Mr. Paul Joyce:

I thank the committee for the invitation to address it today on proposals to reform the legislation dealing with the Financial Services Ombudsman and the Pensions Ombudsman and on the Private Member's Bill sponsored by Deputy Doherty. We would like to put on the record our appreciation and thanks for the interest Deputy Doherty has shown in our 2014 report, Redressing the Imbalance, which forms some of the proposals in the Private Member's Bill before the committee.

We have put together a short submission, which I must say has been hastily assembled. We have been looking at the heads of the Bill, which are quite detailed and contain quite a lot of slightly altered proposals, and we hope to make a full submission on the heads of the Bill in due course.

I will now speak about our 2014 report and the reasons for it. As committee members probably know, we have been involved in many law reform campaigns, including on personal insolvency. When the personal insolvency legislation was finally put in place in 2013 we felt it was opportune to look at what went wrong and what protection was in place for consumers of financial services, in particular people availing of credit and associated products. We looked at a range of consumer credit legislation and consumer protection codes, and how these codes and legislation are enforced, particularly regarding reckless lending which is now acknowledged to have occurred very frequently during the years at the end of the boom in particular. We were looking at what legislative protection is in place for consumers of financial services, thus the name of the report, Redressing the Imbalance, because our ultimate conclusion is the consumer is nowhere near as protected as the provider.

Part of the research was to speak to people who had made complaints to the Financial Services Ombudsman and to people who had assisted complainants, particularly those attached to the Money Advice & Budgeting Service, MABS. These interviews were conducted by our colleague, Dr. Stuart Stamp, a research associate at NUI Maynooth and an independent social policy researcher. The research indicated a fair degree of dissatisfaction from a number of complainants about the processes they faced when they made a complaint, particularly regarding an over-reliance on the exchange of paperwork. Many of the complainants felt this disadvantaged them and gave a natural advantage to the financial service provider. A big problem is the lack of access for complainants to specific assistance to frame complaints, understand submissions and look at issues such as the adequacy of settlements that might be proposed.

From a philosophical point of view, our report departs from the principle that a consumer of financial services takes an economic risk but instead is a person who contributes hugely to economic growth in the society in which he or she lives and therefore is entitled to substantial protection in law which, in our view, has not always been there. We feel this is part of a wider broader right of access to justice, that the consumer should be adequately protected by the State, entitled to fair redress and must be provided with timely and adequate advice and information.

With regard to the legislation establishing the Financial Services Ombudsman, the points we examined in the report which are reflected in the Private Member's Bill are the six-year time limit on complaints, what we feel is the ambiguous and difficult language concerning the ombudsman's mandate, the problematic definition of consumer, how findings are classified and the very difficult and, in our view, prohibitive avenue of appeal to the High Court.

As we stated, we are also concerned by the view expressed by a number of complainants that the processes had essentially disadvantaged them. This is also reflected in the fact that the consumer must first make a complaint under the terms of the consumer protection code to the financial service provider's internal complaints mechanism before he or she can make a complaint to the Financial Services Ombudsman. While the provider is supposed to meet a 40-day time limit, it appears from anecdotal evidence that this time limit is often exceeded and by the time complainants get to the ombudsman, they may already believe they are up against it, as it were.

We also looked at the Financial Services Ombudsman reports for the period from 2006 until 2012. We found the information trends disturbing. For example, many complaints were disappearing from the radar under the heading "No further contact from the consumer". In addition, issues such as settlements were being recorded as being resolved in the complainant's favour, whereas a settlement is not necessarily always in the complainant's favour. We also looked at the low and declining rates of success for complaints that proceed to adjudication. In 2012, 10% of complaints were upheld, 17% were partially upheld and 73% were declined. Low levels of compensation are also a factor.

To be fair, since the publication of our report, the current Financial Services Ombudsman has been much more proactive about looking at and trying to capture information trends, as he has set out. Nonetheless, in 2015, for example, more than 1,700 complaints or 35% of the total were closed due to no further contact. The ombudsman and his staff are examining the reasons this is occurring. In our view, the reason may be the perception among complainants that the odds and processes are stacked against them and substantially advantage the provider.

In terms of pre-legislative scrutiny, we focus on five specific issues covered in the Private Members' Bill. As I indicated, the free legal aid centres examined the heads yesterday. Many detailed issues arise which will require further elaboration.

On the issue of the statute of limitations, on which there is fairly broad agreement, albeit not on the nuances of what should be the amendment, we note that the three-year limitation period from the time the consumer becomes aware of, or ought to have been aware of, the conduct of the provider that gives rise to the complaint, is only available for long-term financial products. A long-term financial product means a financial service, the term of which exceeds six years. We are a little concerned about the wording used here. Does it include payment protection policies, for example, which do not have a term, as such, but are paid on a monthly basis? This issue should be clarified.

The issue of how a court will assess when a person ought to have known of the conduct that gave rise to the complaint and what criteria would be used is also critical. We have had difficulty for some time with the informal aspect, without regard to technicality or legal form, of the ombudsman's mandate. As a legal rights organisation, we have difficulty with a requirement to make decisions without regard to technicality or legal form. The High Court, on a number of occasions, has overturned decisions of the ombudsman where the ombudsman has acted incorrectly in law in the High Court's opinion. This mandate is unnecessary and should be clarified.

The problematic definition of the term "consumer" is raised in our submission and the FLAC report and it has been pointed out by the courts in one or two decisions. The definition is extremely wide. The Bill reflects the view that a distinction should be drawn between a personal or ordinary consumer and a commercial consumer. Well-known complaints have been brought by credit unions and investors with large property portfolios, which are very different consumers from an ordinary person who has an insurance policy that does not pay out. This issue needs to be addressed, perhaps in a two-tiered process.

Some of our respondents were very unhappy with how findings were classified. One or two were shocked and a little annoyed to find that their complaint had been classified as being partly substantiated when they believed it had been substantially rejected. We proposed in our report a reclassification of how findings are recorded.

The final issue addressed in the submission is the very important matter of the avenue of appeal to the High Court, as provided for in the current legislation. The proposed legislation maintains this avenue to the High Court. This is a limited appeal which is akin to an appeal on a point of law. The High Court is a prohibitive venue for consumers to go to, especially without access to legal advice and representation, which are, by and large, not available from the State. In the debate on 6 October last, the Minister of State, Deputy Dara Murphy, addressed this issue and made some interesting points. He stated, for example, that in the existing statutory appeal to the High Court, the complainant is shielded by the high threshold that is applied to the statutory appeal. A practice has developed over the years whereby the ombudsman acts as the respondent in all appeals. This is a little unusual for an alternative dispute resolution process. Our report records that 31 of the 37 appeals to the High Court in 2012 were brought by consumers. As such, if anybody is being shielded as a notice party, perhaps it is the financial services provider. We propose a full de novoappeal to the Circuit Court for both parties. Obviously, there are dangers inherent in this proposal, particularly if financial service providers decide to routinely appeal decisions of the Financial Services Ombudsman. However, the right to a full appeal is a fundamental issue of access to justice and should be buttressed by the availability of civil legal aid from the State for consumers to either appeal or defend an appeal.

There are still many people who wish to make complaints who do not have access to assistance to properly frame their complaint, which is a major difficulty. I thank members for their attention.