Beating up banks - A tale of success
Note: This is not financial or legal advice. It does not take into account your personal circumstances. I am not a lawyer nor an financial professional. Doing anything described in this blog may cause your teeth to fall out, the Large Hadron Collider to destroy the Earth, and Uwe Boll to release another movie.

A little bit of history. We purchased our house (with a mortgage) years ago, before the housing price boom in Australia. We also paid off the house years ago as well, with a low mortgage and high savings it isn't that hard. However due to the way our mortgage was structured, we discovered we could keep it as a line of credit with no interest charges, and no ongoing fees, and so we did; it's an easy line of credit if we should ever need it.

Late last year, our mortgage provider (RAMS) sold their branding and distribution lists to one of Australia's largest banks (Westpac). The remaining company (RHG) continued to hold the existing loans, but now lacked all the instruments needed to gain new customers. So, how does a mortgage provider increase their shareholder value without the ability to gain new customers?

In mid-February this year, we received a slip with our statement, saying that our mortgage discharge fee had increased from $295 to $695 as of the end of January 2008; that is, as of about two weeks ago. This is the only fee that everyone with an RHG mortgage would have to pay, regardless of what they did with their loan. Being able to net a profit of $400 for every mortgage in RHG's extensive portfolio is a very wise business decision, and given they just sold their name and distribution network, it didn't really matter how much bad press they got about it.

But wait, I hear you cry! How could they increase retroactively increase the fees? Surely people must be given appropriate notice, so they could discharge their loan early if unsatisfied with the change? Well, financial institutions do have to provide notice of fee increases, but the Australian Consumer Credit Code allows this notice to be given by means of a notice published in a newspaper that's in circulation in the appropriate region. RHG claims to have published such a notice in one of our national papers at the start of January.

I'm of the personal opinion that the Consumer Credit Code (CCC) is a pile of steaming excrement, since it's completely unreasonable for consumers to read every newspaper every day to see if their fees would be increasing. What's more, while there are provisions for appeal against an unfair rise in interest rates, or an unfair rise in early termination fees, there's no specific provision for appeals against general fee increases, which makes fighting them more complicated.

My views on the CCC aside, we were left with the problem of a fee increase we didn't want to pay. If we'd been given even a single day of real notice we would have discharged the loan, but by using the sneaky newspaper announcement we simply didn't have this chance. So, what does one do?

Start by keeping a log. Just a piece of paper where you can note down when you received the notice, when you made phone calls, who you spoke to, what was agreed, and any letters you've sent or received. Hopefully you won't need this, but it really comes in handy later when you need to intimidate or escalate.

Now call the organisation with which you're having the dispute. Be polite and friendly when doing this, it's not the fault of the person on the phone that you've been screwed. Indeed, the people you're talking to are your negotiation partners, they're going to assist you in putting things right. Normally the first person you talk to won't be able to help, but they can put you in touch with someone who can. From our first point of contact we discovered that we weren't the only people who were upset about the increase, that our customer service representative agreed the situation sucked, and we were given the details for RHG's dispute resolution centre.

Now, it's worth noting that the role of a customer complaints or dispute resolution centre isn't to listen to your complaint. In any large business there are going to be people who are angry, and the complaints department exists simply to try and absorb or deflect this anger as cheaply as possible. You can expect to get canned responses, form letters, and general unhelpfulness. All of these are cheaper for the organisation than giving up $400 worth of additional fees, and many people will give up after the first couple of events. In any telephone conversations, make sure you record the full name of who you spoke to in your log. Make sure you record any details they provided, and ask for clarification if you need to. Keep being friendly and polite, even if you need to be firm in your requests. It's easier to help someone who's likeable.

Once you've collected enough information in your log to demonstrate that you're not making progress, write a letter, preferably addressed to the most senior person you've spoken to so far. Explain your case in full, provide details including dates and names with the conversations you've had with the institution. Explain that you feel that you're not getting anywhere with the dispute, that you're very unhappy with this, and that you plan to escalate this matter to $CHANNEL if it's not resolved within 10 business days. The purpose of this letter is to demonstrate that you're sick of being screwed around, and that you've got sufficient evidence of their unhelpfulness that you can escalate the matter successfully. The 10 business days is so they've got time to react (big organisations are slow). Send the letter via registered post, make sure you keep the paperwork, and give them a call a few days later to confirm they have the letter.

Your $CHANNEL will depend upon the organisation. In Australia, we have the Banking and Financial Industry Ombudsman (BFSO). The BFSO is a joyful and wondrous thing. When a dispute is taken to the BFSO, the financial institution pays for it. Any determination made by the BFSO can be rejected by the consumer, but if accepted is binding upon the financial institution. If the issue is a systemic one (eg, everyone's had a fee incorrectly charged) then the BFSO can pull out a big can of whoop-ass and unleash it on the bank. Put very simply, any dispute that reaches the BFSO is a guaranteed loss for your bank; in time and BFSO fees if nothing else. There are similar ombudsmen for other industries, the BFSO isn't unique.

Not every institution is under the BFSO's jurisdiction, and in our case that included RHG. If you're in Victoria, the appropriate body to go to is the Victorian Civil and Administrative Tribunal (VCAT). VCAT handle a whole range of small disputes (under $10,000), including credit disputes, payment disputes, and trade practices disputes. At the time of writing, lodgement fees for most consumer disputes are $34.20, although some are higher.

As it happens, I've never had a case go to either the BFSO or VCAT, and that included our dispute with RHG. Why? Because it's much cheaper for the dispute department to roll over on a $400 dispute than it is to go through all the time and expense of a legal process. Even if they win, the time taken to bring a dispute through VCAT will end up costing them more than $400. This sort of process tends to be a very reliable way, albeit a somewhat time consuming one, to resolve a dispute with most large organisations.

To end our tale with RHG, I received a phone-call from them the day I was filling in the lodgement paperwork for VCAT. We were given a long spiel about how RHG does not admit any fault, that this is a once-off decision made as a gesture of good will, and that RHG believes it has complied with a long list of sections in the CCC. When you get this phone-call, be polite, say thank-you, and don't get smart. Whoever is calling you probably doesn't want to be doing what they're doing right now, so make it easy for them. Do make sure you get their name and contact details if you're not getting the resolution in writing, you may need them later.

As it happened, everyone worked like clockwork after the phone-call. A few days later we completed all the required paperwork under the old fee structure, and our land title arrived in the mail. Huzzah!