The bank is responsible for correcting issues arising from their own administrative errors

Key Learnings

• Administrative errors are the bank’s responsibility. But the customer must show evidence that they took reasonable steps to resolve any issues.
• The bank is responsible for non-financial harm placed on the customer because of the bank’s action/inaction.
  
  

In early 2016, Mr. and Mrs. J noticed that their bank had not taken the regularly scheduled mortgage payments from their account. The couple had diligently paid their mortgage on time for the past 5 years. When they noticed the discrepancy, they immediately contacted the bank to address the issue.

An administrative error is made

The couple advised the bank of the missed mortgage payments. The bank investigated and discovered that it had used the incorrect account number. The bank apologized for the error. It then arranged to take three separate payments. The second of these three payments was not processed. Mr. J contacted the bank immediately. The bank informed Mr. J they would deal with the issue appropriately.

Missed payments cause additional issues

The bank then attempted to take undisclosed payments from the account. It did so without first speaking to Mr. and Mrs. J. This sent the couple’s account over their $500 overdraft limit. They incurred an NSF charge as a result. During the next year, the couple’s finances were subject to numerous additional fees resulting from NSF charges. These additional costs totaled well over $900.

From early 2016 until spring 2018, the couple’s credit bureau score reported the payment history on the mortgage as late. This led to further charges. There were also indirect costs connected to their car insurance and car payments. The couple faced legal expenses and stress as they were confronted with the threat of losing their home.

The client must make efforts to rectify the issue

It was clear that Mr. and Mrs. J were proactive in trying to resolve the issue. The bank, however, missed several opportunities to correct its error. The couple claim that the bank did not provide documents to reconcile the account and mortgage until they hired a lawyer. The couple had not been contacted by the bank until their file was sent to collections in August 2016.

The bank offers reimbursement

The bank conceded that it was responsible for the initial administrative error. In its view, however, ensuring payments are taken in a timely manner is a joint responsibility. Thus, both the bank and the couple bore responsibility for the penalties resulting from the NSF charges. The bank offered a partial reimbursement of $2,600.

What did OBSI do?

The couple was unhappy with the bank’s final offer of partial reimbursement. They turned to OBSI. We investigated the couple’s complaint. After speaking to both the couple and the bank, we found that the bank was fully responsible for the payment issue. The financial harm the couple had experienced was due to the errors the bank had made. The missed mortgage payments would not have caused credit issues and charges without the original errors and the amount of time taken to rectify the matter.

The bank was also responsible for non-financial losses. This included the couple’s distress and inconvenience over the two years and legal costs, which were well documented.

OBSI’s recommendation

We recommended that the bank compensate the couple $9,000, including compensation of $2,000 for non-financial losses. We also recommended correction of the credit bureau score. The bank agreed with our recommendation but offered $1,000 for non-financial losses, which Mr. and Mrs. J accepted.