In this occasional series of blogs, I recall some memorable cases which I have dealt with.
Mrs W and Lloyds Bank’s refusal to consider the case
As a general rule of thumb, if a bank can find a reason to refuse to consider a case, it will. The most common approach a bank will take to do this is to argue the case is “out of time”.
Under regulatory rules, there are time limits that apply to someone wishing to complain about bad advice. If the case is brought outside these time limits then the bank (or insurer) can refuse to consider the case and just reject it out of hand as being “out of time”.
The time limit rules state that a person has either six years from the time of advice or, if it would give more time, three years from the date the customer had reasonable cause to know they had grounds to complain.
The six-year rule is very straightforward to test. The three-year time limit, in contrast, is very much open to interpretation. What represents “reasonable cause”?
Mrs W’s case illustrates how banks (and indeed insurers) will try to make it cover as wide a span as possible.
Mrs W is an elderly widow and was advised to put more than half her savings into a Lloyd’s structured investment product. It performed poorly (naturally) and matured after five years with little in the way of profit. That was in 2008.
Mrs W took no action at that time, and it was not until 2014 that her family came across the product literature. Instinctively thinking this type of investment was not suitable for their mother, I was asked to investigate the sale. I was more than happy to accept the instruction, as it seemed another classic case of a bank pushing an investment product onto a vulnerable customer.
Having considered the point of sale paperwork and product literature, I identified a number of areas for concern with the advice. The bank had not, in my view, explained the product in an unbiased and fair manner, nor in sufficient detail. Moreover, I disagreed with the salesman conclusion that the product met Mrs W’s attitude to risk. She had declared (or he had persuaded her) that she had a low risk nature, but not a no-risk nature.
On the basis of that declaration, the salesman recorded the product was a good match. My own view was that this was wrong on two counts. Firstly, the product was not in fact “low risk” as it had the potential to return less than the original amount invested and could, in extreme circumstances, return nothing.
Secondly, Mrs W’s apparent low risk attitude was at odds with her circumstances. Everything that had been recorded about her history and finances strongly suggested she did not have sufficient capacity to shoulder any risk, nor potentially suffer a loss. Her profile was one of a typical “no risk” investor,
I raised my concerns about the advice and how the sale was conducted with Lloyds. It came straight back and told me that as the product had matured more than three years previously, it was “out of time”. Mrs W, said Lloyds, had reasonable cause to complain about the product within three years of it maturing, if she was unhappy with the payout.
Wait a moment, I said to Lloyds, nowhere in my long letter have I mentioned unhappiness with the final value (although it was poor, I steered clear of saying it, knowing Lloyds would try to use it as a reason for a time bar). My whole letter was about issues concerning suitability of the product in general and potential breaches of the selling rules in terms of the “know your customer” requirements. Mrs W, I pointed out, knows nothing about the selling rules, nor about issues of suitability, and she herself did not therefore have “reasonable cause” to complain about these issues. Consequently, the maturity of the product in 2008 did not set the clock running on these issues unless Lloyds could provide convincing evidence that Mrs W had sufficient knowledge about them to raise her complaint at that time.
Lloyds, of course, did not provide any evidence of this kind. It simply refused to debate the matter, stating we could challenge its decision via the Financial Ombudsman if we liked.
Naturally, I did just that and the time bar was over-turned by the Ombudsman, which opened the door for the issues I had raised to be properly considered and Mrs W suitability compensated for the mis-sale.
The lesson here is that a “time bar” from a bank or insurer should never be taken to be the end of the matter. Banks are increasingly using this argument to reject cases, even when they know there is no valid reason to do so. I have lost count of the number of times I have successfully over-turned a “time bar” on appeal to the Ombudsman. What worries me, of course, is that ordinary consumers probably would not have the confidence or knowledge to mount a challenge and will just accept that their case is dead in the water. No doubt this is the reason banks site a time limit has been breached in so many cases. It is nothing short of unethical and denying people a fair hearing.