Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I understand that the intention of this amendment is to provide that the ombudsman would review the maximum compensation payable and compare it with the losses suffered in the complaints received. This is unnecessary, as the Government's Bill allows for full rectification to be granted in addition to compensation for inconvenience.

The proposed amendment might be based upon a misunderstanding. The existing legislation allows for a number of redress tools, including rectification and compensation. Rectification makes good the loss to consumers and there is no ceiling. Compensation, which can be additional to the rectification, can be high or low depending on the specific facts of the case. I understand from the ombudsman that the ceiling of €250,000 has not caused problems in directing compensation.

Compensation can be high or low depending on the impact on the individual, for example, the inconvenience caused to consumers by the misconduct of the provider. This is usually determined by the specific facts of the case. The Financial Services Ombudsman's office has advised that, to date, it has not found that the ceiling of €250,000 causes problems in directing compensation.

Examples of where rectification could be in excess of €250,000 include a direction by the Financial Services Ombudsman that a financial service provider apply a lower rate of interest to a mortgage loan, pay an insurance claim, pay a life insurance claim and pay a critical illness claim. Other important directions might include amending credit history information and ordering an insurance company to reinstate cover and-or continue cover over the next number of years. For example, in the ombudsman's 2016 annual review, there was a direction to a provider to rectify the conduct complained of by immediately buying back an investment that had been mis-sold for the original amount of €250,000, together with a direction for payment of an additional sum of €7,000 in compensation.

At the pre-legislative scrutiny meeting on 27 October, the ombudsman drew the committee's attention to the fact that he could direct a financial service provider to pay compensation of up to €250,000 and that he could also direct rectification. He highlighted that such rectification could be significant, as it can involve putting a person back to the position in which he or she was before the complaint arose. In some instances, such as where a home or life insurance policy has been voided or an income continuance or life insurance claim denied, this is potentially more important for the complainant than compensation.

In terms of reviewing the maximum compensation ceiling that the Deputy refers to in his proposed amendment, there is provision to enable the increase in compensation amount in the Government Bill, which was published yesterday. This is a new power given to the Minister, one that is provided to the council under existing legislation, to adjust and update the maximum compensation amount if necessary. Under section 4 of that Bill, for example, the Minister for Finance may, whether on his or her own initiative or at the request of the ombudsman, make regulations. Section 4(2)(h) states that such regulation may "specify a maximum amount of compensation that the Ombudsman may award to a complainant under section 60", which relates to complaints and redress in respect of financial service providers.

Furthermore, in the existing legislation and in the Bill published yesterday, there are provisions to carry out reviews. Section 25(3) of my Bill on the publication of other reports states: "The Ombudsman may, from time to time, prepare and submit to the Minister such other reports in relation to the performance of the functions under this Act as he or she considers appropriate." Section 25(4) enables the Ombudsman to "publish reports on other matters if he or she considers that it would be in the public interest to do so". If this section in Deputy Doherty's Bill proceeds to the next Stage, I wish to put the committee on notice that I may propose Report Stage amendments covering the issues mentioned above and other technical drafting changes or other related issues.

My key point is that, if someone's complaint relates to serious financial loss and is upheld, it is not the compensation that makes good the loss, but the ombudsman's rectification power. It is only after making good the loss in full that the compensation issue arises. Without trying to rewrite law, it seems that the compensation piece is analogous to punitive damages in civil actions. The case is settled and the compensation due is paid, but because of the bad behaviour of the party against which the complaint is made, an additional sum of money should be paid to allow for the fact of such bad behaviour, which is a loose lay man's description of how punitive damages arise. It is the same in this context.

There is nothing in the existing legislation or Deputy Doherty's Bill that would prevent a full rectification to be made to a complainant. According to the ombudsman, the head room of €250,000 is sufficient for any further compensation provisions along the lines that I have described to be paid. The legislation published yesterday has gone further again in teasing out certain aspects of the compensation provisions that might be necessary and how they might be kept up to date. As such, I request that Deputy McGrath reflect on the matter between now and Report Stage. I will get my officials to dialogue with him on whether we can incorporate the essential request of his amendment in the Government's Report Stage amendments.