Summer holiday finance lessons from dispute resolution schemes

Source: Radio New Zealand

When you’re on summer holidays, you might not be thinking much about your banking, insurance or other financial products – unless something goes wrong.

The three external dispute providers that deal with complaints that can’t be resolved between financial services providers and their customers say there are a number of things that can catch people out at Christmas and New Year.

Here are a few to watch for and how you can avoid them.

Disputed transactions

Both the Banking Ombudsman and Financial Services Complaints Ltd (FSCL) said they saw complaints about disputed or incorrect transactions.

FSCL said it was common to see them at hotels, bars, online retailers and overseas lounges where cards were used for tabs, pre-authorisation or to place a security hold, if the amount was then more than expected.

FSCL said it also heard about delays or disagreements when card issuers declined to reverse a transaction or chargeback, especially where the merchant argued a charge was legitimate or where the cardholder has not closely followed card terms and conditions.

“Avoid open tabs where possible, check pre authorisations, keep your card with you at all times, be careful not to be overlooked if entering a PIN, keep receipts and monitor accounts frequently,” FSCL ombudsman Susan Taylor said.

“Report suspicious or incorrect transactions promptly, consider cancelling your card if used without your authority, and follow your provider’s dispute process; escalate to a dispute resolution scheme such as FSCL if unresolved.”

In one case the Banking Ombudsman scheme investigated a man who tried to book an Auckland hotel room and found one that was $201 with free cancellation.

But when he confirmed the booking, it changed to two rooms in US dollars, which came to NZ$481.85. He asked his bank to block the transaction and disputed the payment.

He was told to contact the hotel and booking site but could not reach either.

He was then asked for supporting documents, which he supplied, but the bank did not proceed with a chargeback because it said he had confirmed the booking.

He argued the details in the booking confirmation were different to those shown in the terms of sale and appeared only after clicking “confirm”.

“We found the bank failed to consider the terms [he] saw before confirming the booking, instead concentrating only on what showed after clicking the confirm button,” the ombudsman said in its case note.

“It did not ask for evidence of those initial terms, despite [his] consistent explanation. The bank also overlooked a valid chargeback ground under the card’s misrepresentation rules. These state that a customer can seek a chargeback if the merchant has misrepresented the terms of sale.”

Scams

Scams can be common over Christmas.

Through the year, there have been a number of fake retail websites operating.

Banking Ombudsman Nicola Sladden said there were fewer complaints to her scheme this year, suggesting banks’ efforts and growing public awareness were making a difference.

“That said, the financial impact of scams remains significant, with losses continuing to rise – reminding us that scammers are adapting quickly, and we must stay vigilant.”

In one case FSCL dealt with, a woman was contacted by a scammer who told her he worked in the bank’s fraud team and her account had been compromised.

She was told to transfer her money to another account where it would be safe.

He gave her his bank staff photo and ID number before helping her load software on to her phone to give remote access to her bank account. He then helped her open a “special account”.

She transferred $155,000 into that account in four instalments.

“[She] believed the ‘special’ account was just a holding account until the bank resolved their security issues, and she would be able to transfer the money back into her regular bank account,” FSCL said.

“When she later viewed her ‘special’ account, she discovered all the money had gone and alerted the police.”

The account had been with an international money transfer service and the money had been shifted offshore.

She was referred to the money transfer service’s complaints process and acknowledged that it had not done anything wrong. She withdrew her complaint.

Financial difficulties

Sladden said her scheme was seeing more complaints from people experiencing financial hardship.

“These cases reflect the economic pressures many New Zealanders are facing and highlight the importance of helping them navigate difficult financial situations with their bank.”

In one case dealt with by the ombudsman’s office this year, a man complained about a credit card he took out in 2011. He fell behind on repayments in 2021.

“After two years, he applied for financial hardship assistance from the bank and complained that it should never have given him the card in the first place or allowed his adult daughter to have an extra credit card.

He said the bank’s communication with him about the debt was inadequate and it should have offered him hardship assistance earlier.”

The ombudsman could not look at whether he should not have received the card because it was too long ago.

The communication had been clear and effective, the scheme said.

“[He] said the bank should have sent him letters however it was not obliged to do so. The bank had sent him emails, as well as calling him and his daughter. However, we considered the bank should have sent him information about financial mentoring services – as required by the Credit Contracts and Consumer Finance Act 2003 – when he fell behind in his payments.”

The bank offered to wipe the $2800 in debt he had left, in light of its failure to send him information about the mentoring.

“We considered the bank’s offer to be more than we would have recommended as compensation because we doubted [he] would have taken up a suggestion by the bank to see a financial mentor – a doubt reinforced by the fact he did not seek help when the bank did tell him about such a service.”

FSCL said summer and Christmas spending could also lead to more complaints about credit and loans, including concerns about responsible lending if people took on short term or high cost credit for gifts, holidays or travel, then struggled with repayments in the new year.

“Consumers may also complain when they feel fees or contract terms were not clearly disclosed, or when they did not fully understand the long-term cost of a quick holiday top up loan.”

Taylor said people should be cautious about taking on new high-cost credit for discretionary spending.

“If you get into trouble, talk early to the lender about hardship options and keep records of all discussions. Consider contacting a financial mentor for help with your budget. Seek external dispute resolution help if you cannot resolve things directly with the lender or card provider.”

Leaving house secure

Insurance and Financial Services Ombudsman Karen Stevens said people could sometimes be caught out if they did not meet insurers’ requirements for securing their belongings.

“If people fail to take care of their belongings, they are likely to be disappointed with an insurer’s response to their claims,” Stevens said.

That could mean leaving things visible in a locked car, leaving items on the beach, or leaving a house unsecured when they went away, she said.

In one case IFSO dealt with, a couple returned from holiday to find their house had been burgled.

They were declined by their insurer because they had left a window open on a security stay.

Upon examination, the IFSO Scheme found that the insurer had introduced a policy in 2020, imposing a new condition on the insured to ensure their house was securely locked when “unattended”.

The IFSO Scheme said it was an unusual requirement and as such, they should have had their attention drawn to it.

The IFSO Scheme said the insurer was unable to rely on a failure to meet this condition to decline the claim, and the complaint was upheld.

In other cases, people had their claims turned down for items stolen hat they had left on the beach.

One person whose 19-year-old daughter was looking after the house while they were away and had friends to stay, had their insurance claim for stolen valuables turned down because one of the guests was a likely suspect.

Exclusions

Stevens said there were often complaints about insurance for overseas travel if people found their pre-existing conditions were not covered.

FSCL said it saw the same. It said common triggers for complaints about travel insurance were claims declined because something was excluded, for example, pre existing medical conditions, civil unrest, or loss of enjoyment not being covered, and disputes over how much would be paid, poor communication in claims handling.

“Consumers often assume the whole trip is covered when policies only cover specific booked components or defined events, leading to disappointment if a trip is disrupted but not strictly ‘cancelled’ under the policy wording.”

Taylor said people should read their policies before they booked and travelled, paying close attention to exclusions for pre-existing medical conditions, adventurous activities, civil unrest or pandemics.

She said they should also check what counted as a cancellation or additional expense.

“If the policy is complimentary with your credit card, make sure you have checked the activation criteria before travelling. Ask the insurer to explain if you have any questions. Keep evidence (receipts, medical reports, airline notices) and contact the insurer as soon as something goes wrong.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand