Press Release - 07 May 2009

Financial Ombudsman’s 2008 annual report

Financial Ombudsman is kept very busy and consumers have benefited by some €45m as a result of his findings since 1 April 2005. 6,000 complaints received in 2008 (36% increase) and so far this year complaints are up by 45% to 2,600.

Summary of year’s activity

In his Annual Report for 2008 published today Financial Services Ombudsman Joe Meade indicates that during 2008

• 5,947 complaints were received, a significant increase of 36% over 2007. 4,887 complaints were resolved with 62% to complainants’ satisfaction and 38% rejected. Over 1,000 (400 in 2007) investment losses complaints received.
• 17,450 complaints received since establishment on 1 April 2005 with 87% or 15,100 complaints resolved. Over 1,600 complaints were received in the last quarter of 2008 while in 2009 some 2600 complaints received; a 45% increase.
• 19,000 phone calls received, 83% increase, while 180,000 visits made to the website compared to 70,000 in 2007.
• Revised complaints handling procedures were put in place in August 2008 in a very short period to take account of a July 2008 High Court judgment which is under appeal to the Supreme Court- time for resolving cases now takes longer.
• Over €45m has been refunded to consumers as a result of Ombudsman’s findings.
• The running costs of the Office were €5m including €1.3m of legal expenses in defending High Court actions taken against the Ombudsman’s findings. By 31 December 2008, just 0.2% of his findings appealed - 8 by financial service providers and 16 by complainants. Of the 14 appeals closed at that date only 2 judgments were against the Ombudsman.

Complaints

• In May 2008 the Irish Nationwide Building Society informed him that €1.56m had been refunded by it when the ‘look back’ exercise, requested by the Ombudsman in 2006, was completed under the general supervision of the Financial Regulator. He was surprised at how low the final figure turned out to be as the original estimate by the Society itself was in the €3-€6m region. He communicated his concerns to the Financial Regulator.
• Arising from investigating complaints by credit unions about investments made with advice from brokers he raised serious concerns about the way credit unions’ committees and management invest members’ funds. He awarded €500,000 where a union lost €1m after investing in a worthless bond while over €35m was refunded by a stockbroker to many credit unions for other bond sales following his finding in favour of one credit union.
• He also investigated complaints about the sales of an insurance bond linked to the performance of an Irish unregulated financial services company, ISTC Ltd, which subsequently went into examinership in late 2007/early 2008. The investments, reported at €40m, were then worthless. His main concerns were whether or not the ‘wrap-around’ product was clearly understood by the sellers, promoters and purchasers as being in reality a product of an unregulated company and its unsuitability in general for elderly people.
• The Ombudsman made other findings regarding the sale of inappropriate financial products, geared property funds, credit cards, lost or misplaced property deeds, policy reviews not being carried out on time, specified illness cover and income protection benefit exclusion issues. Conflicts of interest not being disclosed were also of concern as well as sales practices. A few financial service providers were culpable in selling inappropriate products but trying to defend those practices to the Ombudsman were to say the least unacceptable, ill judged and rather foolish.
• The Financial Regulator’s information notes on serious illness cover and on travel insurance as well as its reminders to financial service providers of their responsibilities for dealing properly with elderly customers and to ensure that whole of life insurance policy reviews were carried out on time took into account serious concerns he had already conveyed to it.

Significant findings published

The report also includes summaries of 52 findings (35 upheld and 17 rejected) already published during 2008 including

• Insurance agent driving a vulnerable person living alone to an ATM cash point to secure sale of unsuitable health policies while another agent stayed behind in his house - action condemned, premiums of €1,520 returned and €1,500 compensation
• Naive bank official facilitating an ‘interfering neighbour’ to improperly deal with and change the account status of elderly siblings joint deposit account of €106,000 - 85 year old in hospital and 79 year old deaf; €1,200 compensation and account change reversed
• €50,000 award following delayed review of Unit Linked Whole of Life Policy for couple in their late 60s who had paid over €60,000 in premiums – increase from €780 to €2,000 in monthly premium sought; systemic problem identified in 1,800 other cases
• €325,000 specified illness cover directed to be paid and application of Insurance Company’s ‘loss of independence’ test severely criticised
• €250,000 unsuitable investment in a geared property fund to be refunded
• Misplaced property title deeds over 20 years merited €47,000 compensation as well as €20,000 refund of legal costs
• €74,00 refunded to solicitor who was defrauded when year old cheque for €111,000 was cashed and paid out on by a bank
• €1m worthless investment bond complaint was not upheld while a daughter’s €90,000 investment allegedly for 90 year old mother was also not upheld.

Further information: Conor Cashman (6318575) or Diarmuid Byrne (6318561)

Download full report

Financial Services Ombudsman, 3rd Floor, Lincoln House, Lincoln Place, Dublin 2.
Lo call 1890 88 20 90 Telephone: 01-6620899 Fax: 01-6620890