Press Release - 04 July 2008

Joe Meade Financial Services Ombudsman- address to the Public Affairs Ireland conference on 4th July 2008 on the topic - THE FINANCIAL REGULATORY REGIME & CONSUMER PROTECTION POLICY

Joe Meade Financial Services Ombudsman- address to the Public Affairs Ireland conference on 4th July 2008 on the topic

THE FINANCIAL REGULATORY REGIME & CONSUMER PROTECTION POLICY

Opening remarks

We have heard this morning a comprehensive review of the challenges facing financial regulation in Ireland in the national and international context. I would like in this short presentation to describe how my role as the Financial Ombudsman fits into the regulatory scheme of things and how my role also benefits both consumers and financial service providers.

At the very heart of the idea of an Ombudsman is the notion or principle of a person to whom an individual or SME can go to seek redress for a wrong done to him/her by a corporate body - in the case of my office, by a Financial Service Provider. It must be noted that the complainant must have exhausted the internal complaints process of the institution before I can deal with the matter.

My office commenced work on 1 April 2005 as a statutory office. I came about because it was felt that the then voluntary ombudsman schemes for parts of the insurance sector and for the banking sector were not the answer to the issues identified in the 1999 McDowell Report. As well other financial service providers did not have satisfactory dispute resolution systems in place. Naturally much was expected from me from day one and I am pleased with our progress and achievements in a short three year existence.

Let me say at the outset that financial service providers are striving to have satisfied customers but no matter how good you are genuine complaints will arise. How they are dealt with is what matters. Indeed in an industry where large volumes of transactions exist, where complex products are sold and where institutions are dealing with human beings I would be amazed if complaints did not arise. As well certain complaints will need outside assistance to be resolved- it mirrors life in this respect. As Ombudsman I am the independent and impartial arbiter of unresolved disputes and an aggrieved person does not have to go Court to get its complaint resolved. It must be appreciated that as Ombudsman I am not a consumer champion or advocate though but my actions have benefited consumers.

What I do in reality

As Ombudsman I exist to resolve disputes outside the legal system. I do this by registering a dispute and then facilitating a settlement between the parties, if at all possible. If no settlement is reached during internal complaints procedures then as Ombudsman I will go on to investigate that case and to make a finding. While significant decisions and compensation awards have been made by me from day one the size of the award is not what matters. Instead it is that the person who has complained and the financial service provider concerned get a fair and impartial decision from me.

What a Complainant, seeking redress for a grievance, wants above all else is a free, fast and fair investigation of the complaint, an impartial determination of the matters in dispute and a swift remedy if the complaint is upheld. That is the service that my office is uniquely equipped to provide. Though very complex matters arose from 1 April 2005 they were dealt with in a professional and proper manner. My staff and I have not shirked our responsibility to deal with some extremely difficult cases in a short period of time and will continue to do so.

Essential Features of an Ombudsman

It is not enough to say that the Ombudsman can do this or has power to do that. There are certain essential qualitative features which must be present and demonstrably so. These essential features are:-

- Independence
- Accessibility
- Power to investigate
- Power to make binding decisions
- Adequate resources

I will now expand on each of these features in turn.

Independence

In order to be seen to be independent and more importantly to be perceived as being independent, the Ombudsman must be selected by public competition and have tenure for a fixed period of years, say six or seven years, as the case may be. Removal from Office must be for a very serious reason such as incompetence or ill health. Tenure may or may not be renewed. An Ombudsman must not be accountable in any way for his investigations and decisions to any person or body other than the High Court. Most of all independence is demonstrated and guaranteed by statutory remit. In the case of my office, these powers are vested in me by virtue of Part vii (b) of the Central Bank & Financial Services Authority of Ireland Act 2004. This Act provides that the Ombudsman "is entitled to perform the functions and exercise the powers given to him under the Act free from interference by any other person”. [Section 57 BK (4)].

Again, the Act states that the Ombudsman "is required to attend a meeting of a Joint Committee of the Houses of the Oireachtas whenever asked to do so by the Committee to provide such information as the Committee specifies”.

However the Act goes on to say that the Committee "is not entitled to request the Financial Services Ombudsman to provide information relating to any complaint that is currently under investigation. The Financial Services Ombudsman must refuse to comply with a request from the Committee to provide it with any such information”.

I mention these points in detail because they illustrate so clearly the extent of the independence conferred on my office by statute.

Accessibility

Accessibility is facilitated in a number of ways. Access to my Office is free of charge and the procedures are simple, fast and strictly confidential. Complaints can be made on line also. A friendly and informative website is a sine qua non and we have one. Accessibility is also made easier in that a complaining consumer does not have to use a lawyer to bring forward and process a complaint and is not at any disadvantage in not doing so. This is so because as Ombudsman, by virtue of the powers given to me under the statute, I have extensive powers to investigate a complaint by demanding to see documents and by asking probing and searching questions in the furtherance of the investigation of the complaint.

I also have the power to take evidence on oath from Financial Service Providers and to search premises without a warrant. These powers are unique to me as Ombudsman and are fundamentally different from the powers of the Courts in our common law system where a judge will not generally make any enquiries at all and will decide the case on whatever evidence is put before him. This is part of the reason why a consumer can bring his complaint to my office without the assistance of a legal representative, however I do not object if you engage professional help but you bear the cost.

Finally I publish case studies and trends every six months and indeed my staff and I have been known to address people and organisations late at night and at weekends.

Power to Investigate

As I have mentioned, the statutory powers which have been given to me include the enforceable power to demand to see any document in the hands of the Financial Service Provider which, in my opinion, are relevant and to take statements, on oath if I deem it necessary, from any person employed by a Financial Provider. Indeed a provider may finish up in prison for three months if he/she does not cooperate. These powers should be used judiciously and sparingly, as indeed they are. Nevertheless they illustrate that my office has been given all necessary powers in order to carry out its work. As if to emphasise this, the statute provides that "the Financial Services Ombudsman has the same powers that a judge of the High Court has when hearing civil proceedings that are before that Court with respect to the examination of witnesses (including witnesses who are outside the State)”. [Section 57 CE (5) of the 2004 Act].

The Oireachtas clearly intends that no Financial Service Provider and no consumer need be in any doubt as to the extent of the investigating and adjudicating powers of my office. It is my practice to use these powers sparingly and only when necessary but my past actions indicate that I am not afraid to if needs be. So far I have put no one in prison or felt the urge to do so. Naturally should I –perish the thought-ever overstep the mark in any way, the High Court is there to correct me and that is a statutory safeguard for all including myself.

The power to make binding decisions

The power to make legally binding decisions in an impartial manner is an essential and necessary feature of my office. I have power to make an award of up to €250,000 by way of compensation in any particular case and/or give such other direction to a Financial Service Provider such as rectifying or changing the conduct complained of and/or to direct that there be a change in the future in the conduct found to have been wanting.

Once I make a Final Decision in a case, it is legally binding on the parties subject only to an appeal by either party to the High Court. Contrast that worldwide or with the former voluntary schemes where the decision is binding on the provider but not on the complainant.

I base my Decisions on what I consider to be a fair and reasonable outcome having regard to all the evidence which is put before me by either party. Of course I have due regard to the law of contract, to the law of tort, to consumer protection legislation and to any other statutory provisions which are relevant. But at the end of the day, it is what I consider to be fair and reasonable in all the circumstances that will determine the outcome of the case.

Quasi judicial powers

Because I have quasi judicial powers I must, of course, act judicially. That does not mean that the procedures of my office have to be akin to those of a Court of law. The whole point of the Financial Services Ombudsman is that it is an alternative method of dispute resolution, alternative, that is, to the courts. My procedures must therefore, of necessity, be informal and flexible. For example I do not, as a general rule, have oral hearings but will hold them if I deem it necessary. Such oral hearings would be unwieldy and would not be fair to the consumer. The large financial institution is in a far more advantageous position to take part in an oral hearing than the individual private citizen who brings forward his complaint against such an institution. The reasons for this are quite obvious.

Resources of the Office The adequacy of the resources at the disposal of any statutory Office and to me as Ombudsman will determine the effectiveness of any Ombudsman Scheme and it goes without saying that adequate resources are central to the independence of any Ombudsman. Ultimately it must be for me as Ombudsman to determine what resources are needed to run the office. For my office, a statutory levy on Financial Service Providers is the method of funding and I have to say that this method has been working extremely well. I can report that I have all the resources that I need in order to do my job properly and my governing Council has given me its full support. Providers also pay up and on time generally.

Some Statistics

My office has received and processed over 14,000 complaints since the office opened in April 2005. Indeed this year so far some 2,700 complaints have been received, 30% up on last year. 60% of these complaints were resolved to the satisfaction of the consumer, either because of an amicable mediated settlement or through a legally binding ruling in the consumer's favour. However 40% were rejected and that demonstrates my impartiality and what my role really is-an independent arbiter of unresolved disputes.

Although either party has a statutory right to do so, there have been very few appeals to the High Court against my Decisions, 18 in all, representing only 0.2% of my rulings. You are all well aware of the over 100 case studies I have published, the high profile Court challenges taken by four providers and the significant financial benefits accruing to consumers from institutions as a consequence of my decisions.

Conclusion

I have tried to show where my office stands in terms of the regulatory framework. As Ombudsman I am not a regulator, a consumer champion or advocate but a statutory impartial and independent officer who by my actions plays a vital role in the overall regulatory environment for financial services. All the regulation in the world is of little use to the individual consumer if he/she cannot have access to a system of redress so as to ventilate the alleged wrong done and have it remedied. I am proud that my office is able to provide, has provided and will continue to provide such a system in a cost effective, impartial and efficient manner.

The Government's continuing emphasis on having a well regulated - but not over regulated- financial services sector, the Financial Regulator's statutory Consumer Protection Code, increased awareness by consumers, and clearer focus by the industry on treating the customer fairly combined with my role as Ombudsman cannot but enhance further the financial services environment overall for everybody in Ireland.

Thank you for your attention.