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ombudsman news

issue 139

January/February 2017

complaints involving under 25s

Given the wide range of life events people experience from middle age and into retirement - and the wide range of financial services these typically involve - it isn't surprising that "generation X" and "baby boomers" together account for 80% of complaints we resolved in the year to December 2016.

In contrast, younger consumers bring far fewer complaints to us. Consumers aged 25 and under - spanning the millennial and post-millennial generations - accounted for less than 1% of complaints.

Of course, these differences might simply reflect that the younger people are, the less engagement they've generally had with financial services. But when they do, their first impressions may set the tone for their future attitudes towards managing their money. And just like older generations, younger generations may face challenges relating specifically to their age.

car and motorcycle insurance

Car insurance premiums for the youngest drivers - aged 17-22 - are nearly double those of drivers aged 23 and over, and nearly triple those of people in their 30s (AA British Insurance Premium Index, Q4 2016). So it's understandable that young people look for ways to keep their costs down. This may result in what's known as "fronting" - where a parent tells their insurer they're the main driver, but it's actually their child. Parents might not realise they're doing anything wrong. But if the insurer cancels the policy - which they may be entitled to do - it can lead to trouble getting insurance in the future.

index of case studies

  • 139/1- consumer complains that insurer has cancelled policy and accused her of "fronting" - because car is actually owned by her son
  • 139/2 - young driver complains that insurer has wrongly cancelled car insurance - after telematics box reports speeding
  • 139/3 - consumer complains that bank has closed her account - after suspecting her involvement in fraud
  • 139/4 - young consumer complains that bank has put Cifas marker on his records following fraudulent activity on his account
  • 139/5 - consumer complains that bank has closed her current account and put her name on Cifas database - so she can't open an account elsewhere
  • 139/6 - young consumer complains that bank has closed account and applied Cifas marker - following fraudulent activity

139/1
consumer complains that insurer has cancelled policy and accused her of "fronting" - because car is actually owned by her son

Mr H was involved in a serious car accident with two other cars. Following an investigation, the insurer contacted Mr H's mother, Mrs H, who was the policyholder. They said they believed Mrs H and her son had been "fronting" - that is, that Mr H was actually the main driver of the car, but that Mrs H had said it was hers to get cheaper premiums. So they were cancelling the policy as if it had never existed.

The insurer also explained that they had an obligation to pay the other drivers' claims arising from the accident - and that they'd be looking to reclaim the money from Mrs H.

Mrs H complained to the insurer. She said that even if she'd made a mistake on the application, the insurer wasn't being fair or proportionate. When the insurer didn't respond to her complaint, Mrs H phoned us.

putting things right

We asked the insurer what information they'd based their decision on. They showed us that Mrs H had said on the online application form that she was the "registered keeper" of the car. But when they'd investigated the claim, she'd told them that the car was registered in her son's name. And this had been confirmed to the insurer by the DVLA.

We checked the application form - and decided that the insurer had asked a straightforward question about the name of the car's registered keeper. When we asked Mrs H about this, she said that as she'd been paying the insurance premiums and the car's running costs, she'd just assumed she was the registered keeper.

We asked the insurer if they would have provided cover if they'd known Mr H was in fact the registered keeper of the car. They said they wouldn't have. They sent us the policy terms and conditions, which said clearly said that a vehicle could only be registered in the name of the policy holder or their spouse.

Mrs H argued she'd just made a simple mistake on the application form. However, we thought the situation was more serious. We told Mrs H that, even if she hadn't set out to deliberately mislead the insurer, we thought she'd been very careless in filling out the application form. The insurer wouldn't have offered cover if they'd known she wasn't the car's registered keeper - so it was fair for them to treat the policy as if it had never existed.

The insurer had already offered Mrs H £50 for the poor handling of her complaint, which we thought was reasonable in the circumstances.

By using telematics or "black box" technology, young people can demonstrate they're driving safely - and get lower insurance premiums as a result. As these devices have grown in popularity, we've seen them feature in complaints involving younger drivers.

139/2
young driver complains that insurer has wrongly cancelled car insurance - after telematics box reports speeding

Mr L, aged 19, took out a car insurance policy which required him to have a telematics box fitted to his car to record his driving habits.

A short time afterwards, Mr L received a letter from the insurer saying they would be cancelling his insurance within seven days. They quoted a clause in the policy that allowed them to do so where a driver broke the speed limit. According to the insurer, the telematics box had recorded that, on two occasions in the same journey, Mr L had travelled at 65 mph in a 30 mph zone.

Mr L's father phoned the insurer, saying that the telematics box must be wrong, because there was no way Mr L could have reached those speeds on those particular roads. He also complained that the clause the insurer had referred to wasn't in the policy documents.

At first, the insurer said that if Mr L cancelled his policy before the date in their letter, the incident wouldn't be on his record. But before Mr L could try to do so, the insurer cancelled the policy themselves.

Feeling his son had been treated unfairly, Mr L's father asked us to step in.

putting things right

We asked Mr L's father why he believed the information from the telematics box was wrong. He sent us calculations that he said showed it would have been impossible for Mr L to have gone over the speed limit in the places where the telematics box said he had.

We asked for the insurer's view on Mr L's father's calculations. They felt he had misunderstood the data and provided comments from an engineer explaining how the car could have accelerated. They also sent us a report showing the box had been installed correctly and was connected to a sufficient number of satellites to work properly. We decided that, on balance, the data from the telematics box had been accurate.

We then asked the insurer for copies of their policy documents. We agreed with Mr L's father that the paperwork didn't specifically say that the insurer could cancel a policy if a driver broke the speed limit. But it did clearly say the insurer could cancel if the data from the telematics box identified "unacceptable driving behaviour".

The insurer hadn't defined exactly what this meant. But in our view, there was no question that doing more than double the speed limit was unacceptable driving.

The insurer accepted that their helpline had been wrong to say the incident wouldn't go on Mr L's records if he cancelled his policy himself. We considered whether Mr L was worse off because of this mistake. But we concluded that he'd be in the same position if he hadn't been told this- as the cancellation would still be on his records.

Given everything we'd seen, we didn't agree Mr L had been treated unfairly.

current accounts - "money mules"

There's evidence that younger people are particularly at risk of unwittingly getting caught up in financial fraud. According to the fraud prevention service Cifas, over half of "misuse of facility" fraud involves people aged under 30. This generally involves,knowingly or otherwise, acting as a "money mule" - allowing criminals to launder money through your account in return for a cash payment.

The real consequences of committing this kind of 'Misuse of Facility' fraud includes the risk of a conviction for money laundering, which carries a maximum prison term of 14 years. Additionally it could affect future applications for mortgages, credit cards, mobile phones and student loans.

We have clear rules that our members need to follow to make sure that individuals are only recorded where they were complicit in the fraud.

Cifas - www.cifas.org.uk

Financial businesses that are members of Cifas record and share information through the National Fraud Database. People who contact us often do so after a business closes their account without warning - and they then discover they've got a fraud marker on their record.

139/3
consumer complains that bank has closed her account - after suspecting her involvement in fraud

Miss K, aged 21, suddenly found she couldn't use her debit card or mobile payments - and that her online banking had been blocked. When she phoned her bank, she was told her current account and ISA had been closed. And the next day, she received a letter confirming that they no longer wanted her as their customer.

Over the next few weeks, Miss K tried to find out what had happened. She also tried to open new accounts with different banks. When both proved unsuccessful - worried she had no way of being paid or covering her bills - she phoned us.

putting things right

Miss K told us that in her phone call with the bank, she'd got the impression that they were concerned about money going into her account from a job she'd recently had. She said some of the banks she'd unsuccessfully tried to open accounts with had referred to "Cifas". But she hadn't really known what this was - and thought she might be asked to pay for something when she had no way of doing so.

We asked the bank for more information about their decision to close Miss K's accounts. They showed us that her current account had regularly been receiving large amounts of money, which had then been moved out again to different accounts almost immediately. The bank explained that because of this activity, they'd suspected Miss K was involved in fraud - and had put a Cifas marker on her records.

In light of this, we asked Miss K more about the job she'd mentioned. She said she'd found it on a classified ads website - and of all the applications she'd sent off, that employer had been the only one to reply. She said she'd been taken on as PA to a management consultant. Among other admin tasks, she'd been asked to receive money into her bank account and to send it onto her boss's clients. She said it wasn't the job she'd hoped for, but she'd really needed the money.

We looked carefully at the whole email exchange between Miss K and her boss. Given the volume and general tone of these messages, we could understand why Miss K had though the job was legitimate. We explained to Miss K that we thought it was very likely that her employer had been a fraudster - and it seemed her bank thought so too.

But there was no evidence to suggest she'd been knowingly involved in fraud. So in the circumstances, we told the bank to remove the Cifas marker from her records.

139/4
young consumer complains that bank has put Cifas marker on his records following fraudulent activity on his account

Mr H, aged 18, received a letter from his bank explaining that they'd decided to close his account. After Mr H had difficulty opening a bank account elsewhere, he complained that the bank had put fraud markers on his file. He said he'd lost his debit card and been a victim of identity theft - but hadn't been involved in fraud himself.

However, the bank wouldn't remove the markers - and Mr H contacted us.

putting things right

In their letter to Mr H, The bank hadn't given any detail about why they'd blocked his account. So we asked them to tell us how they'd reached their decision.

The bank explained that Mr H had rarely used the account since opening it three years previously. They felt the fact he'd paid in £100 just before the fraudulent transactions happened meant he was clearly complicit in the fraud.

On balance, we didn't agree. We pointed out that the £100 payment wasn't necessarily connected to the subsequent transactions. It was possible that it was a payment Mr H had received from the fraudsters in return for using his bank account. But in itself, it wasn't sufficient evidence that he'd been involved in the fraud. And it wasn't fair for the bank to apply a fraud marker based on suspicion alone.

In the circumstances, we decided a fair solution was for the bank to remove the fraud marker from the open record about Mr H - but that it could be retained for the bank's own internal records.

139/5
consumer complains that bank has closed her current account and put her name on Cifas database - so she can't open an account elsewhere

Ms M, a college student, found she couldn't withdraw cash or check her bank balance. When she phoned her bank, they asked her to come into one of their branches to discuss the situation.

When Ms M visited her local branch, she was told that a fraud marker had been put on her account due to a transfer and withdrawal she'd made. She was told her account was being closed and she'd need to bank elsewhere in the future.

Ms M tried to open another account with several other high street banks, but was turned down. An adviser with one bank told her that they couldn't approve her application because of a warning on the Cifas database. They said she'd struggle to open an account elsewhere, too.

Ms M's mother, Mrs M, complained to the bank that had closed her current account. But the bank replied that they'd acted fairly and in line with their legal and regulatory obligations. Worried her daughter was now without a bank account, Mrs M phoned us.

putting things right

We asked the bank for more information about why they'd applied the fraud marker. They said that Ms M's account had received £800 - and they'd been told by the bank the money had come from that the transfer was fraudulent. The money had been withdrawn the same day using Ms M's card and PIN.

The bank said that when they'd phoned Ms M about the transactions, she'd told them that the money had originally come from a "friend of a friend". Because of this, the bank believed Ms M was involved in the fraud. So they felt closing the account and reporting the issue to the Cifas had been appropriate actions.

We then asked Ms M's mother about what had happened. She said she hadn't known these details until her daughter's complaint had been brought to us. But she said that at the time of the transaction, Ms M had been experiencing severe bullying in college, including having her personal possessions stolen, and was under the care of the local community mental health team for anxiety and depression. She said that if her daughter had got caught up in fraud, it was likely to have been under duress.

Mrs M and Ms M agreed that we could share this information with the bank. In the circumstances, they agreed that to help Ms M get things back on track, they'd remove her name from the Cifas database - although not from the bank's own records.

So while she wouldn't be able to bank with them again, she should be able to get an account elsewhere. We explained this to Ms M and her mother, who were pleased to accept the offer.

139/6
young consumer complains that bank has closed account and applied Cifas marker - following fraudulent activity

Miss D, a 16 year-old sixth-form student, received a letter from her bank saying they'd blocked her current account and would shortly be closing it. When Miss D's mother - Mrs D - phoned the bank to question this, she was told two large amounts of money had been paid into the account.

The bank said another bank had contacted them about the payments, which they believed had been fraudulently paid into Miss D's account by one of their own account holders.

Miss D's mother asked the bank to refund the payments and withdrawals her daughter hadn't authorised. But the bank refused to do this. Instead, they closed Miss D's account, paid her the £1 left in it and put her details onto Cifas, the fraud prevention database.

Unhappy with how Miss D been treated by the bank, Miss D's mother got in touch with us on her behalf.

putting things right

We asked the bank for more details about the disputed transactions. They explained that two payees had been set up online. As part of this, "one time" passcodes had been sent to the mobile number registered to the account - Miss D's mother's mobile.

Two payments of several thousand pounds each had been paid out to these payees around a month later. According to the bank's records, immediately after the payees had been set up, the registered mobile number for the account had been changed to Miss D's own mobile.

The bank's records showed that various bill payments had then been set up, with passcodes sent to Miss D's number. A number of cash withdrawals had been made with Miss D's card and PIN - but she'd only reported the card missing around six weeks later.

We asked Miss D's mother to tell us more about the misplaced card. She pointed us to the date that Miss D had last used the card to get out cash herself - and said it could have gone missing anytime from that point. When we asked Miss D's mother why it had taken six weeks to report the card missing, she said that Miss D rarely used it, so hadn't noticed before then.

We also asked Miss D's mother how she thought a fraudster might have got Miss D's online account details. She said that her daughter's phone had been stolen - and her online bank details were probably stored on it. First, Mrs D gave a date two months before the first disputed transaction took place. She later said that Miss D had lost her phone just before the fraud happened.

In light of everything we'd seen and heard, we weren't convinced that Miss D hadn't authorised the transactions in question. The faster payments had been set up using passcodes sent to the registered numbers on the account - first Miss D's mother's mobile and then Miss D's mobile.

Although Miss D said she'd lost her phone, this didn't explain how a third party had then managed to get her new number and set up further payees. And even if Miss D hadn't used her bank account recently, it wasn't clear why she hadn't questioned receiving mobile passcodes relating to payees she apparently didn't know about.

Similarly, the cash withdrawals had been made using Miss D's own card and PIN. This suggested she'd either made the withdrawals herself, or had given someone else her PIN in order to make them. We could also see from the bank's records that the other bank had said the two large payments had been paid into Miss D's account fraudulently, without the authority of the third party account holder.

In the circumstances, we explained that we didn't think it was unfair for the bank to close Miss D's account or to record her details with Cifas.

Image: ombudsman news 139

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.