[August 10, 2006]

Compensation does not pay for time and effort

(Daily Record Via Thomson Dialog NewsEdge) WHEN a claim is settled with a financial institution, the aim is to get the individual back to where they would have been if the error hadn't been made.

That may sound fair, but if you take into account the amount of work some people have to do, and the distress others have to endure, a settlement should take more into account than just the numbers.

Louise went along to a financial advisor to look for a better mortgage when her five-year deal with the Abbey expired.

She got one with Halifax and filled in the forms to change over. When the paperwork came through, the interest rate was higher than the one Louise had been offered. She complained and received an apologetic letter - with a promise of further action.

Asubsequent letter explained her mortgage request "had not been actioned" and instead of the 4.29 per cent she had booked, Louise was now paying 6.5 percent.

Without consulting Louise, the bank sent her a cheque for pounds 1071.60, which, they claimed, represented the difference between what she was paying and what she would have paid.

Not so, answered Louise, and she arranged another meeting with her financial advisor. She said: "We calculated the difference and came up with a higher figure. They hadn't backdated the compensation to when I started paying it."

Louise sent another letter to the Halifax, who upped the amount to pounds 1220 - including pounds 50 compensation for inconvenience.

Wrong. Louise complained again and the Halifax increased their

offer to pounds 1440.

Louise still didn't agree. To make matters worse, the Halifax announced that since she had not yet agreed to a compensation figure and had not yet arranged another mortgage, the 5.45 per cent rate had expired and they could now only offer her 5.55 per cent.

She sent me the pile of paperwork. Throughout the dialogue, the Halifax's letters are misspelled, contain wrong information and, in one case, referred to enclosures that weren't there. Louise also calculates that she's spent over 20 hours writing letters, driving to Perth to see her advisor and phoning the Halifax.

Until last week, their offer of compensation for her time wasted still stood at pounds 50.

Listening to stories like Louise's, I believe that the aim of any compensation scheme should not just be to put the individual's account back to where it would have been if it had been correctly handled in the first place.

To award compensation that represents the difference between the two mortgages disregards the amount of time and money spent to get this matter rectified.

When the boot is on the other foot, the question is viewed very differently by the banks. They levy mandatory, and often unrealistically high, penalties - even when an error is immediately rectified.

In Louise's case, she looked set for a hefty penalty from the Halifax, whose own mistake was at the root of the problem and whose subsequent negligent behaviour prolonged the dispute. Instead of settling with grace and efficiency, they brought Louise to the end of her tether. It might have been advisable to make a decent offer at the outset.

If banks are not punished for their mistakes, they will carry on cutting costs by employing untrained staff and using underresourced call centres.

For every client who complains and persists with a complaint to the bitter end, there must be hundreds who don't have time to pursue their complaints. Unless hefty fines are levied, the banks will continue to play these odds.

The Financial Ombudsman is now considering Louise's case. The Ombudsman does take into account time, inconvenience and distress caused by the financial institution's handling of a complaint.

Since I contacted them, the Halifax have offered to quadruple their compensatory payment to pounds 200 as a goodwill gesture in recognition of the inconvenience Louise has suffered as a result of their error.

For a company that last week announced interim profits of pounds 2.3billion, it's a gesture they can afford.

I TRY to help everyone who writes in, but sometimes the volume of letters makes this impossible. Please put your full name and phone number on your letter or email. Don't send any original documents or include your account details. You can email me at Money@ dailyrecord.co.uk or write to me, Lesley Campbell, at Daily Record, One Central Quay, Glasgow G3 8DA

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