The murky world of financial complaints

If you complain to your bank that you’ve been overcharged or given bad financial advice, would you expect to be handed a confidential agreement to settle the matter?

These agreements – also known as non-disclosure agreements – typically state the company will pay you some money, provided you keep quiet about it and agree not to pursue things further.

They’re a quickfire way for companies to shut down complaints and help make sure their lapses never come to light.

Reports about these agreements have been growing, although their confidential nature means hard numbers on their use are hard to come by.

But available data suggests thousands of bank complaints are settled out of the public eye each year, with the customer getting a payout or some other form of financial compensation.

The Banking Ombudsman recently started asking banks to provide figures on the number of complaints they receive.

Of the 94,000 complaints disclosed in the year to March, just over a quarter – about 25,000 – were settled with a ‘‘financial remedy’’. That’s the equivalent of close to 500 each week.

Little detail is available on how many complaints involved minor versus major shortcomings. And there’s no requirement for banks to report whether confidentiality agreements were part of the settlements, or whether customers knew they could take the matter further if they didn’t want to sign one.

Companies using these agreements can take advantage of the fact that many customers may be uncertain about their legal rights.

A recent survey by the Financial Markets Authority found just three in 10 people felt confident about what to do if they were treated unfairly by a bank or another company providing financial services.

The finding likely reflects the complicated system we’ve ended up with to handle complaints.

In the wake of the 2008 global financial crisis, rules were introduced requiring banks and other financial institutions to belong to a dispute resolution scheme.

But it was also decreed there should be a competitive market in this area. As a result, there are four of these schemes and companies get to choose which to join.

Public awareness of the schemes isn’t high – the Banking Ombudsman is the most wellknown – and only a fraction of complaints come to them for a decision.

Once you sign a confidentiality agreement, dispute schemes will be reluctant to reopen the matter if you later complain to them, and you may have also foreclosed on other legal avenues.

However, these agreements won’t hold any weight if companies use them to mislead customers about their legal rights.

High-profile cases overseas involving other traders have uncovered evidence the agreements have been used to do just that.

In 2019, appliance manufacturer Whirlpool found itself under fire in the UK for requiring customers to sign non-disclosure agreements before it would compensate them for faulty clothes dryers, even though they were entitled to compensation.

The company ended up before a parliamentary select committee, which slammed the use of the agreements and the ‘‘chilling’’ effect they have.

It found evidence confidentiality agreements were used in other industries to silence customers.

Evidence of these agreements typically surfaces only when customers suspect something is not right and come forward.

If you’re presented with an agreement, don’t feel pressured to sign. Companies can try to impose tight timeframes on customers to decide whether they’ll accept these deals.

While it may be in the company’s best interests to keep the matter quiet, it may not be in yours.

If you decide you want to settle, you can always tell the company you accept its compensation offer but that you consider a confidentiality clause in the settlement agreement isn’t necessary.

The company may refuse to budge, but you’ve still got options. You’re free to take a complaint about unfair treatment by a bank, or any other company providing financial services, to a dispute resolution scheme.