Hardship complaints, scams dominate banking report

The latest report from the banking industry watchdog has revealed a heavy volume of complaints related to financial hardship applications, a 21 per cent increase in scams, and a 6 per cent rise in complaints overall.

Overall complaints numbered 3149 and the report noted that financial hardship was a recurring theme in the Banking Ombudsman Scheme's annual report released this morning.

Ombudsman Nicola Sladden received 319 complaints related to financial hardship or debt collection in the year to June. These complaints were usually associated with credit cards, home loans, or KiwiSaver.

Covid heightened the need to give customers financial hardship support and other forms of help, she said.

“Banks are expected to look out for, and take particular care with, customers experiencing vulnerabilities – including financial hardship, which was a recurring theme last year,” Sladden said.

The report said when hardship complaints started to rise with the Covid outbreak, the Banking Ombudsman developed new policies that saw half of hardship complaints resolved within 20 working days. At times, banks have fallen short in the way they handle hardship requests, the report said.

Most complained about bank

The report records that ANZ was the most complained about major bank, but it is also the largest.

Of the big five, complaint numbers tracked size, bar for KiwiBank — the smallest by assets — which came in fourth.

NZ Bankers' Association chief executive Roger Beaumont told the Herald, “All banks can offer options for customers experiencing hardship. We've been particularly conscious of this through the economic impact of Covid-19.”

But he qualified that, “We're not seeing the same demand for help we saw with the first lockdown in March last year.”

Scams on the rise

The Ombudsman's report notes a 21 per cent rise in online fraud complaints, which hit 330. It said that in the case of a scam part of the onus fell on a bank, but that a customer also had to take reasonable precautions to ensure communications were genuine.

It illustrates this point with the case

of “Ralph”, who only received partial compensation after being scammed.

“A scammer, pretending to be from a telecommunications company, asked Ralph for remote access to his computer and phone for the fibre installation Ralph was expecting. The scammer then made 11 internet banking withdrawals totalling $125,000 from Ralph’s home loan revolving credit facility,” the report said.

Five of the transactions required two-factor authentication via text message. The scammer instructed Ralph to open and delete the text messages. Ralph discovered he’d been scammed and the bank recovered $15,000.

Ralph asked the bank to reimburse him for the remaining $97,000. The bank declined because Ralph had given someone remote access to his computer and mobile.

“Banks are required to reimburse unauthorised transactions unless customers have acted fraudulently or negligently, breached the bank’s terms and conditions or failed to take reasonable care to protect their banking details,” the report said. “We considered it was reasonable for Ralph to believe the scammer was legitimate, especially since he was expecting to be contacted about the fibre installation.

“However, we thought a reasonable person would have been concerned about text messages from the bank . . . In this case, the bank failed to pick up a series of out-of-character transactions from a previously unused account.”

Ralph and the bank agreed to split the loss equally.

The Herald has covered a number of online banking fraud cases, which have seen mixed results. In one, a West Auckland couple who paid fake invoices after a scammer hijacked their bathroom renovation company’s email address, had the full amount they had lost — $21,000 — paid back by their bank, Westpac.

But in a second case, involving an ex-Army officer who transferred around $14,000 from a Westpac account to what turned out to be a fraudster’s account, as he thought he was buying Starlink shares (the Space X subsidiary is not listed) no funds were recovered.

Both banks said they would have had more chance of resolving the situation if the retired Army officer had contacted them immediately. It was more than seven days after he transferred the money that he realised he had been conned.