Mortgage defaults drive increase in bank customer complaints to Banking Ombudsman

By Gareth Vaughan

Disputes between banks and their customers the Banking Ombudsman is involved in rose 73% in the July to November period compared with the same period of last year.

The latest email newsletter from Banking Ombudsman Deborah Battell says the level of disputes her office is probing, is also up - for the July 1 to November 30 period - by 34% from pre-global financial crisis (GFC) levels.

Disputes are complaints that have been through a bank's internal complaints system but haven't been resolved leaving the Ombudsman to step in.

Complaints direct from the public to the Ombudsman and referred back to the banks, are up just 8% year-on-year but are 82% higher than pre-GFC levels.

Battell told interest.co.nz what the statistics are probably saying, is proportionately more complaints are being referred to the Ombudsman's office for resolution than at the same time last year.

"Lending issues, especially mortgage defaults, are responsible for much of the increase, especially where people have got into trouble with repayments," Battell said.

"Common allegations are that properties have been placed into mortgagee sale unfairly or that banks have been irresponsible to lend in the first place. It has therefore become very clear that debt-related defaults both take a long time to work through and are still happening."

Asked by interest.co.nz last month what both customers and banks could do better, Battell said customers ought to ask their bank lots of questions, and banks could lift their game by making sure customers have all the information they need to make decisions. See more on this here.

In the year to June the Ombudsman scheme completed 1,857 cases (down from 1,974 the previous year) and helped resolve about 4,000 disputes between bank customers and their banks. A total of 1,587 cases - defined as any enquiry, complaint or dispute - were received in the 2010-11 year. That's down 337, or 18%, from the 2009-10 year when complaints reached record levels thanks to the ANZ-ING frozen funds issue. The 2010-11 cases figure also trails 1,888 in 2008-09 but is well ahead of the figures for the 2001-02 to 2007-08 years.

The Ombudsman facilitated about NZ$3.8 million in compensation payments to customers in the 2010-11 year, well down on the ANZ-ING frozen funds driven NZ$14.5 million the previous year. The Ombudsman can seek compensation for customers of up to NZ$200,000 with complaints coming primarily from small businesses and trusts.

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