ING saga creates unprecedented year for Banking Ombudsman

Wednesday 17th November 2010

The ING frozen funds debacle "is clearly the most serious investment product failure the Banking Ombudsman has ever dealt with", according to its annual report.

The general downturn in the economy and the ING investigations contributed to what the Ombudsman has described as a year "unprecedented in the history" of the scheme.

In its full year report the Ombudsman revealed it completed double the investigations over the 2009/2010 year than in any previous year and facilitated $14.5 million in compensation to complainants.

Of the 715 investigations completed during the year, 349 involved ING, with Westpac second with 103.

"In the last year, we completed more than twice as many investigations as in any previous year," said Banking Ombudsman Deborah Battell.

"This has been a result of the flow on effects of the economic downturn and, most notably, the ING investment failure, which constituted nearly half of all investigations completed during the year."

Battell said the Ombudsman had facilitated compensation payments totaling $23.5 million to customers that complained about ING investment funds sold through ANZ.

Of that sum, $13.7 million was facilitated for ANZ customers during this financial year in addition to the $45 million in compensation resulting from the Commerce Commission settlement, some of which will go to Banking Ombudsman complainants.

Over three quarters of the completed investigations over the financial year related to investments and superannuation, largely relating to ANZ/ING, and mortgage finance, an area that saw complaints increase by 18% on the year earlier.

The Ombudsman began its investigations into complaints arising from the failure of the ING Diversified Yield Fund and Regular Income Fund marketed by ANZ in 2007 and the investigation "continued to dominate out case load this year."

"By June 30 2010, we had completed 470 investigations. A further 217 cases were under investigation or awaiting allocation to an investigator. Also by June 30 2010 we had facilitated additional returns to ANZ customers of more than $23.5 million."

Compensation payments ranged from $340 to $400,000 with the average being $39,118.

Despite the Commerce Commission decision not to proceed with legal action against ANZ the Ombudsman said it is continuing to investigate whether any direct misrepresentations by the bank's advisers to customers were made, whether the investment was fit for the purpose stated by the customer and whether the bank took "reasonable care and skill when giving investment advice to the customer."

The report said it remains too early to draw all the lessons from what it described as "clearly the most serious investment product failure the Banking Ombudsman has ever dealt with."

The Ombudsman said it aims to complete the outstanding ANZ/ING investigations by the end of the year.

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