How Do They Get Away With It and How Can You Stop Them?

I would be very grateful for any comments, advice or even (last resort!) commisseration on the following draft of a letter the finished version of which I posted to my bank today.



Dear Sir/Madam

On 23rd December 2004 I entered into the above contract as a solicitor in Ireland had notified me of the imminent dispersal of my late mother’s estate and urgently requested bank and account details for transmission of an inheritance. You will note the contract specifies purchase of EURO at a “fixed rate” of 1.4518 at any time between that date and 23rd March 2005.

The solicitor e-mailed me on 19th January that she had transmitted my legacy electronically to the bank to the details given. On Monday 24th January Lloyds Foreign Exchange in Birmingham informed me – when I telephoned for the fourth time enquiring if they had yet traced the transfer made six day previously and which they had no idea of the whereabouts – that the funds had arrived in my account (details above) in STERLING which is why they had been unaware of its existence!

I was informed that I had broken the exchange contract and the penalty charge was £2,336.33 (difference in the Euro/Stg exchange rate on 21st to 23rd December and 19th and 24th January……….none of these dates were clearly specifiable to me throughout this saga, despite also being told the rate of exchange was ‘time-critical’ and not negotiable). I was informed this charge would be deducted immediately from my account.

I asked to speak with the Supervisor who said negotiation was not an option. If I wished to take a chance and not close the contract immediately but wait until the end of the contract period the percentage of the penalty charge might be less but might be greater.

I closed the contract then on the basis that this decision was without prejudice to further action on my part and subject to further attempts to negotiate with Lloyds at another level.

In accordance with Lloyds process for complaints-handling (cited on your website) I am writing to you in the first instance. There are a number of issues involved in this extraordinarily punitive charge.
1. I was directed by one of your in-branch employees that the process for receiving funds from abroad was to contact Lloyds Foreign Exchange Services as Euro would not be accepted into my sterling account. I was given a bit of paper with the relevant phone number. I was not seeking currency exchange at that point but attempting to notify my branch to expect a large amount of money in Euro and to contact me on receipt. I approached your agents at every stage in good faith for advice on the premiss you worked in your customers’ best financial interest. There is no information available on transfer of funds from abroad on your website (aside from offshore banking which I did not require) or elsewhere in your organisation nor did your agents at any stage indicate there were alternative ways to exchange currency for deposit into my account – for example the method used by the solicitor which was in fact the optimal arrangement for transfer of these funds and did not require any Forward Contract!
2. I did not “break the contract”. The estate solicitor gave me a figure in EUROS immediately prior to closing her office for a two-week holiday. On her return she arranged the transfer in the best interests of the estate and the beneficiaries involving changing the currency from the estate end at the most favourable rate to her client in co-operation with an Irish bank which was acting in the best interest of its customers and which “held” the payment until the rate was more advantageous to me. The solicitor had not identified that the funds “must” reach my bank-account as Euro.
3. You did receive the funds within the contract period and very cheaply. There never was any element of “risk” as was communicated clearly to your agents. They were my funds “in Ireland” coming into “my” account in England. I am not a business or benefiting from exchange fluctuations but a private individual and a customer of your bank constrained to make arrangements in a financial domain which contrary to all the financial control legislation in this country apparently provides no information on which the lay public can make an informed judgement on how to best manage their financial affairs;
4. In my view Lloyds appears in this case to be penalising a private individual for an occurrence outside of her (or anyone elses!) control but which has incidentally beneficially identified weaknesses in your F.E. monitoring procedures – work which would have cost Lloyds massive sums in consultancy fees.

There is much more I could say but let that suffice for now. I am distressed and disappointed that a bank with has benefited from my financial business for 26 years thinks so little of customer loyalty that present gain at any cost is paramount. I am even more distressed that after four long years of exhaustion organising my late mother’s hospitalisation, nursing-home placement, funeral and probate from the other side of the Channel I am now faced with a battle to retrieve this (to me considerable!) sum of £2,336.33 of her legacy which I consider to be most unfairly appropriated.

This letter does not pre-empt any necessary further applications to - for example – The Financial Standards Authority, Financial Ombudsman Service or the Office of Fair Trading – for redress and I am interested to hear your comments.

Yours faithfully

"even (last resort!) commisseration"

Hi Marie,

Sorry to hear about this problem. The banks are just somethin' else both here and across the water. Am firmly convinced that its no longer about providing a service but purely about making money.

My brother emigrated to Australia some time back and they tried down under to fleece him on the transfer of the money from here to there. Luckily enough he was one step ahead of them and objected immediately and they backed down.

Hopefully you will get some advice from others here. Best of luck with your endeavours.

Sueellen.

Thanks Sue! I sent a more polished version of that letter express-signed for-registered etc., track-able every moment of the way. My Secret Weapon is a retired friend who used to produce a consumer-rights programme for the Beeb and he's really pushed me to do this (my first response was "May all my bad luck go with it but life's too short"). Talking with people the response has been "Don't let them away with it. They wouldn't DARE to treat the wealthy in that manner as they'd never be out of the courts, but will 'try it on' with ordinary folks who are novices in a very specialist area of life. Must say "AAM" and the growing sense of outrage at peoples' experiences with large financial institutions has also given me the energy to take a stand.

The fact is that in foreign exchange transactions (and there are dozens of queries about this area on AAM every week) there is absolutely no information available to customers and you go into the business as a gambler, 'hoping it will work out'. Not good enough when they claim to be charging for a 'service'. What service?

What can I expect from Financial Ombudsman?

Last week received the bank's response to my objection to them claiming £2,336+ in a situation where in my view they had not performed any service or product.

Their response is that recorded telephone calls between myself and their Foreign Exchange branch I agreed to the terms of a 'Forward Contract' which included a penalty (the £2,336+) if Euros were not received as contracted. I had not disagreed with that. That is the truth. My objection was that I had not been made aware that in a currency exchange I was in competition with my bank, had entered the contract under the impression the bank were working for me as their customer.

The next step is the Ombudsman. Has anyone experience of this process and what criteria they rule by, how long the application takes etc? Any other advice or tips relevant to this situation would also be very much appreciated.

My objections - which the bank fail to grasp - are based on (a) there was no written information available or offered in advance, the first written communication being a post-contract pro-forma letter advising me that I was 'legally bound' to produce the Euros by dint of my telephone conversation three days previously and must now sign and return the enclosed agreement; (b) there is no 'cooling off' period/mechanism as with any other financial deal or contract and (c) their 'product' does not appear to be a product at all but a series of case-by-case arrangements.

I am organising the transfer of my account to another bank.

What are the chances the Ombudsman can achieve anything?

Re: What can I expect from Financial Ombudsman?

Marie,

Sorry to hear about the difficulties you are having.

I have no experience of the Ombudsman procedure, either here or in the UK, but I do have some comments on your 3 objections, which I hope are helpful in preparing.
(a) It is standard for Forward Contracts to be agreed over the phone (and recorded), with minimal documentation following later.
(b) due to the nature of the contract it is not possible to have a "cooling off" period - the price is agreed and the deal done at a point in time. It is unlikely the same contract could be made a week, a day or even an hour later. Cancelling the contract would involve reversing the trade in the market with another participant at a different rate, which could be more or less favourable to the bank and will result in either a gain or loss. If it is a loss they pass the cost on to you, if it is a gain you may be entitled to receive the benefit of this.
(c) With a Forward Contract, what you are buying is the "certainty" offered by knowing you will convert a certain amount of Euro to GBP at a set rate at a particular time, and this is the service the bank was providing. The rate you agreed was calculated on the basis of the exchange rate at that time, the duration of the Forward Contract, the difference in interest rates between Euro and GBP and a profit for the bank. The charge comes from the fact that the bank now has an open EUR/GBP position (due to be closed by your funds) that it must close in the market at market rates. The precise price depends on when they do this - hence the suggestion that you could leave the contract run longer to see if a more favourable rate could be achieved.

To be honest I think the difficulty arises from 2 sources:
- due to the fact that there were 2 agreements to convert the Euro amount to Sterling. I am not clear how this happened, but if for example the Irish bank converted without instructions from you, they should not have done so and are at fault.
- Lloyds do not seem to have made sufficient information available before selling a forward. They should have made sure you understood the product before it was sold. This is probably a point you should consider in your submission to the Ombudsman. Did you fully understand the contract you were entering into? Did the bank explain the details of a contract that they could not reasonably have expected you to be familiar with? Did they properly sell you a product that was appropriate for your needs?

Hope it works out well for you.

What can I expect from Financial Ombudsman?

Statler - Thank you for that response.

To your first question - it was the solicitor in Dublin who was dealing with/instructing BoI to disburse the funds to myself (in UK) and sister (in Holland)

To the second - yes they did explain clearly during the telephone contract that it was legally binding etc. HOWEVER the bank had advised that a Forward Contract was 'the best and cheapest method' of transferring the money. In fact the 'cheapest and best' method was the one taken by the solicitor and BoI (which I wasn't aware was being made).

And no - there was no information available outside of the telephone contract.

I am going to the Ombudsman with the suggestion that Lloyds have treated a personal banking transfer as if it was a risk-entailing business deal with transfer of funds from one business or company to another and is not geared to personal banking. Will post an update here when the Ombudsman has ruled, though fear they will just say 'Tough. Get used to it'.

Re: What can I expect from Financial Ombudsman?

Hi Marie,

I can't help wondering if a claim against BoI might be successful. They converted from EUR to GBP, without an instruction from you to do so (not sure if the solicitor instructed them to convert before sending or just to send). If this was based on an assumption on their part they should not have made the conversion and you would not have incurred the cost with Lloyds.

Anyhow, the very best of luck with the Ombudsman. You have not been treated well by Lloyds and I hope you receive some redress.

What can I expect from Financial Ombudsman?

Statler - Thank you for the suggestion about BoI. I'm not sure I have the energy to pursue that and don't even know where the misunderstanding arose (there have been many, many misunderstandings and miscommunications between myself and the solicitor over the past two years). I could write a book.

Yes, Lloyds have been churlish. I've been a customer of theirs continuously since 1980 when they gave me an unsecured (huge!!) loan to equip and pay rental for a whole year on a wonderful studio I'd located just as I was graduating and setting up as a freelance sculptor and teacher.

I've closed my account (just when I'm moving into that period of life where my earnings are about to quadruple with completion of my organisational consultancy training!) so they have lost considerably. Personal anecdote is powerful influence; a number of colleagues in the hospital about to arrange mortgages or loans have struck Lloyds off their list of potentials; two friends who held shares have sold in disgust (dividend was ridiculously low anyway!)