Money: Building societies can make mistakes too

Who are you going to call? The Ombudsman.

AFTER SO much favourable publicity in the past year or two, it is hard not to view building societies as cuddly institutions, determined to do their best for customers come what may.

Perhaps unsurprisingly, this is not a view shared by many thousands of their customers who find that "cuddly mutuals" can, at times, deliver service that is just as appallingly bad as the publicly-listed banks they try to distinguish themselves from.

So what happens if you want to complain about your building society? The Building Societies Ombudsman's office is the place to go.

Established in 1986, the office has a staff of 35, many of them lawyers. The Ombudsman is Brian Murphy, a solicitor who worked in private practice for many years.

The service, provided free to complainants, is funded by the building societies. All societies are required by Parliament to belong to the scheme. Its annual operational budget is just over pounds 1.5m. How independent is the Ombudsman? Of the so-called "final decisions" made by the office, approximately two thirds favour societies and one third back consumers, a similar batting average to most other Ombudsmen.

Most complaints are from personal members of a society, but the Ombudsman will deal with companies, firms, clubs or associations with a turnover not exceeding pounds 1m. However, the aggrieved customer is first urged to approach the society to attempt to resolve the issue through its internal complaints procedure. This normally takes six weeks.

Complainants can write to the Ombudsman first, but his office will just pass the letter on to the society. Should a stalemate ensue, a letter confirming that the internal complaints procedure has been exhausted should be obtained and sent to the Ombudsman. His office will then forward a complaints form for completion and return. The Ombudsman will not deal with a complaint if:

t It is about general creditworthiness;

t It relates to a society's general policy;

t A court or another ombudsman is involved;

t Or it is without substance or clearly has no reasonable prospect of success.

Additionally, he may refuse to help if over six months has elapsed since the complainant became aware of the matter. Furthermore, his powers to deal with membership rights are extremely limited with regards to conversion to a bank, mergers or takeovers.

The Ombudsman's terms of reference only permit him to consider a complaint if it is about "a service of a kind which is provided by building societies for individuals in the ordinary course of business". Conversion in itself does not fall within this category.

Even so, for the year ended March 1998, nearly 47 per cent of the incoming workload related to conversions. Although his office cannot challenge the fairness of the terms for issuing shares, he can investigate actions by the society which resulted in the member not receiving the windfall. These may be the failure to update address records, resulting in a member not receiving the details, or failing to explain that the account opened would not qualify for any windfall.

With five large conversions in 1997, six lawyers worked almost exclusively on this subject. Of the 7,204 complaints conversion complaints received, 2,391 became cases. This placed a considerable strain on the office and, by the end of March, 1,551 cases, nearly half of which related to conversion, were outstanding.

The office initially attempts to resolve any complaint by conciliation. If this fails, the Ombudsman examines the papers and issues a "preliminary conclusion", on which both parties are asked to comment. If the matter is still not resolved, the Ombudsman issues his "final decision".

The complainant has to reject or accept this. If it is accepted, both parties are normally bound by it, but if rejected there is no right of appeal. However, the complainant's legal rights remain unaffected. Societies are bound by the Ombudsman's decision unless they take the "publicity option". This route has only been taken twice. The society then has to publish its reasons for not conforming to the Ombudsman requests.

The Ombudsman can make awards up to pounds 100,000. The average time for resolving cases is 4.8 months. Of the 15,473 initial complaints received to the year ended March 1998, 7,204 related to conversions; 4,306 to mortgages and 2,183 to investment and banking. Of the total, 4,519 were outside the terms of reference, and a staggering 10,187 did not proceed, primarily because complainants did not respond to requests for further information. Only 934 cases were resolved by the society's internal complaints procedures, while the Ombudsman resolved 1,548.

For `A Guide for Applicants' contact: The Office of the Building Societies Ombudsman, Millbank Tower, Millbank, London SW1P 4XS (0171 9310044)