5.1 "ABC" Bank

"ABC" Bank submitted the following to the Committee:

"The article ‘Don’t let interest recalculators tempt you’, published in the Business Times of 23 May 1999, invited written submissions on experiences involving recalculators.

As the article correctly points out, banks are put to considerable time and trouble in dealing with claims from interest recalculators, purporting to represent the banks’ own clients, usually borrowers. The recalculation and verification of, for example, a client’s mortgage loan account, which often dates back many years, is a lengthy, time-consuming exercise. Worse still, and as the article also records, banks feel constrained to do the recalculations despite the fact that 99% of recalculators’ claims are rejected. This is certainly our own experience. This fruitless exercise is very often attributable to the fact that the recalculators have simply used their own computer programmes in carrying out their own calculations, which bear little or no resemblance to the contractual basis governing those done by the bank. The use of incorrect dates, rates and/or interest cycles are the norm. This results in a massive, unnecessary expense for the banks.

By way of example, I enclose a copy of a letter dated 14 April 1999 in which (recalculator’s name) concede having done their calculations without being in possession of a copy of the relevant bond (or Letter of Grant, which is the loan agreement) and "solely based on the information established from the given bank statements’. Our client’s name and other details have been deleted for purposes of confidentiality.

Satisfied in the knowledge that our calculations are almost certainly correct, and to avoid becoming embroiled in unnecessary litigation, we provide these interest recalculators with copies of all relevant documents (beyond those which we are obliged to furnish our clients by law) and verify our own calculations. I am sure other banks do the same.

Some recalculators are more persistent than others and, through their own attorneys, have instituted legal proceedings against the banks in the name of the various account holders. Our experience is that, once these actions are defended, they are seldom pursued. We are even aware of a case where an interest recalculator:

We are in possession of a copy of the relevant agreement.

Over the years, we have had numerous claims from several interest recalculators. Our policy remains unchanged in that we will immediately rectify any error which we discover. To date this has not been necessary.

We support the Committee’s investigation and would be willing to provide you with such further assistance or documentation as you may require for this purpose".

A representative of the "ABC" Bank told an official of the Committee that a client of the bank, at the request of his interest recalculator, required copies of the client’s bank statements from 1984 to date. To recover the statements occupied three bank employees for four months. This was brought about by inter alia amalgamations in the banking sector, the closure of some branches and the opening of others.

5.2 The Council of Banks (now called the Banking Council)

The Council of Banks (the Council) stated that it is a matter of fact and public record that, on occasion, banks do make mistakes and incorrect data is captured on the computer system. The Council furnished the Committee with the value of claims received and paid out via interest recalculators over the past few years. The summary in the table below is for cheque accounts, home loans and hire purchases. The Council stated that very little interest has been repaid in relation to home loans or hire purchase.

The figures in the table were qualified by the Council. It stated that it was aware that there were counter views, frequently supported by "evidence" of specific bank actions. It is these actions, often at branch level, which made it difficult to determine an accurate picture of exactly what has happened in the banking sector. Examples were where:

banks and clients settled claims subject to legal action out-of-court;

branches settled claims outside the context of banks’ centralised claims recalculation departments (thereby bypassing the "official" statistics),

claims were settled in error by the wrong department;

banks made mistakes, for example, inputting 20 instead of 10 years, or failing to change an indicator when a client is upgraded from one type of special package deal to another and better one; and

banks settled claims to preserve the client relationship, rather than as an acknowledgement of any wrongdoing.

The Council stated that it was because of these reasons that it was difficult for it to comment emphatically on the behalf of the banking industry. There are obviously many variables beyond the control of the centralised departments officially responsible for dealing with recalculation issues.

Nevertheless, the table shows that since banks started communicating cheque interest rates to clients in 1992, the incidence of successful interest claims has decreased dramatically. This confirms the opinion of the BPC that the market for interest recalculators is getting smaller.