Credit Union Dispute Resolution Centre DETERMINATION 2B * DATE: 21 December 2004 SUBJECT MATTER: Member s account closed without notice members sought compensation for interruption to their business accounts and lost interest The following is the Determination I have reached in the case of Mr & Mrs V ( the members ) and the credit union. Extent of Review In making this Determination, I have reviewed the information provided by the member and the credit union, the Finding of this office dated 1 October 2004 and the further matters raised by the member and the credit union in response to the Finding. Finding I have reviewed the Finding and I am satisfied that the Finding accurately identifies the nature of the dispute and the issues raised by the member and the credit union. I do not propose to restate that analysis but to adopt it for the purposes of this Determination. Response to Finding In a letter dated 14 October 2004, the credit union said that: 1. It does not agree that the credit union should be required to give the members 14 days notice before the account closure; * This Finding has been edited for external publication and the parties de-identified.
2 2. In the present electronic banking environment, it considers that 5 to 7 days notice should be considered as more than reasonable; 3. The credit union exercised its discretion to take prompt action to close the accounts. This is considered reasonable given the circumstances of this particular case; 4. The credit union should not be required to reimburse the members any lost interest on the business account funds because it did not make an error in issuing the cheques payable to the company; 5. The credit union does not have to replace the cheques payable to the company but chooses to do so to resolve the dispute; 6. The assessment of non-financial loss is unwarranted as the Finding found that the members did not experience more than a degree of ordinary inconvenience; 7. The credit union decision to close the members accounts was only made after no other workable remedy could be found; and 8. The credit union believes that its offer to make a $50.00 exgratia payment and to replace the cheques payable to the company represents a fair and reasonable resolution. The members did not respond to either the Finding or the credit union s rejection of the Finding. Review The issues raised in response to the Finding for my consideration are: 1. Should the credit union give notice to the members before it closed their accounts? If so what is considered a reasonable period of notice to be given in the circumstances of this case; 2. Was it necessary for the Finding to address the issue of nonfinancial loss? and
3 3. Is the credit union s offer to resolve the dispute sufficiently reasonable? Assessment Reasonable Notice Period It is up to the credit union to decide whether or not to continue a banking relationship with the members. In making the decision to close the members account, the credit union should give the members sufficient notice so that they can make alternative banking arrangements. This is because it is easy to foresee that the members would need to open new accounts to keep operating their business and personal banking affairs. It is also reasonably foreseeable that failure to provide adequate notice would cause the members more inconvenience than is necessary. It is important to acknowledge that making alternative banking arrangements would involve more than just the physical opening of new accounts with another institution. As stated in the Finding, it would also include: a. Allowing unrepresented cheques to be processed and paid or alternative arrangement made for them; and b. Contacting customers and service providers to change direct debit and credit arrangements. Additionally, the members would need to spend time and effort to look for a new account institution offering the products that suit their requirements. It is important that the members look after their own interest to open the new accounts without delay. However, they should be able to do so without undue haste. I agree with the view expressed in the Finding that a 14 day notice period is appropriate in the circumstances of this case. In this case, the members deposited the cheques from the closure of their personal account with the credit union to the new account on 11 September 2003. I confirm that the credit union should compensate the members the amount of lost interest as calculated by the Case Manager in the Finding.
4 Non-financial Loss Issue The credit union says that the circumstances of this dispute are such that the assessment of non-financial loss is unwarranted. When we investigate disputes whereby the members have claimed suffering stress and inconvenience as a result of the credit union s action, part of our assessment would include whether or not the credit union should compensate the members for their non-financial loss. There are cases where it may not be appropriate to require a credit union to compensate the members. However, that does not mean that our assessment of that aspect of the dispute is unwarranted. Our policy is that claims for simple inconvenience are not sufficiently substantial to warrant compensation. Factors to be taken into account in our assessment include: 1. The extent of actual physical inconvenience, including the length of time it persisted and its degree; 2. The extent to which the members used their time to rectify the situation; and 3. The extent to which the members expectation of enjoyment and/or peace of mind was interfered with for reasons beyond their control and as a result of the act or omission of the credit union. I note that the Case Manager s view in the Finding was that the members did not experience more than an ordinary degree of inconvenience by having to make alternative banking arrangements. The Case Manager also noted that when the credit union closed their account, the members requested to receive the proceeds in cash instead of cheques. They also made a subsequent request to exchange the cheques for cash at a suburban branch of the credit union. Their requests were declined. The Case Manager has expressed the view that the members were placed in a more stressful situation than was necessary because the
5 credit union declined their requests to receive the proceeds in cash instead of cheques. The assessment of the members non-financial loss did not arise out of their inconvenience of having to make alternative banking arrangements. Rather, the Case Manager considered that the members have suffered non-financial loss because of the additional stress that they suffered for not having access to the funds that they required. I have reviewed the Finding and am satisfied that the assessment was made in accordance with our principles and policy. Therefore, I confirm that it is fair and reasonable for the credit union to make a compensation payment of $100.00 to the members. The Credit Union s Settlement Offer The credit union has offered to pay $50.00 to the members to resolve the dispute. The credit union has also offered to issue replacement cheques for those drawn in favour of [the member s company] when it closed the members business account. The credit union says that because it did not make an error in issuing the cheques in favour of the company, it should not be required to pay for the amount of lost interest on these sums. The Finding concludes that the cheques were drawn in favour of the company in accordance with the credit union s records and, in doing so, the credit union s action was not erroneous. There is no information available to me to disagree with this conclusion. I support the view that the credit union should pay the members the amount of lost interest on these sums. The reason is that the lost interest was calculated on the basis that reasonable notice should have been given to the members for the closure of their account, and not because the cheques were drawn in favour of incorrect payee. It is also my view that when an account is closed, the account holder can request how he or she would like the cheque or cheques drawn from the proceeds. The cheques do not have to be drawn in favour of the account holder. However, they must be drawn in accordance with the account holder s instructions.
6 In this case, since the credit union unilaterally issued the cheques without seeking the members instructions, my view is that the credit union is required to issue replacement cheques to the members. It is acceptable for the credit union to arrange for the physical exchange of cheques at one of its branches or another mutually agreed location. If the physical exchange of cheques is not mutually convenient, the credit union should countermand payment of the original cheques and send replacement cheques to the members along with payment for the lost interest and compensation. Determination For the above reasons and those set out in the Finding, I recommend that: 1. The credit union pays the member an amount of $76.61 for the lost interest; 2. The credit union pays the members $100.00 to compensate for the inconvenience caused; and 3. The credit union and the members make arrangements to effect the exchange of cheques in a mutually convenient way. In the absence of such arrangements, cheques should be sent to the business care of the address stated on the signed authority form provided to this office, being [address of the company].