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Error in setting up automatic payments – account overdrawn – interest and honour fees incurred – reasonable offer of settlement – paragraph 18(f) of Terms of Reference
In 2004 Mr O and Mrs M arranged a housing loan with their bank. Due to an error by the bank in setting up automatic payments to fund their loan account, insufficient funds were transferred to the loan account to meet the loan repayments and insurance premiums. A considerable time passed before the error was detected, resulting in an overdraft of more than $2,500. Mr O and Mrs M had also been charged overdraft interest and honour fees.
The bank acknowledged its mistake and agreed to refund the overdraft interest and honour fees charged. In addition, it offered a period of six months during which it would charge no interest on the loan, to enable Mr O and Mrs M to repay the overdraft, as well as $500 in compensation for the stress and inconvenience suffered by them. Mr O and Mrs M were not satisfied with the bank’s offer, and suggested that it should write off the entire overdraft.
After considering the information provided by Mr O and Mrs M, I decided not to investigate their complaint further. Paragraph 18(f) of my Terms of Reference says that I do not have to consider a complaint if, on the basis of my consideration of relevant facts, I am satisfied that the bank has made a reasonable offer of settlement. It seemed to me that the bank had indeed made a reasonable offer in this case.
I explained to Mr O and Mrs M that the bank had agreed to pay back all charges and other costs incurred because the automatic payment had not been set up properly. Therefore they had suffered no direct loss. The actual overdraft was not a direct loss, because it was made up of payments that they would have been making for their loan and insurances if the automatic payment had been set up correctly from the beginning. I noted also that the bank’s offer of $500 as compensation for the stress and inconvenience suffered by Mr O and Mrs M was in line with the amount of compensation I have suggested in the past for similar claims.
Mr O and Mrs M decided to accept the bank’s offer, and the complaint was resolved on that basis.