Press Release - 05 July 2006

Statements at the launch of the Financial Services Ombudsman's 2005 annual report

5 July 2006- Statements at the launch of the Financial Services Ombudsman’s 2005 annual report

(a) Chairperson Dr. Con Power

Welcome to the Press Launch of the Financial Services Ombudsman’s first Annual Report that covers the period from the 'establishment day' of 1st April 2005 to 31st December 2005. I am Con Power, and I am the Chairperson of the Financial Services Ombudsman Council. The Minister for Finance appointed my fellow nine members and me on 1 October 2004.

The Council's main task was to get the new statutory Financial Services Ombudsman regime up and running by 1 April 2005, to merge the existing two voluntary schemes into it, and to provide for its expanded remit. We also want to ensure that the Statutory Scheme operates in a fair and pragmatic manner.

I am pleased to record that the initial task was achieved within a very tight timeframe, and I thank my fellow Council members and others for their help and support.

Let me emphasize that though the Ombudsman is subject to the Council's general superintendence, he is completely independent regarding the investigation of individual complaints - his main task.

We are fortunate that Joe Meade, the person selected by public competition to be the Ombudsman, has gone about the task with zeal and determination

I compliment Joe, his deputies, Gerry Murphy and Caroline Gill, and all his staff for providing an efficient service and for the seamless transfer from the voluntary schemes to the new expanded statutory one.

Joe has presented his Annual Report to the Council and ultimately to the Oireachtas today. His Report demonstrates an initial period of proud achievement and endeavour.

I now call on Joe to address you, and to answer your questions.

(b) Joe Meade, Financial Services Ombudsman

I welcome you all today to the publication of the first annual report of the new statutory Financial Services Ombudsman. I am especially pleased to welcome you to our new location.

I extend a special welcome to Paul Kenny, the Pension’s Ombudsman.

I took up duty as Ireland’s first statutory Financial Services Ombudsman on 16 May 2005. As Financial Services Ombudsman I am a statutory officer who deals independently with complaints from consumers about their individual dealings with all financial services providers that have not been resolved by the providers. Accordingly I am the arbiter of unresolved disputes who exercises a quasi judicial role and I am impartial. My decisions are binding subject only to an appeal to the High Court by either party. It is a free service to the complainant and I can award compensation up to €250,000.

The new statutory scheme replaced the two former voluntary ombudsman schemes for insurance and credit institutions. It has significantly expanded powers for enforcement and now includes all financial providers. It started on 1 April 2005 and voluntary schemes and staff merged into it. I compliment the former ombudsmen-now my two Deputy Financial Services Ombudsman- and staff for their voluntary schemes work which set a sound foundation for the statutory scheme.

I also thank the Council ably led by Dr. Con Power for successfully getting the show on the road and guidance since given. The Council as Con has said has no role in dispute resolutions.

Decisions I made on major complaints already published in October and February last but are listed at pages 50-51.

The press release summarises significant developments during the period with easy reference to the relevant pages of the report. In short

• It has been an extremely busy initial period as some 2600 complaints against financial service providers were received.- an increase of 23% on the same period in 2004

• The highest compensation awarded by me was €56,000 against a credit institution and €32,000 against an insurance sector provider.

• I express serious concerns about

o the urgent need for a code of practice for travel agents and tour operators selling holiday insurance cover as they are not subject to my remit;

o some solicitors by not agreeing to VHI necessary undertaking in third party matters are causing unnecessary distress to patients;

o Medical consultants need to be certain when advising patients about insurance cover.

o All of An Post’s financial services being subject to my remit.

• A number of issues were referred to the Financial Regulator for appropriate regulatory and consumer actions- mortgage protection policies, payment protection policies, credit card payment dates and changing rates of interest. The Regulator is pursuing these matters.

• A Memorandum of Understanding for cooperation between the Financial Services Ombudsman, the Financial Regulator and the Pensions Ombudsman is in place. Paul Kenny and I liaise closely on issues as does the Regulator I am glad to record

• Information campaigns, integration of the former two voluntary ombudsmen schemes staff, appeal procedures as well as levy collection were also implemented satisfactorily.

That is an outline of our activities for the first nine months of our existence .

I now refer to matters which are active in 2006

• The first ever High Court Judicial review proceedings against me were taken a by the Irish Nationwide Building Society in February 2006. I had directed the Society in February to change its practice of charging automatic six months interest when commercial mortgages were redeemed early. I considered that this was not a genuine pre estimate of loss and was in effect a penal charge. The High Court proceedings were settled in my favour in May with full costs awarded to me. However I had to take later actions in June to ensure that the agreed settlement terms were implemented. I can ill afford the time it took to ensure that compensation directed in another similar type case – though it was not subject of the judicial review proceedings payment of this compensation was part of the settlement terms - was in fact paid. Nevertheless be aware that I will take all appropriate measures to ensure that my decisions are enforced. I am far from impressed with INBS’s delay in complying with the High Court settlement.

• An appeal has been initiated by Ulster Bank against a cumulative €7m compensation direction given by me last February which may involve 3-400 consumers. Initial legal argument was heard by the High Court on 31 May- at the request of Ulster Bank- as to the scope of the appeal. The judgement by the President of the High Court is expected soon. The appeal proper will then follow. Needless to say I will vigorously defend my actions.

• I had to initiate enforcement action against a credit union in May 2006 for failure to pay a €4,000 compensation award made by me in February this year- the amount has since been paid. In mitigation I suspect the credit union concerned did not fully appreciate my role.

• Disappointed and somewhat surprised that some financial service providers make noises about the constitutionality of the Act’s provisions principally when I direct compensation or exercise my statutory powers -this is one of the major enhanced provisions which the former voluntary schemes did not have. I will exercise my full powers when necessary. In general I acknowledge that these are exceptional to the normal cooperation I get.

• Let me add that threats of appeals, judicial reviews or indeed possibly referring matters to the media or elsewhere by either party to a dispute do not intimidate me at all as being a creature of law I must act as I deem appropriate.

• Case load of 1625 complaints so far this year - 665 for credit institutions (621 in 2005) and 960 for insurance (1009 in 2005). I acknowledge that FSPs are improving their complaints procedures.

• New case studies for January/June 2006 complaints will be published in a few weeks.


Finally I wish to record my thanks to all my staff, OPW for the fit out of this building, the Minister and Department of Finance staff, the Financial Regulator, Pensions Ombudsman, financial service providers and representative bodies, the general public and the media.

My deputies and I will now take questions from those who are media personnel.