Tipp FM Legal Slot – 7th August 2012
Gillian O’Mahony on Ulster Bank Failures[soundcloud id=’167071516′]
How many people have been affected?
No exact figures have been released as to precisely how many people’s accounts have been affected by the recent computer glitch but reasonable estimations would suggest that between 500,000 and 600,000 Ulster Bank customers were affected in some way in Ireland. Of course as many people will know this problem is not just an Irish one but concerns the entire RBS Group and has had an impact on many millions of people in the UK also.
How have people been affected?
People have been affected in a wide and varying range of ways, from people’s wages failing to register on their accounts, to direct debits not being taken, being unable to withdraw funds all the way up to property and other major business transactions being delayed.
What caused the problem?
The Bank are stating that the problem was caused when maintenance on IT systems in Edinburgh disrupted the regular processing of overnight transactions. It took time to resolve this problem which, in turn, created a significant backlog so many account balances were incorrect.
Are people entitled to anything as a result?
Yes – as Ulster Bank customers a contractual relationship exists with the bank and anyone who has suffered a loss as a result of their error is entitled to be put back in the position which they would have been in if the error had not occurred in the first place. Jim Brown, Chief Executive of Ulster Bank has stated that they have “made a firm commitment that no customer will be out of pocket as a result of this issue”. Any fees charged or incurred should be refunded to customers automatically but out of pocket losses should also be refunded.
There is also the important issue of compensation for the stress and inconvenience that people have suffered from not being able to access their funds. Some people have suffered a huge amount over the last few weeks and through no fault of their own.
The Courts have given down many judgments on whether or not people are entitled to claim compensation or damages as a result of a breach of contract case. The majority of the case law in this area where damages for mental distress is awarded focuses on where the contract is providing entertainment and enjoyment. In contrast to this the Courts have denied recovery of damages in respect of mental distress where the breach of contract concerned a contract for sale of land.
The Financial Services Ombudsman however may have a different view and may be of the opinion that compensation should be awarded.
How do people claim?
In making any initial claim the first port of call will be to Ulster Bank itself. Lynch and Partners have many years of experience in assisting people with similar claims and can assist you in setting out the claim which you wish to make. You would therefore firstly be notifying the bank of any out of pocket expenses you may have as a result of the computer problem and of any stress and inconvenience you suffered as a result. It is of course early stages in this process and many people may not yet be fully aware of the full extent of their loss.
It is reported that the Bank itself will formulate a package of compensation for it’s customers, however no details have been released to date.
What if I am not happy with how Ulster Bank deal with my complaint or with what they offer?
The next step then is to have the matter referred to the Financial Services Ombudsman. Prior to referring the matter to the Financial Services Ombudsman you must have followed the internal complaints procedures of your financial service provider and if you are still not satisfied the Financial Services Ombudsman may investigate the complaint.
The Ombudsman has an independent function to deal with complaints which are made by people concerning:
- The provision of a financial service
- An offer to provide a financial service
- Failure to provide a particular financial service that has been requested
What does the Financial Services Ombudsman do?
They will first of all look for a final response from the Bank and if the customer is not satisfied with the Banks s final response the Financial Services Ombudsman will assess the complaint and the option of mediation will be offered to both parties by the Ombudsman as a means of resolving the matter. If mediation is not availed of or is unsuccessful then a formal investigation of the complaint by the Ombudsman will begin.
In the course of reviewing the evidence the Ombudsman will consider whether an oral hearing is necessary. If an oral hearing is held then the oral evidence given under oath at that hearing will be reviewed together with the documentary evidence and a Finding will be issued to both parties.
Where an oral hearing is not deemed to be necessary a Finding will issue to both parties after all the evidence has been reviewed in full.
All complaints are dealt with individually on a case by case basis and any financial package offered to the customer would be considered by the Ombudsman in examining the case.
What can the Ombudsman do?
The Ombudsman can direct the service provider to do one or more of the following:
- Rectify or change the conduct complained of or its consequences
- Provide reasons or explanation for that conduct
- Change that practice
- Pay compensation up to a maximum of €250,000
- Take any other lawful action
It is important to note however that the Ombudsman deals with matters based on compensation to the complainant and not based on penalising the financial institution. The current Ombudsman, William Prasifka, has however stated publicly that he believes generally that people are entitled to something to compensate for the stress and inconvenience of recent events and it is likely that this will be reflected in any cases he nay deal with. In this regard he has mentioned general figures of up to €500 in cases where eg cheques were not deposited and €850 where people relied on misinformation given by the banks but these are general figures and it remains to be seen what level of damages will be recommended in reality.
Is the Finding of the Financial Services Ombudsman binding?
The Finding of the Financial Services Ombudsman is legally binding on both parties, subject only to appeal by either party to the High Court. A party has 21 calendar days from the date of the Financial Services Ombudsman’s Finding in which to appeal to the High Court.