How to report a bank for incorrect tax reporting.

Sillychuckie

To cut a long story short, what they essentially did, was pay out an 'overpayment' on my mortgage, via a credit to a savings account marked 'Interest'. It wasn't interest. It was a credit amount on the mortgage, because the mortgage had been 'over-redeemed', which is standard on these sorts of accounts, because the redemption calculation never takes into consideration the offset benefit between the calculation date, and the redemption date (since they can't predict how the offset balance might vary during that period). This would only materially impact people with large offset accounts, redeeming a mortgage, made worse by any lengthly delay between redemption calculation date and redemption date. Its very unlikely to impact someone reading this post, but there might be a few hundred other customers of theirs that it impacts slightly (but only if the credit breaches their savings allowances etc). In my case, they owed me this money back, but rather than paying it out directly, they somehow added it to a savings account as 'interest'. I didn't notice the specifics of the payment until after I had closed the account and received my final statement. Rather than it showing 'credit refund', it showed 'interest', and they can't change that (and can't avoid reporting it to HMRC as interest).

There will be others impacted, because it seems they followed their standard process, but not many, and probably not to the extent I was.

masonic

In that case it is a significant issue and FOS may be in a position to require the institution to correct its records. It is an important thing for people to be aware of, even if the number of people with this type of mortgage is small.

Have you made a formal request for rectification under the Article 16 of UK GDPR? There are some exceptions for financial services within the legislation, but I don't think this is one of them. Have you followed up with the ICO if this was unreasonably refused?

Looking beyond the mis-classification to impact, this actually won't have any impact for you beyond distress and annoyance because you are in self assessment, which was where I wanted to take discussion earlier. You have a responsibility to declare your income accurately, which does not mean replicating errors made by institutions.

It is well known that the BBSI returns are not an accurate reflection of income arising for tax. For example, for multi-year fixed term accounts that do not permit access and accumulate interest over the term, all of the interest is taxable in the year of maturity, but is reported in the year credited, leading to some pretty large discrepancies. A taxpayer in SA will report the interest when it arises for tax and it doesn't matter that their figures disagree with the financial institution, as they are right and can prove it if necessary. Though I've not heard of any need to do so for anyone in SA. I've personally reported conflicting figures over several past tax years and have never had any comeback.

So you can consider the compensation you've received as just that, you should face no consequences providing you fulfil your legal obligation to declare your income accurately. This would have had a worse ending for someone who does not self assess.

eskbanker

Sillychuckie said:

I don't want to drag their name through the mud on a public forum, as they've tried to do the right thing by me at least, but I'm torn, as it may impact others.

Not really seeing why you're 'torn' - it seems far more obvious to warn others in a helpful way rather than concealing the institution's identity out of some misguided loyalty to them, and explaining the issue in a neutral and factual manner wouldn't be anywhere near 'dragging their name through the mud' in my book.

Section62

friolento said:

If you have not incurred a financial loss, I doubt the Ombudsman would be very interested, and they would be unlikely to rule in your favour. They also wouldn't tell a bank to change their procedures / policies. 

...

Why not?  If the procedure/policy is clearly unfair (which refunding money misdescribed as interest is likely to be) then the Ombudsman has the power to tell the bank to stop doing it. (and/or correct the account record)

Also, you don't have to suffer a financial loss to complain to FOS and get a decision in your favour.

eskbanker

Section62 said:

friolento said:

If you have not incurred a financial loss, I doubt the Ombudsman would be very interested, and they would be unlikely to rule in your favour. They also wouldn't tell a bank to change their procedures / policies. 

...

Why not?  If the procedure/policy is clearly unfair (which refunding money misdescribed as interest is likely to be) then the Ombudsman has the power to tell the bank to stop doing it. (and/or correct the account record)

I think we may have discussed this on the Santander thread but FOS can instruct the institution to make changes for the complainant, but doesn't have the power to do so on a wider basis.

dunstonh

Is the Ombudsman still the right pathway for this sort of complaint, given that they have paid me off to make me good, or is there a reporting/whistleblower mechanism through HMRC?

The FOS is not available to you if you have accepted the complaint outcome from the bank.   Did you accept the complaint outcome (i.e. redress from the bank)

The FOS has no remit to instruct the bank to change processes for other customers.

Sillychuckie

masonic said:

In that case it is a significant issue and FOS may be in a position to require the institution to correct its records....

Have you made a formal request for rectification under the Article 16 of UK GDPR?
Have you followed up with the ICO if this was unreasonably refused?.

I'll see what FOS say in that case, as it would have been my hope that this would be the outcome.
I have not made any 'request for rectification' (or ever heard of this) or Article 16. I guess that was the entire point of this forum post... to open my eyes to such things. Similarly, I've done nothing with the ICO.

You make an interesting point when you write:
"You have a responsibility to declare your income accurately, which does not mean replicating errors made by institution".

As daft as it sounds, this hadn't necessarily occured to me. Their computers don't care what is "right or wrong", only what "looks" right or wrong, and "balances" nicely.
I can see the benefits of not doing so (I'd save £450), but I had considered this a small price to pay to avoid going anywhere near HMRC's radar. However, the complaint settlement letter accepts liability, so in that sense, gives me something to refer to should HMRC come asking. I could even refer to it in the notes on my return.

Dunstonh wrote "The FOS is not available to you if you have accepted the complaint outcome from the bank.   Did you accept the complaint outcome (i.e. redress from the bank)".

This whole affair was handled in a very strange way and I haven't really had an opportunity to 'accept' anything. I had a call from someone explaining that rectifying this properly would be difficult, and that they are considering a path which essentially refunded me the tax liability... but it was all just theoretical chit-chat, talking about potential options and ways to handle it. This was all over the phone. I said I'd be pleased to receive the funds (who wouldn't?!) so that I could at least feel safe that I wouldn't be out of pocket, and didn't consider the wider implications at the time. To be honest, I'm also not so selfless as to bat away an offer of cash for the rights of others. (sorry).
A week or two later, I suddenly received a payment into my current account (the one I had used for years to pay the Mortgage). I was fairly surprised by this, as there had been no further communication on the matter.
I even emailed them after that, saying I'd have liked to have received a formal response. It came a week later.

It states:

"As a resolution, we're agreeing to pay you £450.01 for the tax you'll have to pay to HMRC. I'm rounding this up to £500 and referring the points you have made to our Mortgage Products team. "Having concluded my investigation, I believe the concerns you've raised are justified. If you remain unhappy, you have the righ tto ask the FOS to look at your complaint". etc...
I don't know what they would have done if I had argued that the additional tax would have pushed me over a 100k cliff-edge and lost my childcare allowance, for example.

I know you still want me to name them, but frankly, the odds of someone stumbling across this post in the same situation are pretty slim. I think the right approach is to go via the FOS, then HMRC.
The GDPR route is an interesting one (especially as we are before the time they submit to HMRC). Can an erroneous statement-of-interest, really fall under that category?

Sillychuckie

eskbanker said:

Not really seeing why you're 'torn' - it seems far more obvious to warn others in a helpful way rather than concealing the institution's identity out of some misguided loyalty to them, and explaining the issue in a neutral and factual manner wouldn't be anywhere near 'dragging their name through the mud' in my book.

A few reasons, possibly.
1. I really got the sense that they were in a bind here, and trying to do the right thing, in an environment where it was very difficult to do so.
I spoke to a number of their advisors who were trying to liaise between mortgage teams, savings teams, tax teams. I understand that they even had some internal legal team involved at one point, as I suppose they had to think carefully about what to put into writing.
2. I myself work for a bank (not this one - obviously), so can empathise.

Of course, you are right though. I just think its a bit too early in the process (before I have even raised an FOS record) to start naming and shaming. Well - it is raised now, but only recently.

My appeal to the FOS specifically calls out the 'systemic' nature of this issue, and the fact it is likely to be impacting customers before and after me, and that I wanted to somehow 'hold them to account'.
I still feel like I should let this play out a little longer, then depending on the FOS response, can reconsider whether or not to name them. I guess the FOS complaint, if upheld, will also contribute towards any 'defensive' material I might have, should I not declare the sum on my return as interest - so it is to my (somehwat selfish) benefit to keep pursuing this also.

If the FOS can force them to create a corrected statement for me, then that would be great.
I'm still not sure if the FOS can hold them to account (other than perhaps HMRC and their desire to receive accurate and correct records). I guess this is an issue for the 'FCA' isn't it?

How do the FOS and FCA work together? If the FOS agree with me, do they raise it to the FCA? Or must I? The FCA only just occurred to me... as really one would need some sort of regulator, to verify they had fixed things permanently. Short of taking out (and subsequently redeeming) a new offset mortgage with them, I'll never know.

dunstonh

How do the FOS and FCA work together? If the FOS agree with me, do they raise it to the FCA? Or must I? The FCA only just occurred to me... as really one would need some sort of regulator, to verify they had fixed things permanently. Short of taking out (and subsequently redeeming) a new offset mortgage with them, I'll never know.

The FOS can report difficult firms to the FCA or serious issues (yours would not fall under serious - it would be things like fraud or widespread matters that they are seeing).     If they started seeing hundreds of cases like yours they may treat it as a trend and report it but it would need sufficient volume.

The FOS will be more interested in whether you personally are out of pocket and have the bank done enough to make sure you, as an individual, are satisfied.    

If you feel that there is a widespread issue here then you are better off going to the FCA.   However, the FCA can be sluggish to pick things up and is just as likely to forward your issue back to the bank again to look on an individual complaint basis, which you have already done.  

masonic

Sillychuckie said:

.The GDPR route is an interesting one (especially as we are before the time they submit to HMRC). Can an erroneous statement-of-interest, really fall under that category?

You've established that the bank holds personal information relating to your income that is incorrect. It is that information that you would require them to rectify. This would surely fall under the scope of GDPR.

If it is correct when they send to HMRC then there is no longer an issue. You could then ask them to reissue the SOI for your records.