Common problems: Financial difficulty
1. Credit card debt
Many financial difficulty disputes relate to arrears on a credit card account. In many cases the applicant’s financial situation has declined through unemployment or illness. Often they have prioritised home loan repayments and had no monthly surplus to meet the arrears or monthly credit card repayments. A consumer in this position can usually apply to their financial services provider FSP for financial hardship assistance. However, many FSPs will not assess an application for hardship assistance unless all requested supporting documentation has been provided.
If an applicant has provided sufficient information about their current financial position to enable an assessment of their application to be made, the FSP is expected to review the information and assess the application.
In some cases unreasonable requests for information are delaying the hardship assessment process. Such information may include copies of rental agreements, utility bills, third party information and medical reports (where a medical certificate has already been provided).
The request for information must be reasonable and any offer of assistance made by an FSP can be made on the basis that further supporting documentation will be provided.
2. Property loan debt
Another situation that leads to financial difficulty disputes is an applicant having substantial arrears on their home loan account or investment loan account. A review of the applicant’s current financial position might show that they will not be able to clear the arrears and meet future repayments in the short to medium term. Sale of the secured property might be the only option that will result in repayment of arrears and the outstanding debt.
In this situation, the financial services provider should consider granting the applicant a fixed period of time (say four to six months) in which to sell the property, on the condition that if the sale is not completed within this timeframe, the applicant will surrender the property to the financial services provider.
This option reduces legal fees and other costs associated with repossession of the secured property, and it gives the applicant a reasonable period of time in which to sell the property.
Common problem: Direct transfer
As consumers use internet banking more often to transfer money between accounts and pay bills, there has been a corresponding increase in complaints about unauthorised internet banking transactions. Often these unauthorised transactions are made by a person close to the account holder, such as a family member, friend or employee.
The Electronic Funds Transfer Code of Conduct sets limits on the extent to which an account holder can be held liable for unauthorised transactions, but an account holder may still be liable if they contribute to the losses by, for example, disclosing their password to another person or writing down their password without disguising it. To avoid potential liability, consumers should take great care to maintain the secrecy of their internet banking password.
Preserving good relationships
The FOS dispute-resolution services should be seen as a last resort. In most cases, the consumer and the FSP can work together to resolve their dispute and a third party such as FOS will not be required.
If communication between a consumer and an FSP breaks down or they reach a stalemate, FOS can help to resolve their dispute. Informal, collaborative methods, such as conciliation and negotiation, are used at the start and a formal decision on a matter is taken only if these methods are not successful.
Early, collaborative resolution of a dispute can save all parties time, money and trouble. Perhaps most importantly, it helps the consumer and the FSP to preserve a strong business relationship. That is in the best interests of consumers, FSPs and the financial services industry generally.
Information taken from the Financial Ombudsman Service 2009-10 Annual Review and reprinted with permission.
