IBF Final Submission on FSO Proposals

 

1. Support for the Ombudsman’s Proposal

We welcome the consultation of the Financial Services Ombudsman (the Ombudsman) on the merits of publishing institution-specific information with respect to complaints. In recognition of the benefits to consumers and to industry, IBF generally supports the Ombudsman’s objective in seeking the changes necessary to publish the complaint record of individual financial service providers (FSP’s).

The provision of information on the number of complaints received and upheld could enhance the industry’s ability to compete positively on aspects of customer service and complaints handling and, in the process, will provide a valuable indicator of the competitive environment in which banks in Ireland continue to operate. Publication of the institution-specific information will motivate individual providers to ensure their institution’s internal complaints systems are responsive to consumer complaints to the extent that complaints are only referred to the Ombudsman when all other options have been exhausted, thus helping to reduce the costs of the office of the Ombudsman.

IBF believes that the most important issue for consumers is the manner in which their complaint is handled by their financial services provider. IBF members seek to resolve the complaint to the satisfaction of the customer, and in accordance with the complaints handling regime of the Consumer Protection Code. Where this is not possible, our members abide by the decision made by the Ombudsman.

The details of this new departure require robust analysis and preparation. IBF and its members would like to engage further with the Ombudsman to prepare for the changes required and to explore some of the challenges that arise. To this end we propose a working group of IBF and members and the Ombudsman in order to ensure a comprehensive understanding of what is required.

It is important that the public service benefits of reporting as proposed in this consultation are not outweighed by disproportionate costs of changes to the information requirements of FSP’s and other supporting information such as market share information.

2. Existing measures

We note that the proposed legislative change allowing the specification of the complaints record of individual providers will build on existing measures to adapt the behaviour of any one institution: Where the Ombudsman has a particular concern about an FSP; there is a mechanism in place for sharing of information with the Central Bank of Ireland (CBI). Similarly, the Ombudsman can relay concerns about certain trends emerging in complaints received to the CBI. The CBI can then undertake whatever investigations and actions are necessary in accordance with normal regulatory and supervisory practices. In a few cases, this action may include the imposition of sanctions following the application of the due process under the Administrative Sanctions Regime. In that event, the Central Bank posts the outcome on its website so the Ombudsman would not publish information on such a case prior to the completion of due process.

3. Evaluation of Complaints

To ensure the information provided to the public is correct and fairly reflects the performance of individual FSPs, we expect that the Ombudsman will only publish the complaint records of individual FSP’s following a comprehensive verification process with each institution. This level of care re accuracy would be similar to that of publically quoted companies that employ comprehensive internal verification processes before financial information is released externally. The publication of a correction after the event would not adequately redress potentially long-lasting reputational harm created by the release of erroneous information.

4. Categorisation of Complaints

The Ombudsman has a valuable role to play in ensuring that cases that are referred to it are correctly categorised in accordance with agreed typologies at the time a complaint is submitted.

Categorisation of complaints needs to be specific with sub headings to cater for composition of products and distribution channels. Generic product headings could be misleading and unfair. (IBF members could consider such headings further, in consultation with the Ombudsman.)

It would also be helpful if the Ombudsman published more information relating to its handling of complaints, including details of the number of cases on hand, the average time to resolve complaints and the operational targets for improvement that it has adopted. This information could be readily displayed on the Ombudsman website and would give complainants some guidelines as to how long, typically, it takes for the Ombudsman to resolve complaints.

5. Exploration of Proposals

IBF and its members look forward to meeting with the Ombudsman to explore the detail of the proposals. Please see a brief list of some challenges to be further explored.

5.1 Partially upheld complaints
Inclusion of a complaint which is only fractionally upheld, as part of complainants’ overall success rates, would materially alter the statistics, giving a misleading view of financial service provider’s culpability, especially when relatively small, ex gratia, type payments are recommended by the Ombudsman.

If the substantive issue/s in dispute has been found in favour of the Bank but compensation awarded in respect of inconvenience to the customer arising from a minor operational/administrative issue, we suggest that reporting should focus on the substantive issue and that consideration be given to the reporting of compensatory awards for inconvenience etc., in a separate administrative/ omission section.

5.2 Information about the relative market share of the provider
IBF agrees that information about market share of each provider is important in order to set individual complaints records in context. The calculation of an appropriate market share figure will be challenging and requires further consultation with industry to arrive at an appropriate methodology. For example, it may be useful to calculate market share on the basis of the number of accounts held by an institution rather than the number of customers. The challenge is to come up with a suitable measure of a financial provider’s standing in a market, without creating the need for an elaborate and costly market share measurement and reporting exercise.

For efficiency, market share statistics should be consistent with those already provided to the Central Bank and the Ombudsman by financial institutions.

For consideration and debate:

• Consumers are more likely to focus on their experience and may be indifferent to whether the FSP has a large or small market share. From a consumer information perspective, would whole figures, such as numbers of sales or numbers of transactions be more meaningful?
  
• For multi-product line providers, it may not be possible to show the market share for each product line of complaints.
• Whether the publication of such comparative market share information would give rise to competition law issues at a later date.

 

5.3 Case Studies

We acknowledge that the use of case studies in the Ombudsman’s report is very useful for customers and provides learning opportunities for both consumer and industry alike. If the Ombudsman decides to seek legislative change to name individual institutions in case summaries, we suggest that this should only be done in the case of issues truly representative of complaints to that institution rather than for one-off or atypical cases. The naming of an organisation on a single case will not give an objective view of the general handling of complaints in that organisation. It might also serve to raise alarm amongst other consumers who have purchased similar products or services with that provider.

The naming of providers in case studies might be more usefully examined at a later date, when the initial complaint reporting structure has been satisfactorily established and “bedded down”. It would then be prepared based on clear guidelines on what constitutes a compelling public interest, as well as an appropriate appeal mechanism from such a determination. It would be instructive to review international best practice in this regard.

5.4 Other Items for Discussion

• A clear definition of how the Ombudsman will record complaints
  
• De minimis provision for reporting of the claims records
  
• Amount of compensation