Press Release - 12 May 2009

Address by Joe Meade, Financial Services Ombudsman at the launch of his 2008 Annual Report on 7 May 2009

May I welcome you all to this launch of our Annual Report for 2008? 

In these difficult economic times, the reason why this office was set up and its purpose was never more needed. My office is, in effect, an alternate cost free dispute resolution outside of the Courts for people and SMEs who are not happy with the way they have been dealt with by any Financial Service Provider.  As Ombudsman I am neither a consumer champion nor a consumer advocate, but merely the independent and impartial arbiter of unresolved disputes. I am perceived by almost everyone to be both fair and impartial as well as being independent but consumers and some media commentators must appreciate that I will not uphold every complaint. As Ombudsman I will not satisfy every stakeholder all of the time but gain respect when I act and is perceived by all sides to act impartially without fear or favour.

It is hard for me to appreciate that we are only just four years in existence. Since 1 April 2005, we have received 20,000 complaints and all but 2,500 of those complaints have been finalised. Last year we received 6,000 complaints or an increase of 36% on the previous year. The 2,600 complaints received so far this year represent a further 45% increase. In general, of the complaints that are closed, over 60% went in favour of the Complainant. It is fair to say that Financial Service Providers overall are co-operating very well with us also.

It is significant to note that in just four years this office has been responsible for some €50m being refunded to consumers which would not have arisen, I humbly suggest, if the office was not in place. Furthermore the average cost of dealing with a complaint has dropped from €816 in 2006 to €638 in 2008 - a 22% reduction.

This is by any standard a record of significant achievement and could not have been accomplished without the dedication of my staff. I am also grateful for the support of the Council and its Chairperson, Dermott Jewell. 

As we are a statutory body, we must and do observe due process and fairness and in that regard, any of my Findings can be appealed to the High Court. We have not been afraid to take tough decisions where necessary and, whenever an appeal has been made to the High Court, we vigorously defend our actions. Overall the level of appeals is quite small and most of the concluded cases were in my favour. During 2008, a major High Court judgement was delivered in a judicial review hearing which has been appealed by me to the Supreme Court which will hear the matter on 20/21 May 2009. The last thing I want is for this office to become like a tribunal as our work is geared to ensuring that we act as informally as possible as is required by legislation, having regard to due process. Indeed when I revised our procedures last August following this High Court judgment the time it takes to conclude complaints has gone from 3 to on average 5 months.

The media release outlines the main areas of activity during 2008, some interesting matters of concern such as INBS lookback figure seemed small, Credit Unions investments not up to standard, ISTC wrapped around policies implications, other investment issues, as well as the fact that our workload is increasing very substantially. Conflicts of interest not being disclosed when giving investment advice were also of concern while a  few financial service providers were culpable not alone in selling inappropriate products but trying to defend those practices to me as Ombudsman was to say the least unacceptable, ill judged and rather foolish.

Most of these issues are already in the public domain due to my practice of publishing case studies and complaints trends every six months. Accordingly rather than reiterate what is in the media release, some of the current matters crossing my desk may be of some interest to you all.

• Many of the current year’s complaints deal with investments which have not performed as well as expected or which are even worthless and where alleged mis-selling of investment products has taken place. Each case is considered on its merits but in many instances the greed of both consumers and providers is noticeable. Indeed some people have lost significant sums by their head long rush into investments.

 

• Property type investments are now becoming a new source of complaint.  Some Financial Service Providers are trying to argue that where property is involved, it does not come under my remit. I make no apology for taking a view that where a consumer seeks investment advice and part or all of the investment advice was to invest in a property then that is a matter which falls within my remit.  My legal advice supports my view. If perchance the Courts in an appeal were to find against me, then I will be asking the Minister to immediately change the legislation, as otherwise investment advisors have a free hand to do what they like in regard to property investments and consumers would not be protected.  

• Geared property funds are beginning to feature on my radar also and it is obvious that in many instances the implications of these were not fully explained when people were buying into them, especially the downside risk. 

 

• I have received a number of complaints against accountants who gave investment advice but I could not deal with them. Whilst accountants are authorised as investment intermediaries, they are generally authorised under approved professional bodies status, are not subject to my remit but to their self regulatory accountancy body. I have had to decline investigating three or four major complaints involving accountancy firms where the amount involved was up to €700,000 in each instance. If they were found to be in breach by their professional body very small compensation may arise I understand whereas I can award €250,000 in compensation as well as direct that the investment be made good also. I am requesting that where any type of investment advice is given this should be subject to my remit so as to have a level playing field for everyone.

• I am also concerned that consumers may be confused on occasions when they seek investment advice from accountancy firms - sometimes it may be given by its stand alone separate investment intermediary arm which would bring it under my remit or at other times the consumers may think they are getting advice from this intermediary when in fact they were really getting the advice from the accountancy firm.  I have brought this concern to the attention of the Financial Regulator.

 

• I have received two or three whistle-blowing letters in the last few months and I have referred those letters, where appropriate, to the financial institution concerned, to the Financial Regulator and indeed to the Director of Corporate Enforcement. I can only deal with complaints which come within my remit but as the matters raised in those letters seemed to imply serious regulatory infringements, I felt it appropriate to take the actions which I did.

• In these troubled times, we have noticed that for some providers liquidations and going out of business are beginning to feature on the radar. Indeed where awards have been made by me the professional indemnity insurer of the Provider may not be willing to pay up that award with the result that the consumer may not get its compensation. I am keeping the matter under review.

 

The future regulatory regime for financial services is under consideration by the Minister. I am a creature of statute but no matter what is decided on, the current independent and impartial role of the Ombudsman must remain in the new set up. Naturally, these are matters to be ultimately decided on by the Oireachtas but no diminution or compromise of the Ombudsman’s role should result.

Finally, I wish to thank the various media in particular for the fair and balanced way you have reported on my work to date. Indeed on occasions you posed difficult questions to me and I hope I answered them to your satisfaction most of the time.

We have a busy road ahead but we will deal with it as we have in the past with determination and fairness. 

I am now available for any questions which you may wish to pose.