday Independent, Prasifka said his office had uncovered growing public anger toward the financial institutions.
"The anger out there seems to be directed generally and is widespread towards all financial institutions," he said. "There was a time when your bank manager was someone who was held in respect, perhaps some amount of fear; someone of real power and someone who you wanted to be on your side. You actively worked to do that. For many people those days are long gone and now the financial institutions are the subject of public anger and distrust, absolutely."
The watchdog pointed to complaints against banks trying to get householders out of tracker mortgages and of people who say they paid for payment protection insurance policies that didn't deliver when they made a claim.
And there is widespread resentment that banks are passing people from department to department, not returning calls and failing to engage with extremely worried customers.
He said the publication of the Anglo Tapes in the Sunday Independent, the Irish Independent and independent.ie prompted more complaints – not just against Anglo but other banks as well.
"There are a lot of people making demands on products they never had to make before such as payment protection insurance. They have lost their job and they have never lost their job before. It is only when they try for the first time to make a demand or claim on the financial product that they start reading [the fine print] what they actually signed. That is the subject of a lot of complaints," Prasifka added.
And he said there was growing concern that banks were simply not dealing with customers in a fair and straightforward way.
"There is lots of evidence that people with issues with their bank are shifted around to a lot of people, can't get responses, and calls are not returned. What we detect is that complaints departments in banks are under-resourced.
"The problem is that consumers are passed up the line and no one in the chain can actually make a decision."
Prasifka said his own office also needed more resources to deal with an ever-growing caseload of people who feel they have received a raw deal – mostly from people in mortgage arrears.
The figures are stark. His office handled 4,676 new complaints in the first six months of this year – a 27 per cent rise on the same period in 2012.
Complaints about Payment Protection Insurance rocketed by 150 per cent. So far this year his office has ordered the financial institutions to pay out nearly €400,000 in compensation. Out of that €146,000 related to investments,€150,000 related to insurance and €100,000 was against the banks.
More than one in three complaints received by his office is directly against the banks – with mortgages the biggest problem area.
One area of particular concern is the perception that banks are, in the phrase of Vincent P Martin of New Beginning, "using every trick in the book" to get people off low-cost tracker mortgages.
The issue of trackers was the largest part of complaints about mortgages in the last year. That has now been overtaken by people involved in the Mortgage Arrears Resolution Process (MARP).
Prasifka said the typical tracker complaint was from a homeowner who took out a tracker mortgage in 2002 or 2004 and then in 2006 decided to go on a fixed-rate mortgage for three or four years.
"When the fixed-rate period came to an end they found the bank had withdrawn the tracker," he said.
When the ombudsman's office investigates, it first looks at the documentation to see what people signed in their original mortgage application.
"Some mortgage documents state: 'you have a tracker mortgage for 25 years' full stop. Other documentation states 'when you go off the tracker on to a fixed rate for three years in all other regards your original mortgage remains unchanged'.
"In those cases it is pretty clear. The householder gets their tracker back," he said.
He said there were other mortgage documents which made it abundantly clear that if you went off your tracker, then the bank was entitled to give you any different mortgage product it was offering at that time. Again, these cases could be easily adjudicated.
"The trouble is that there are mortgage agreements in existence which fall in between those two black and white examples," Prasifka said.
"The position we have taken, and this has been supported by the decision of the High Court, is that in order to support the bank's assertion that the complainant is not entitled to a tracker, the documentation has to be reasonably clear to an ordinary reader. It has to be clear to someone who is not an expert, clear to any reasonable lay person who doesn't have the expertise to parse the sentences in the mortgage agreement. If it isn't, then they should retain their tracker mortgage," he added.
But are banks also cherry-picking certain Central Bank regulations under the MARP and ignoring other regulations – a regular criticism made by mortgage holders in distress and advocacy agencies like New Beginning?
"In cases where complaints have been made against the banks, we have been upholding or partially upholding 31 per cent. That speaks for itself," Prasifka said.
"The general complaint we get in relation to the MARP is that the banks are not sufficiently engaging with customers, not taking into account their unique circumstances; that they are not offering clients a sufficient variety of options that may be suitable for them."
Prasifka welcomed his new powers which come into force from today, with the first list of errant institutions due to be published by year end.
"We think that is important because it reinforces the primary drive here, which is to get the banks to start managing complaints more effectively. That is not happening yet. From our experience at the coalface complaints are only going one way – up."
He added that when complaints went up by more than 25 per cent in six months, then in a very short time his office would be underwater unless it got more resources.
"In this country we simply need to start resolving problems," Prasifka concluded.