Case Studies

The Office was approached by representatives of an association concerning the charges of late penalty fees imposed by the banks on its members. The members of the association were not paid by their company (employer) for two months and as a result, they were not able to meet the monthly installments related to their loan commitment.

Even though the problem stemmed from the non-payment by the employer, the Office made an appeal to the banks, which responded positively and reversed the penalty charges. The Office acknowledges the consideration shown by the banks in genuine hardship cases where the problem was caused by circumstances beyond the control of the customers.

LESSONS LEARNT

The banks appreciate the plight of their customers and, depending on the circumstances, are willing to waive certain fees.

Ms. M was reconciling her bank statement when she discovered that there were two withdrawals from the account that she could not identify. She subsequently visited her bank to make enquiries regarding these unauthorized withdrawals. The bank checked its records and indicated to Ms. M that both withdrawals had been made through ATM transactions.

Ms. M advised the bank that on a previous occasion, when she was unable to use her card she had given it to her daughter to withdraw funds. However, she maintained that these specific withdrawals were not authorized and requested a full refund.

The bank agreed to investigate the matter further and told the complainant that it would advise her of its findings. After several unsuccessful attempts to get her matter resolved, Ms M brought the matter to the attention of the Office of the Financial Services Ombudsman for assistance.

After a review of Ms. M’s case, the OFSO held discussions with the bank regarding the complainant. In response, the bank indicated that it could not be held responsible for Ms. M’s losses since there was a clear breach of the Card Agreement by the complainant. As a result, she would not receive a refund of the monies lost. In support of its position, the bank submitted a copy of card Agreement outlining the conditions of use of the card. It made specific reference to the provisions which stated that:

• The Cardholder shall not allow any other person to use his/her Card and PIN and will be responsible for the care and safe preservation of both Card and PIN, and,
• The Cardholder will be liable for all indebtedness resulting from the use of the Card by any other person using the Card with the express or implied consent of the Cardholder.

The Ombudsman’s office held the view that based on the information submitted by the bank, it was acting in accordance with the Agreement. Ms. M, by her own admission, disclosed her PIN to her daughter and in was in breach of the cardholder agreement. The OFSO upheld the position taken by the bank and wrote to Ms. M advising her accordingly. The Office was unable to pursue the matter further and her file was closed.

LESSONS LEARNT

It is against the Card Agreement to allow anyone to use your card or to share your PIN. Doing so, means you give the person access to your monies and the bank will not honour your request for a refund of monies taken from your account.

The customer alleges that he had a mortgage loan with a bank, which was scheduled to be fully liquidated in 2004. In December 2002, however, an officer of the bank contacted the customer and offered him a waiver for the Christmas season without penalty. The customer agreed to this arrangement.

The customer further states, however, that on checking to reconfirm the end-date for his loan, he was informed that penalty interest had accrued as a result of the waiver obtained over the Christmas season. In fact, the loan was extended by a further six months as a result of the penalty interest. He was told that he should not have qualified for such a facility.

He claimed that he was not informed of the additional charges as a result of the waiver. When he contacted the Office of the Financial Services Ombudsman (OFSO), the customer was advised to lodge a formal complaint with the bank and, if not satisfied, to return to the OFSO.

The customer subsequently returned to the Office to report that as a result of making a formal complaint to the bank, the bank agreed to waive the interest payments enabling the loan to be liquidated according to the original schedule. The Office however further suggested to the customer that he should obtain the waiver from the bank in writing.

LESSONS LEARNT

Beware of aggressive advertising campaigns by the banks, if it sounds too good to be true, it may actually be so.

The customer alleges that in March, 2003 he attempted to withdraw monies from an ATM machine. The card became stuck and was eventually captured by the machine. The machine thereafter issued a notice that read: “Temporarily Out of Service”.

The customer visited the bank the following day and informed a bank officer of what had transpired. Internal checks were made and he was informed that his card was not at the branch in question. He was asked to return after working hours so that a further check could be made but he decided to return to his home branch to explain the situation and obtain cash over the counter.

On arriving at his branch, he was informed that his card was used twice on the said morning that he made the report at the branch where the card was first captured. This resulted in unauthorised withdrawals of over $2,000.

After investigations, the bank reimbursed the customer for the monies withdrawn by the unlawful party, less $500. The bank invoked Section 19 (2) of the Electronic Transfer of Funds Crime Act No. 87 of 2000 as the basis for its decision. This Sub-Section gives the card issuer the authority to levy a charge of $500 in certain circumstances concerning the use of ATM machines. The bank held the view that the customer did not exercise the necessary precaution at the machine when he realised that his ATM card had been captured, thereby causing a perpetrator to become privy to his PIN when he was attempting to retrieve his card.

The customer however remained dissatisfied and contacted the Office of the Financial Services Ombudsman because he believed that he was entitled to be reimbursed for the full amount that was withdrawn by the perpetrator of the fraud. The Ombudsman wrote to the bank on the matter and pointed out that the customer had met all the conditions that allowed for a full refund under the said Act. The bank agreed to refund the customer the sum of $500 that was withheld since the customer had made his initial report within the time stipulated in the Act.

LESSONS LEARNT

Report the loss of your ATM or credit card as soon as possible or within forty eight hours; and confirm in writing in fourteen days (14) if the report was done verbally. If that is done you may not be liable for any loss that may occur.

Customer A alleges that on December 1st, 1998, she signed a Memorandum of Deposit of Stocks and Shares and other Marketable Securities as guarantor for a loan taken out by Customer B. She also deposited as security, certain units of the Money Market Fund of the Trinidad and Tobago Unit Trust Corporation registered in her name.

The loan, Customer A alleges, was paid off in full in July 2002 but the bank refused to release the security. Instead, the bank indicated to Customer A that the security would be used against a loan for another account transacted by Customer B in respect of Customer B’s business venture.

After negotiations with the bank to liquidate the second loan, and having arrived at an agreed settlement, the bank still refused to release Customer A’s security, indicating that the security would be switched to secure an overdraft facility incurred by Customer B.

In her letters to the bank in July 2003, Customer A requested the bank provide her with details of the amounts for which she was liable as guarantor so that she might make arrangements to settle. However, no details were provided by the bank. The customer stated that she was under the impression when she tendered her shares as security for Customer B’s loan, that they would be used as guarantee for the particular loan and not be utilised for any and all other debts of Customer B. When she requested a copy of the document from the bank, she was only provided with the front page which did not state that she was responsible for all debts of Customer B.

The Office of the Financial Services Ombudsman acknowledged its gratitude for the kind consideration given by the bank to Customer A’s matter which led to resolution of the case even though it fell outside the time-frame stated in the terms of reference for the Office.

LESSONS LEARNT

When providing guarantee for the loan of a third party, try and be specific as to the particular indebtedness you are guaranteeing and establish, if possible, the limit on the guarantee and an assurance that your security will be released as soon as the particular debt is repaid.

The customer alleged that she is the holder of a chequing account at a bank and that she used her cheque to purchase goods at a retail outlet. Two days later, she deposited cash into her chequing account via the ATM machine to cover the cheque drawn.

Her bank received the cheque for clearance two days after it was drawn but before the deposit was cleared. The cheque was rejected and returned to the outlet from which the customer purchased her goods, and caused penalty charges to be made on her account in respect of the transaction.

When the cash deposit was finally cleared by the bank, and the cheque was re-deposited by the outlet, on the instruction of the customer, it was again rejected by the bank and returned because of insufficient funds. The account only had a few dollars more than stated on the cheque and the penalty charges that were debited to the account for the first transaction as well as the second, left the account with insufficient funds to cover the cheque.

The customer approached the Office of the Financial Services Ombudsman for assistance. She was advised that the bank was within its right to continue to dishonor her cheque because:

• her cash deposit to cover the amount was made after the cheque was drawn; and
• she did not have sufficient funds in her chequing account to cover the penalty charges incurred for the cheque which was rejected on more than one occasion.

She was also informed that under the “Negotiable Instruments (Dishonored Cheques) Act”, it is illegal to issue cheques on accounts when there are insufficient funds to cover same.

LESSONS LEARNT

Do not issue cheques if you are aware that there are insufficient funds in your account. You will incur penalty charges by the bank for processing the returned cheques. Your credit worthiness will be affected and this may prevent you from getting a loan from the bank in question or even another bank. Further, it is illegal to issue cheques with insufficient funds and may result in you being fined or even imprisoned.

The customer alleged that she took out a loan at a bank a few years ago but because of illness decided to pay off the loan before its expiry date.

She further stated that she informed the bank of her intention and was advised that she would have to pay a penalty charge for paying off her loan earlier than originally contracted. The customer found this to be unreasonable since she approached another bank, where she had another loan, with a similar request and was offered a rebate.

The customer approached the Office of the Financial Services Ombudsman and was advised that when a higher purchase loan is offered to a customer for a specific period, interest is calculated over the period of the loan and added to the principal. The total is then divided by the number of months to repay the loan in order to determine the monthly installment. If the loan is paid off in full before the end of the period, the customer can normally expect to get a rebate on the interest added. However, if the loan is on the declining balance, there would be no rebate since the interest is only calculated and paid on the balance outstanding each month.

In most cases, if a customer decides to pay off a loan in full before the end of the termination date, a penalty charge is applied; the amount could be as much as a few months of interest. Theoretically, this is to compensate the banks for the imputed loss of interest during the time it would take them to un-lend the funds that would otherwise be loaned to the customer. This is typical of all loans and would usually form part of the items and conditions.

LESSONS LEARNT

Before entering into a loan transaction, customers should ask the bank what penalty charges, if any, would apply if the loan is paid off before the expiry date and what other charges would apply, for example, penalty charges for late payment of installment.

Read the terms and conditions carefully and make sure that you fully understand the clauses, usually written in fine print, so that there are no surprises afterwards.

On the second day of the New Year, Karen was driving in her Honda Accord motor vehicle when, according to her, a motor vehicle driven by John collided with her vehicle. John accepted liability at the time of the accident and agreed to pay for the repairs to her motor vehicle. Karen was dissatisfied with the repairs claiming that the foreign used parts used to repair her vehicle changed its appearance externally and its functioning internally. Karen also wanted payment of $5,000.00 for loss of earnings as a result of the accident.

It was at this point that Karen visited the Office of the Financial Services Ombudsman (OFSO) for assistance. Karen requested that this Office communicate with John’s insurance company to recover expenses related to repairing the motor vehicle and loss of earnings. The OFSO sent communication to the insurance company as indicated by Karen. However, upon investigation, it was discovered that John was not insured by that insurance company and as such it had no record of the accident. The company also attempted to contact Karen numerous times but was unsuccessful.

When contacted by the OFSO with the insurance company’s response, Karen indicated that she was mistaken and that John was in fact insured by her own insurance company. Karen confirmed that her motor vehicle was finally repaired but her claim for loss of earnings was not as yet settled. Given that there was no further indication from Karen that she wished to continue the matter with her insurance company, the file was closed.

Lessons Learnt:

1. Report your accident to the police- it is the law!

According to the Motor Vehicles and Road Traffic Act, Chap 48:50 (M.V.R.T.A.) Sect 79 (1):

If involved in an accident which causes damage or injury to person, vehicles or property or any animal not in your vehicle, you must stop, take the injured to the nearest doctor or hospital, give your name and address to interested persons and report the accident to the nearest Police Station or to a constable in uniform immediately.

2. It is always advisable to report the accident to your insurance company and to the other party’s insurance company even if the person admits liability at the time of the accident.

3. To expedite the claims process, ensure that correct information is relayed to the insurance company and the OFSO.

The complainant’s home was covered under a homeowner’s protection policy when her house was damaged by an earthquake. She stated that she noticed cracks and breakage in the walls close to the roof of her patio and immediately made a report to her insurers. She was directed by them, to someone else, later identified as a loss adjuster who worked for the company, to have the damages reviewed.

Some time after the adjuster visited the premises, the damaged portion of the roof collapsed, causing the complainant to again contact the adjuster who then advised her to proceed with the necessary demolition work. He further advised her to submit an estimate for her costs to demolish and rebuild her patio. The complainant proceeded to repair her home, at her own expense and await reimbursement from her insurers. To her surprise, her claim was denied on the grounds of ‘construction inadequacies tantamount to poor workmanship’.

The insurance company, supported by the report produced by its loss adjuster denied the complainant’s claim on the basis that the damage was due to poor workmanship and this was strictly excluded under the policy. In his report, the adjuster also stated that the porch was added subsequent to the initial construction of the building and perhaps improper fastening of the porch roof, coupled with inadequate support columns were jointly responsible for the collapse.

However, after the intervention of the Ombudsman’s office and considering the long relationship with the customer, the company offered an ex-gratia payment. This recommendation was then reviewed by an independent investigator appointed by the Ombudsman office who concurred that the calculation of the settlement was accurate and that the complainant should be advised to accept same. The complainant however, declined to accept same and the OFSO closed its files on the matter.

LESSONS LEARNT

The investigator appointed by the Ombudsman’s office found that the ex-gratia payment offered by the company was fair and worthy of consideration by the complainant. In his evaluation of the claim, the OFSO’s investigator considered both earthquakes mentioned by the complainant as separate events and his estimated settlement was not far from that offered by the company. The investigator also indicated that any additions to the main building should have been brought to the attention of the insurer to have same covered by way of an endorsement on the policy. The complainant did not accept the calculation provided by our investigator, insisting that the damage resulted from one earthquake.

Mr. G’s car was being driven in the Port of Spain area by a friend and was involved in a four-car collision at an intersection controlled by traffic signals. He filed a claim with the insurer of the vehicle which he believed was responsible for the accident.

He was advised by the company that it was unable to pay his claim, since its investigations revealed that the insurance certificate for the car driven by the allegedly negligent driver was obtained through fraudulent means. To all intents and purposes, therefore, there was no insurance cover at the time of the accident.

Mr. G was not prepared to accept the explanation given by the company and visited the Office of the Financial Ombudsman (OFSO) to lodge a complaint.

Upon review of all the information presented by the insurance company, the OFSO was of the view that the company was within its rights to deny liability for payment of claim and advised him accordingly. The complainant presented no further evidence to support his case against the insurer. The complaint was deemed to be without merit and was withdrawn.

The complainant was in possession of a flexible premium annuity, Annuity A, from an insurance company. She received a call from her financial advisor indicating that the current rate of interest on that product was declining. After some discussion, they decided that the proceeds from Annuity A would be reinvested ‘in another fund’ in order to maximise the returns. The relevant application forms were then completed and submitted to the company for approval.

Some time after, the complainant received a phone call from the Board of Inland Revenue querying the registration of a new annuity, Annuity B. The complainant was naturally surprised since she was already in possession of an annuity and did not want another. She then visited the insurance company and discovered that Annuity A had been surrendered and the proceeds less the surrender charges were transferred to Annuity B. at that point. The complainant then requested that the insurance company waive the surrender charges on Annuity A and refund her the monies accumulated. She stated further that her servicing agent obtained the second annuity from her ‘under false pretenses’ and, given her financial situation at the time, he should be aware that she should not have taken out a second annuity.

After some investigation, the insurance company declined to waive the surrender charges on the annuity on the grounds that the complainant submitted an application form for the product and she was bound to the terms and conditions therein. Further, the agent stated that he notified the complainant of the type of plan being purchased and that it was designed to provide income upon retirement. The registration of the policy therefore followed and as this was a legal requirement the company would be unable to accede to the complainant’s request to have the plan registered.

LESSONS FROM THE CASE

Consumers should take an active role in their financial affairs. While the call from the agent about the declining interest rates may have been the trigger alerting the consumer about the status of her investment, the onus is on the consumer to get all relevant information before purchasing financial products. Many insurance companies have service centers and customer call centers designed to answer queries from existing and potential clients. Having signed the application form (whether she read it or not), the complainant indicated her agreement with all attached terms and conditions.

The complainant was insured with Company A when her vehicle was involved in an accident in April 2006. She was forced to take evasive action to avoid colliding with another car and in so doing, her car sustained considerable damage when it ran off the road. No other vehicle was damaged in the accident.

She subsequently submitted a claim to her insurers, under her Comprehensive policy, seeking recovery of the damages to her car. However, the complainant was unable to get any word from her insurers as to the status of her complaint and after repeated delays she lodged a complaint at the Office of the Financial Services Ombudsman (OFSO).

The OFSO presented the complainant’s case to the Company which appointed an investigator to review the circumstances surrounding the accident and at the same time, assess the damages sustained by the vehicle. When the report was submitted, an offer of settlement was made to the complainant based on the investigator’s report less the applicable excess under her policy. The complainant accepted the offer. However, she was unable to recover the excess.

LESSONS LEARNT

Although she was not the negligent party in the accident, the complainant was unable to recover her excess as there was no accident to report by another party.

Her insurers were therefore unable to recover any monies paid out to her under her comprehensive cover. Both the complainant and her insurance company were out of pocket by the excess amount and the settlement amount respectively. And, unfortunately, she would have to suffer the reversal of any no claim bonus she would have earned.

The insured purchased a life insurance policy in 1976 from an insurance company. He made arrangements with his bank to pay his premiums by means of a standing order. The insured went away from Trinidad and Tobago for an extended period.

In 2000, the insured became aware of an outstanding loan of approximately $20,000.00 against his policy. He claimed to have made attempts between 2001 and 2005 to get information from the insurance company about the loan but was unsuccessful.

In 2006, he was advised that an Automatic Premium Loan (APL) had been applied against his policy for the months in which the company had not received payments of premium, in accordance with the terms of the policy contract.

The insurance company also indicated that he was advised of the APL from as early as 1998, via correspondence mailed to the same address which had not changed from inception, starting with a loan balance of approximately $6,300.00. The complainant claimed that he did not receive any such letter and asked only to pay the loan balance as at 1998.

This request was denied by the insurance company on the basis that the insured had not reported any change of address at any time during his relationship with the insurance company. In fact, his address remained the same to date. Having sent the correspondence to his usual mailing address, they felt that they had satisfied their obligation. Additionally, they had no record of any attempt being made to query the outstanding accumulated loan amount, which increased as further premium loans and compound interest were added over time.

LESSONS LEARNT

Consumers need to monitor the payments made against their policies very closely as Automatic Premium loans are a feature of most life insurance policies.

In instances where a premium is not received by the insurance company, the outstanding premium will be treated automatically as a loan as long as there is sufficient cash value attached to the policy. This is to avoid the policy going into a lapsed state. Interest will be added to the loan on a compound basis and, over time, the loan balance could erode altogether the cash surrender value of the policy.