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ombudsman news

issue 77

May/June 2009

financial complaints involving the use of the internet

issue 77 index of case studies

  • 77/1 - consumer complains of financial loss after cashier in bank branch gave him inaccurate information about his online account
  • 77/2 - consumer provides inaccurate details of his income when applying online for a mortgage
  • 77/3 - consumer denies withholding significant information when applying online for motor insurance
  • 77/4 - consumer complains that problems with his online share-dealing account caused him to place duplicate order by mistake

77/01
consumer complains of financial loss after cashier in bank branch gave him inaccurate information about his online account

Mr T, who had a current account and an internet savings account with bank A, decided to close down his internet account. He would then put his savings in a new account with a different bank - bank B.

He planned to send his savings to bank B in the form of a cheque, so he first needed to transfer the money from his internet account to his current account. He was unsure how long this would take, so he called in at a local branch of bank A and spoke to one of the cashiers. She told him the transfer would be "instantaneous" as it was an internal transaction.

So Mr T then posted a cheque to bank B by second-class post, reckoning that it would take at least two days to arrive.

In view of what the cashier had told him, he thought he was allowing ample time for the money to reach his current account before bank B got the cheque.

Early the next morning, he logged-on to his internet account. He entered all the information needed to close the account and transfer his savings to his current account. After he had pressed the button to confirm he wished to proceed, an on-screen message told him the transfer might take "up to 48 hours".

Mr T then cancelled his cheque. He was alarmed by the possibility that it might arrive at bank B before the funds reached his current account. Four days later, once he was sure his savings had been transferred, Mr T sent bank B another cheque.

He then wrote to bank A. He said its cashier had misled him about the length of time it would take to transfer the money from his internet account. He wanted compensation for the interest he said he had lost, as a result of the delay. He also wanted bank A to refund the fee it had charged for cancelling his cheque.

Bank A acknowledged that Mr T had been misinformed when he visited the branch. However, it pointed out that branch staff did not normally get involved in queries relating to internet accounts. It added that Mr T had not been financially disadvantaged, as he had continued to receive interest on his money within the internet savings account until his savings were transferred.

Unhappy with this response, Mr T referred his complaint to us.

complaint upheld in part
We saw no evidence that Mr T had lost out, as far as interest payments were concerned. The rate offered on his new account was almost identical to the one he had received from his internet account, and bank A had continued to pay interest until his money reached bank B.

The terms and conditions of the internet account clearly stated that the account could only be managed online, and that any queries should be made by phone or by email, not at a bank branch.

We accepted bank A's point that it was not usual for branch staff to be asked questions relating to the bank's internet accounts. However, we did not think that excused the fact that the cashier had misinformed Mr T. She could simply have given him details of the internet account's phone and email helpline, rather than attempting to answer his query herself.

We said bank A should pay Mr T £50. This covered the amount he had been charged for stopping the cheque, together with a token amount in recognition of the inconvenience it had caused him by its poor handling of his initial enquiry.

77/02
consumer provides inaccurate details of his income when applying online for a mortgage

After completing an online mortgage application, Mr B was told he had the lender's "agreement in principle" for a mortgage of £324,000. Based on this provisional agreement, and as part of the mortgage application process, Mr B authorised a payment to the lender for a booking fee and a valuation fee.

Before it could proceed further with the application, the lender needed to see proof of Mr B's income. After checking through the documents Mr B sent to confirm his income, the lender said it could not lend him more than £260,000. It said his income was "not sufficient to support a larger amount".

Mr B complained that the lender had "broken the agreement" and he asked it to return the fees he had already paid. However, the lender refused to do this. It said it had given its "agreement in principle" in good faith, based on the information he provided in his online application. It added that it had already spent some time processing his application and had made arrangements for the valuation, even though this had not gone ahead.

Unable to get any further with his complaint, Mr B came to us.

complaint not upheld
The lender sent us a copy of Mr B's online mortgage application form. He had indicated that he received a monthly bonus of £7,000. However, this was not reflected in the documents he later sent the lender. We noted that the £7,000 was not, in fact, related to Mr B's main employment. It was the annual net profit of a separate business that he ran.

We then checked the online application process itself. We looked to see if there was anything about its wording or design that might have misled or confused Mr B - resulting in his entering incorrect information. However, both the online process and the wording of the instructions were clear and straightforward.

We concluded that Mr B had made an unfortunate error when he completed the mortgage application online. That error led directly to the lender's saying it would be prepared to lend him £324,000 - subject to the usual verification of income and a valuation of the property in question.

We said that the fair and reasonable outcome in this particular case was for the lender to refund the valuation fee - as no valuation had taken place. However, we agreed with the lender that it should not refund the booking fee.

77/03
consumer denies withholding significant information when applying online for motor insurance

Ms L was due to renew her motor insurance policy but was not particularly happy with the quote she received from her existing insurer. She applied online to a different insurer and was able to obtain a more competitively-priced policy.

A few months later she was involved in a road traffic accident. However, when she put in a claim under her new policy, the insurer refused to pay out. It had discovered that when she applied for her policy, she had said she had no penalty points on her driving licence. In fact she had nine points. The insurer said she had "intentionally withheld" this information, so it would "avoid" the policy. This meant it would treat the policy as if it had never existed. It would return the premiums she had paid but it would not pay the claim.

Ms L denied that she had intentionally withheld any information. However, the insurer refused to reconsider its decision, so she brought her complaint to us.

complaint not upheld
The insurer sent us details of the forms Ms L had completed online. We looked in particular at the section relating to penalty points. Ms L had told us that this section was set out in a very misleading way. And she said "the computer must have automatically reverted to a default position that showed a different answer to the one I gave".

We found nothing misleading about the way the page was structured, and the wording and layout were perfectly clear. Ms L had been asked to select one of several options to indicate how many points, if any, she had on her licence. There was no "default position" that could have led to her inadvertently sending an incorrect answer.

In order to provide the insurer with the information that she had no points on her licence, she had first had to select the "zero" option, and then to click on "yes" when prompted to confirm that this was her answer.

We therefore thought it more likely than not that Ms L had intentionally misled the insurer about her penalty points.

We said the insurer was entitled to reject the claim and to "avoid" the policy.

77/04
consumer complains that problems with his online share-dealing account caused him to place duplicate order by mistake

Mr A was an experienced investor who regularly bought and sold shares through firm C's online dealing service. He told us he had been interested for some while in making a sizeable investment in the shares of a particular bank. He had been watching the share price closely before deciding the time was right to make his purchase.

However, after deciding to invest just under £24,000 in the bank's shares, he was frustrated to find there was a problem with firm C's website and he was unable to log-on to his share-dealing account. He therefore rang firm C's phone dealing service and placed an order for the shares.

Later that afternoon, Mr A successfully logged-on to his online account with firm C. However, when he looked at the list of recent transactions he was unable to find any reference to his phone order. Assuming that there had been some error and that firm C had failed to process the order - Mr A then put through an order online for the bank shares.

In due course, Mr A discovered that his phone order had, after all, gone through - as had his later online order. He contacted firm C and asked it to cancel the second order, as he did not have sufficient funds to cover it. Firm C refused to cancel the deal, but it allowed him fourteen days to raise the necessary funds. He settled the account 10 days later.

Mr A then complained to firm C about its refusal to cancel one of the deals. He said it was only because its online system had let him down that he had inadvertently placed a duplicate order. He could not afford to retain both lots of shares and wanted firm C to compensate him if he was forced to sell the "unwanted" shares at a loss.

Firm C denied that it was responsible in any way for Mr A placing the second order and it said it was not liable for any losses he might incur. Mr A then referred his complaint to us.

complaint not upheld
In the terms and conditions of its online dealing service, firm C stated that it could not be held responsible for any problems resulting from the service being temporarily unavailable. It also said that there might be a delay before "executed trades" were listed online in the customer's account. Customers were advised to phone the firm's helpdesk if they had any queries about recent transactions.

Mr A said that before placing his order online he had tried to call the helpline. However, he had been annoyed to find that the line was busy. He said he did not want to "waste any more time waiting to get through on the phone". He was anxious to ensure he got his shares before there was any adverse price movement, so he had gone ahead with the online purchase.

We did not uphold Mr A's complaint. We said it had been his decision to place the second order without first checking whether his phone order had gone through. The firm could not be held responsible for his decision or for any losses he sustained as a result.

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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.