Ombudsman urged to resolve bank disputes


Tribune Business Editor


The Government is being urged to appoint an independent Ombudsman to help resolve disputes between Bahamians and the commercial banking industry.

Advisers to Malcolm Spicer, a 2013 Cacique award winner, who is embroiled in a bitter loan dispute with CIBC FirstCaribbean International Bank (Bahamas), told Tribune Business they had received “a very positive response” when raising the Ombudsman concept with Bahamian government officials.

Michael Geoghegan, a 26-year Canadian government relations consultant, said the creation of a statutory Ombudsman would ensure “greater accountability and fairness” in relations between Bahamas-based banks and their customers.

A “mutual friend” of Mr Spicer, who has been supporting him in his battle with CIBC FirstCaribbean, Mr Geoghegan explained that the Ombudsman post was prevalent throughout Canada and many developed countries.

An Ombudsman is effectively an ‘independent third party’ who seeks to mediate, and resolve, disputes between consumers and service providers without either party having to go through expensive court actions.

“Malcolm Spicer’s financial adviser came up with that idea, and I know he’s met with senior Bahamian government officials and it has been received in a very positive way,” Mr Geoghegan told Tribune Business.

“I think it’s a brilliant and very sensible suggestion. Sometimes you need to get the egos out of the room and have an independent third party say: ‘This mistake needs resolving satisfactorily for both sides’.

“This would be better for customers in the Bahamas who do not have the wherewithal to lawyer up and seek legal redress,” Mr Geoghegan added.

“If you had an Ombudsman there, there would be greater accountability and greater fairness. I only hope the Bahamian government pushes that initiative, and my understanding is that they have been very receptive to the idea.”

Mr Spicer’s advisers are believed to have discussed his case, and the idea of a Bahamian banking Ombudsman, with Damien Gomez when he was minister of state for legal affairs.

Discussions are thought to have continued subsequent to Mr Gomez leaving ministerial office, and it is understood they are now trying to arrange a meeting on the subject with Prime Minister Perry Christie. A similar meeting with Opposition leader, Dr Hubert Minnis, on the Ombudsman proposal is also understood to be in the works.

Mr Geoghegan said Canada had created numerous Ombudsman posts, both at the state and federal levels.

He cited British Columbia’s Ombudsman for banking services and investment, and noted that CIBC FirstCaribbean’s Canadian parent even boasts its own internal Ombudsman. The Canadian Bankers Association, too, has an established, set-out process for resolving disputes between its members and customers.

“I think that in terms of the Bahamas, it would be good to have one [an Ombudsman] who is not tied to a particular financial institution,” Mr Geoghegan told Tribune Business.

“They would act as an honest broker, an honest, independent third party, in terms of resolving these disputes. It’s good news for consumers.”

The Ombudsman proposal was first made in a May 26, 2015, affidavit sworn by Mr Spicer’s ‘financial adviser’ in a bid to support his fight with CIBC FirstCaribbean.

Mr Hall alleged: “It is my opinion, as a past banker, that if ever a case could be deemed sufficient to call upon Her Majesty’s Government of the Commonwealth of the Bahamas to consider appointing an independent and statutory-protected banking Ombudsman for the protection of all Bahamian citizens, this case may be it, as in my opinion it has all the necessary ingredients for public outcry.”

That interpretation, though, has been vigorously rejected and denied by CIBC FirstCaribbean. The bank’s own court filings allege that the matter involving Mr Spicer is a simple asset/security repossession following the borrower’s default.

It is now seeking Supreme Court approval to foreclose on his family home and Abaco-based apartment/restaurant investment project, which was designed to provide for his family in retirement.

CIBC FirstCaribbean is understood to be extremely upset at Mr Spicer and his advisers over what it sees as unfounded claims that it was the bank’s own negligence and/or “malfeasance” that resulted in the loan default, given its position that there is no evidence to support such allegations.

This newspaper understands that CIBC FirstCaribbean has been eager to get the Spicer matter before the Supreme Court and adjudicated. The matter was adjourned again from its last scheduled hearing date because Justice Estelle Gray-Evans was busy dealing with a criminal matter.

However, Mr Spicer’s case has been attracting significant public interest since it was first publicised by Tribune Business. An online petition he initiated, seeking support and attacking the policies of the Canadian-owned banks, had attracted some 561 signatures by press time yesterday.

A Town Meeting relating to the Spicer case, and the alleged issues it raises, was also held in Abaco over the weekend.

Rightly or wrongly, the Ombudsman proposal may be ‘pushing at an open door’, given the Bahamian public’s perceptions and attitude towards the commercial banking industry - especially the Canadian-owned banks.

Apart from repossessing homes and businesses from distressed Bahamian borrowers (as they are often within their rights to do), the commercial banks have tightened lending requirements and levied an ever-increasing range of fees on customers to make up for reduced interest (loan) income.

The Canadian-owned banks have also outsourced several hundred jobs from the Bahamas to overseas jurisdictions, and complaints about high interest rates and spreads, and the alleged treatment of borrowers and clients, are widespread.

The commercial banking industry, which has been among the Christie administration’s top tax targets since taking office, is also an easy political ‘whipping boy’ with a general election in the offing.

Prime Minister Perry Christie last year slammed the banking industry for breeding a culture of “modern day economic slaves”, and “cajoling and sweet talking” customers to take on consumer debt for things they cannot afford.

The Ombudsman proposal thus stands a good chance of being adopted in the election campaign manifesto of at least one political party.

Mr Spicer and his advisers are alleging in court documents that CIBC FirstCaribbean knew it was lending a sum, $855,500, that was inadequate to complete the first stage of his project, located near the Abaco Club at Winding Bay.

And they are claiming that this loan amount was based upon a fundamentally flawed calculation.

A realtor’s March 2006 appraisal report on Mr Spicer’s property, commissioned by the bank, came up with the following calculation:

“Proposed buildings:

4 at 4,014 square feet = 12,042 square feet.”

Based on the maths, the appraisal report should have produced a 16,056 square feet calculation. However, it went on to base the ‘replacement method’ for valuing Mr Spicer’s property on the 12,042 square feet.

Given that the ‘first stage’ involved just two (half) of the four proposed buildings, Mr Spicer is alleging that he should have been eligible to receive $253,500 more on the original loan which, at $855,500, was based on 50 per cent of the incorrectly calculated $1.7 million.

Mr Spicer and his advisers are alleging that, based on the initial under-funding, which was exacerbated by the flawed appraisal calculation and its non-disclosure, and failure to follow through on claimed verbal assurances that more financing would be forthcoming, CIBC FirstCaribbean effectively condemned the project to falling into “bankruptcy”.

However, CIBC FirstCaribbean is vehemently denying the allegations by Mr Spicer and his attorneys that it was negligent, or guilty of misrepresentation, in its dealings with the project.

Bryan Thompson, its Abaco branch manager, alleged in a November 6, 2014, affidavit, that “at no time did the bank agree to” or indicate that it would definitely provide further financing beyond the original loan.

“The state of the defendants’ loans at the bank reveal that they fell into default when Mr Spicer requested further financing, and I recall that Mr Spicer requested further financing, and I recall that Mr Spicer indicated that he could not continue to service the loans from his Abacom account at the bank,” Mr Thompson alleged.

“This led the loans at the bank to fall into serious default in light of the non-payment of the agreement to pay the interest on the larger loan of $855,500.”

He added that CIBC FirstCaribbean followed its standard practice of assessing the borrower’s payment history and collateral security, and on that basis determined that Mr Spicer’s project did not qualify for further funding.

Mr Thompson also denied that the sum lent, $855,500, was based on the $1.7 million calculation arrived at by the flawed appraisal, which has been seen by Tribune Business.

Mr Geoghegan, who has previously held posts such as ‘chief of staff’ for British Columbia government ministers, is said to have developed “a growing reputation” for successfully fighting so-called ‘abuse of power’ cases by government and corporate institutions.

He has done this both in Canada and internationally, although CIBC FirstCaribbean would reject claims that the Spicer case falls into this category and/or merits such attention.


Wanderer 7 years, 8 months ago

The Banks in the Bahamas have been abusing their customers for too long. The Ombudsman is a consumer service, running in most civilized countries. The public needs to make their voices heard on this issue. Alone you cannot fight the banks. A petition is now online asking for this very thing and is approaching 700 in just 6 working days. Please make your voice heard.



Entrepreneur 7 years, 8 months ago

The Bank Ombudsman proposed by Mr. Spicer's advisor would be of benefit to all Bahamians.

For as it stands there is no contingency plaintiff's bar in the Bahamas so the law courts remain open to all men like the doors of the Ritz hotel, to steal a line from Lord Denning.

Equally, it is in the banks' interests to have such an Ombudsman in order to have a sustainable banking industry without the otherwise arguably inevitable expensive litigation.


Economist 7 years, 8 months ago

We desperately need an Ombudsman. The Central Bank is not doing its job. It issues the License and then goes to sleep.


Entrepreneur 7 years, 8 months ago

I heard from a colleague who has read the publicly available affidavits that the bank's affidavit allegedly borders on the surreal for many reasons. Such as the "collateral security" was allegedly approximately double the loan amount, and it was only after the best part of a year of the bank not replying to any correspondence or undertaking any of its duties professionally once the money ran out (while still extracting thousands of dollars in interest each month from the Spicers), that the loans only then fell into default.

Nice business if you can get it - bankrupt the client and then say he's in difficult and grab assets worth double the loan while the Ritz Carlton stood close by ready to develop the site with you.

Under the circumstances I've heard many find the bank's affidavit hard to believe.

Couldn't happen if we had a Bank Ombudsman...


bogart 7 years, 8 months ago

Prior to and or accompanying office the govt must absolutely push for the creation of Senator Jerome Gomez Consumer Protection Agency. Prevention is better than surgery. These cases should not even get to the international level as we have some 5,000 Bankers and some 300 banks as an international Financial Business nation. A few should not jepordise the many. Many cases abound of unfairness including the already mentioned Spicers, another one with the contractor by the bank and the other cited as myth where allegedly some bank advertised in the press and sold a repossessed house with the people still living in it. Truly awful for these stories to go any further.


Entrepreneur 7 years, 8 months ago

The petition is already getting closer to 1,000!

As one intelligent colleague said today, given the petitioners' efforts have only been based from one small island SO FAR - if say 700 or so are from that Island what % is that of bank customers on that island that are really upset about the Spicer case and the need for an Ombudsman?

It's a relatively significant % in a very short period of time.

Once word gets spreading through Nassau we would not be surprised to see this number grow even more...

But we need the outcry - one lady today who signed the petition was complaining about her 19% interest rate with a Canadian bank on a $5,000 loan!!

For her, like most Bahamians on a modest salary, no matter how much she pays each month because of the interest, the loan never really seems to go down she says!!

19%??? - when the Canadian central bank is lending to the Canadian banks here at what? 0.5%?

Bahamians deserve to be treated like Canadians, not institutionally taken advantage of!


butlers 7 years, 8 months ago

An Ombudsman is way overdue in the country. The really isn't any true Consumer Protection as far as the Banks are concerned. To bad it took so much pain and suffering for Mr and Mrs Spicer to bring this issue to light. These Canadian Banks enjoyed huge profits for many years and when the market got soft they continued to capitalize on the peoples throughout the Caribbean.


Wanderer 7 years, 8 months ago

Well done you Abaconians! Now lets see if you can get Nassau, Grand Bahama, the rest of our lovely islands and our neighbours in the Caribbean, educated and involved.


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