Financial Services Ombudsman Irish Experience William Prasifka Financial Services Ombudsman 9 October 2012 Financial Ombudsman Institute, Armenia
Introduction & Background
FSO Role Independent adjudication on unresolved disputes between Complainants and Financial Service Providers (FSPs) thereby enhancing the financial services environment for all sectors
Background to FSO • Established in 2005 under The Central Bank and Financial Services Authority Act 2004 • Successor to voluntary ombudsman schemes for credit institutions and the insurance sector in early 1990s • Recognition that a complaints resolution process outside of the Courts was necessary and appropriate
Points to Note • Fair adjudicator of complaints against regulated FSPs • Not a consumer advocate • Not an industry advocate • Free Service – can engage professional advocates at your own expense
Power of the FSO • Investigate /Adjudicate complaints • Award compensation up to € 250k • Direct Rectification (No € Limit) • Findings - legally binding, appealable only to the High Court
Organisations Subject to FSO Investigation • Banks • Building Societies • Insurance companies • Credit Unions • Mortgage, Insurance and other credit intermediaries • Stockbrokers • Moneylenders • Credit sales companies • Leasing companies
Who can complain to the Ombudsman? • All personal customers • Limited companies with a turnover of € 3,000,000 or less • Unincorporated bodies, charities, clubs, partnerships, trusts, etc.
Complaints outside Jurisdiction If the conduct complained of: • Is or has been the subject of legal proceedings before a Court or Tribunal • Occurred more than six years before the Complaint was made • Is within the Jurisdiction of the Pensions Ombudsman
Discretion to discontinue investigation If the complaint is: • Frivolous, vexatious, not in good faith • Trivial • Alternative and satisfactory forum available • Complainant has no / insufficient interest in conduct being complained of
Complaint Experience
Complaint Trends – Context Total Complaints Received 8000 ? 7000 6000 5000 4000 3000 2000 1000 0 2006 2007 2008 2009 2010 2011 2012 ?
Overall Complaints, Up H1 2012
Complaints Recd – By Sector
Complaints Experience • Insurance Sector – 50% of Complaints • Insurance – PPI largest increase • In Banking – mortgage complaints make up approx 40% of all banking complaints • Investment complaints – alleged mis-sale & Investment Performance
Outcome of Findings - Overall
Outcome of Investment Findings
Outcome of Banking Findings
Outcome of Insurance Findings
Recent Issue - Ulster Bank
Ulster Bank – IT ‘Glitch’ • ‘Computer Meltdown’ • Transactions not processed • ‘600,000’ customers directly impacted • Impact on Non-UB customers • 2 weeks’ duration
FSO – Response • Encouraged Early Resolution • Address Complaints Quickly • Effort to address Complaints without need for referral to FSO
Ulster Bank Complaints Complaints Received July = Approx 150 August = 60% Less Sept – Dec = ?? Complaints must go through UB Complaint process before referral to FSO
FSO Experience with Judicial System
High Court Appeals • FSO Findings – Appealable to High Court • Both FSP and Consumer entitled to appeal • Currently – Approx 40 HC Appeals (1%)
Courts hold FSO to High Procedural Standard • Substantial experience before the Courts • Full exchange of submissions & opportunity of parties to respond • Procedures / investigation must reflect the remedy directed • Request for discovery and jurisdiction must be fully considered
High Court Appeals – Standard of Review Not a ‘de novo’ review “To succeed ... must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors...“ Ulster Bank Investment Funds Limited v Financial Services Ombudsman, 2006
‘Lyons & Murray’ Case “… a material disputed question of fact could only be resolved by • an Oral Hearing …” – Paragraph 29 “ Once [FSO] proceeds to adjudication, a legal Rubicon is … • crossed. As agent of the State, [FSO] is thereby bound to uphold the constitutional right to fair procedures … This has further consequences, for … the resolution of the question of whether there should be an oral hearing is not a matter which goes directly to the specialist expertise of the [FSO] so that the deference to that expertise as enunciated by Finnegan P. [Ulster Bank Case] is simply not applicable in this case ” – Paragraph 38 Supreme Court Appeal •
Judicial Support for FSO “What has been established: [FSO] is an informal, expeditious and independent • mechanism for the resolution of complaints ... not engaged in resolving a contract law dispute in the • manner in which a court would engage with the issues ... can also make orders of a type that a court would not • normally be able to make ... possesses a type of supervisory jurisdiction not normally • vested in a court.” Hayes v Financial Services Ombudsman & Ors – 2008
Judicial Support for FSO • Unique Jurisdiction • ‘Plain Language’ • Confirmation that the purpose of the FSO is to keep the process of dealing with quantum of complaints, so far as possible, out of the court. • The Ombudsman is not the correct forum for a party who wants court style remedies • Courts do not ‘second guess’ awards
Conclusions
Complaint Trends & Outcomes • ‘Paradigm’ Shift • Consumers’ awareness and willingness to complain • Product types / complaints may change... ...BUT Complaints remain at record levels • Increase in challenges to Findings (Legal / Non Legal) • Indications are for an increase in Complaints
Not all FSPs are Alike Best Performers FSO upholds < 10% • Awards – Small • Cases Upheld – Difficult / Novel • Worst Performers FSO upholds > 40% • Awards – Large • Cases Upheld – Recurring Issues • No Evidence of Convergence
Legislative Amendments • At the moment - FSO cannot identify complaints records of individual Financial Institutions (FSPs) • Problem: FSP Management of Claims / Recurring issues • Solution: Publication of Claims Record of FSPs
Legislative Amendments • Consultation Process re Legislation • Cross-party agreement to change FSO Legislation • Consumer Interest not best served by inability to publish records of individual Institutions • If legislation amended, clock reset to zero
Customer Engagement • FSPs must actively manage complaints - Earlier intervention, before complaint elevation - Industry must internalise FSO methodologies - Refer to published Data / Guidelines - More settlements - Review processes to reduce complaint numbers
Thank You Any Questions
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