FOS – more questions over the Financial Ombudsman
The FOS is exposed for more bad behavior. It is one thing that the banks are up to their necks in unacceptable behavior, it is quite another when you cannot rely on the Financial Ombudsman who is meant to provide justice to people who need it. This is no surprise to us because in one of our clients cases a Senior ombudsman prepared 5 separate fictitious file notes that they produced to the court. If it wasn’t for our telephone recordings we would not have been able to prove the file notes were fictitious.
See latest story below:
Macquarie Bank withheld $875,000 from couple in loan dispute
The Guardian by Christopher Knaus
Businessman alleges documents were forged by the bank to insert a clause he did not agree to in a case that exposes failings with financial ombudsman
Macquarie Bank wrongly withheld $875,000 from a Sydney couple after using “not unusual” practices that prompted allegations of forgery and misconduct.
As the royal commission on banking this week turns its sights on small business lending, the bank’s treatment of Steve Wise, 66, and his wife has also exposed mistakes by the industry-funded financial ombudsman service, which misconstrued evidence to initially recommend Macquarie be cleared of wrongdoing.
The case has prompted a surprise intervention from Tony Abbott, Wise’s local member, who last week wrote to his colleague, the financial services minister, Kelly O’Dwyer, urging her department to “take another look” at what appears to be “improper behaviour by both a bank and a regulator”.
Wise, a retired businessman, first approached Macquarie more than a decade ago, seeking an investment loan. He was told to take out loans worth $16m, advice Wise would later allege was inappropriate.
Macquarie then had Wise and his wife sign a partly blank loan application form.
The practice was described as “not unusual” at Macquarie, even for loans of that magnitude.
Macquarie staff later signed Wise up to a “shared upside” feature, something he had never agreed to. The feature allowed the bank to keep $875,000 of Wise’s investment returns from the loan in exchange for a discounted interest rate.
When Wise realised what had happened, he complained to the financial ombudsman service, a complaints-handling body funded by banks and financial service providers.
The bank then produced documents to the ombudsman in an attempt to prove Wise had ticked a box agreeing to share his investment returns with Macquarie. The document was so full of discrepancies that the ombudsman eventually disregarded it entirely.
The relevant page showing Wise’s agreement to share his returns was missing an “original” stamp found on other pages. It also recorded the wrong loan amounts, and had amendments that tended to exaggerate Wise’s financial position.
The ombudsman noted that the forms it considered were different to a version of the application form Macquarie provided it with during an earlier dispute involving Wise.
The ombudsman, in its final decision, found the Wises had not advised Macquarie to sign them up for the shared upside feature, and said Macquarie’s practices of having customers sign blank forms did not meet good industry standards and exposed it to allegations of forgery.
“[Macquarie] arranged for the applicants to sign largely blank application forms, which were to be completed by the FSP’s representatives at a later time,” it ruled.
“The [bank] says this was not unusual in respect of these facilities. This practice did not meet good industry standards. It has exposed the [bank] to allegations of forgery and created uncertainty.”
But the ombudsman itself only arrived at that decision after a concerning twist.
It had initially planned to find against Wise, according to a draft decision in 2016, seen by Guardian Australia.
In the draft decision, the ombudsman misconstrued one of the key pieces of evidence it used to find in Macquarie’s favour: a statement from Wise’s accountant.
The ombudsman’s draft determination found the accountant had said Wise discussed shared upside features with another bank, Westpac. The ombudsman reasoned that he was therefore likely to have discussed it with Macquarie as well.
Wise’s accountant, however, said he gave no such evidence.
The accountant became aware of the draft ruling when it was mistakenly posted online instead of the final ruling. He wrote to the ombudsman to complain.
“The statements made referring to (myself) the applicant’s accountant on pages four and five are fabricated accounts that were not in my statement and never took place,” he complained.
The erroneous evidence did not appear in the ombudsman’s final ruling.
A Macquarie spokeswoman denied any allegation of forgery “categorically”. The bank is constrained in its ability to speak about the case because it cannot breach client confidentiality.
But the spokeswoman said the case stemmed from actions more than a decade ago, had been settled and was dealt with by the ombudsman. The ombudsman, she noted, had found against Wise in another matter. She said Macquarie Private Wealth had also engaged in an extensive remediation program since, which was the subject of its enforceable undertaking with the corporate regulator, Asic.
“While we acknowledge FOS’s findings in relation to processes regarding this client, Macquarie categorically rejects any allegation of forgery,” the spokeswoman said.
The ombudsman did not respond directly to Guardian Australia’s questions about its mistaken interpretation of the evidence or the decision not to investigate Wise’s additional claim.
But a spokesman said the ombudsman had “fully and thoroughly investigated” Wise’s shared upside complaint using a panel – including a consumer representative, a stockbroker and an ombudsman representative – and awarded Wise more than $400,000.
“An applicant does not have to accept a FOS determination once issued if they do not agree with the outcome and are free to take action against the [financial service provider], including in the courts,” a spokesman said.
“In this case, the applicants confirmed that they accepted the FOS decision and the FSP paid the compensation awarded by the panel in the FOS determination.”
The ombudsman has faced similar criticism in the past.
In 2016, it was criticised over its handling of a complaint by Goldie Marketing, a small business that asked it to consider allegations about ANZ’s lending practices.
Senior ombudsman staff were accused of taking misleading file notes before deciding not take on the case.
Bruce Ford, an advocate for victims of financial misconduct, was involved in the Goldie case. He said there were widespread problems with the financial ombudsman, which were highlighted in the global financial crisis.
The GFC, he said, led to a vast increase in complaints to the ombudsman, creating a backlog that led to the office “drowning in the workload”.
Ford said the ombudsman worked too quickly through the cases and tended to favour financial institutions.
“What we’ve seen and we’ve got evidence of it is where they just make these ridiculous determinations to say ‘we’ve looked at it, we can’t see any wrongdoing, see you later’,” Ford told Guardian Australia.
The allegations were strongly denied by the ombudsman. The spokeswoman said increased complaint volumes had been matched by a significant increase in staff, up from 212 in July 2009 to 406 in April this year. The ombudsman had also improved its dispute process and its internal quality assurance program to keep pace.
“The assertion in the case of this determination or more generally that FOS does not deal with cases thoroughly, fairly and impartially in accordance with our terms of reference is without any basis,” the spokeswoman said.
The Coalition, in the wake of damaging revelations in the royal commission, plans to replace the ombudsman with a one-stop shop for financial complaints. The new body, to be named the Australian Financial Complaints Authority, would also amalgamate the credit and investments ombudsman and the superannuation complaints tribunal.
But the new ombudsman will still be funded by banks, and Ford said it would largely retain staff from the financial ombudsman.
Ford said that, without fundamental changes, similar problems would continue at AFCA.
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