Oireachtas Joint and Select Committees
Wednesday, 5 March 2014
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Bi-annual Review 2013: Financial Services Ombudsman
2:00 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
No. 4 is the Financial Services Ombudsman bi-annual review of June 2013. I emphasise to members, witnesses and those in the Public Gallery that all mobile telephones must be switched off to avoid interference with the broadcasting of the meeting. I welcome Mr. William Prasifka. It is his first time before the committee since his appointment. He is joined by Ms Jacqui McCrum, Deputy Financial Services Ombudsman, Mr. Diarmuid Byrne, head of administration, Mr. Tom Finn, head of legal services and Ms Mary Rose McGovern, head of investigation. Mr. Prasifka and his colleagues are here at the invitation of the committee to discuss the 2013 bi-annual review of the Financial Services Ombudsman. The committee will be particularly interested to explore the statistics and trends reported in the review, such as, for example, the sharp decrease in the number of complaints made to the ombudsman, which seems positive although there has been at the same time an increase in the number of complaints requiring full formal investigation.
We also welcome the opportunity to discuss the way in which the relationship between the ombudsman and the financial services providers has been developing and whether this is resulting in better outcomes for consumers of financial services. Members of the committee will, no doubt, have questions on the experience of the ombudsman regarding complaints concerning the mortgage arrears resolution process. The committee will discuss this matter with the banks and organisations representing their customers in a series of meetings in early April. We will begin with opening remarks from Mr. Prasifka. Following that, members may put questions to the Financial Services Ombudsman.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence in respect of a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Mr. William Prasifka:
I thank the Chairman and the committee for extending me an invitation to appear before them. I understand the committee wants primarily to discuss the bi-annual review the office published last week, but I am happy to answer questions any other questions they have about my role as Financial Services Ombudsman and the workings of the bureau.
The Financial Services Ombudsman Bureau was established in 2005. Before that, there were two voluntary schemes, the Insurance Ombudsman of Ireland and Ombudsman for Credit Institutions. Those were amalgamated and placed on a statutory footing. The bureau was established to adjudicate complaints from “eligible consumers” against “regulated financial service providers”, FSPs. It provides an impartial, alternative dispute resolution service. It is neither an industry nor a consumer advocate, nor is it a court. Our fundamental role of is to determine disputes impartially and in an informal manner. The establishing legislation provides that the office deals with complaints “efficiently” and “effectively”, adjudicates complaints “fairly”, and deals with complaints in an “informal” and “expeditious” manner. We are funded entirely by a levy on the industry. We receive no funds from the Exchequer. We do not charge consumers for making a complaint to us.
The ombudsman operates in a larger institutional framework. We adjudicate complaints based largely upon the contractual agreements which the parties have in place, but in the context of the relevant legal principles and statutory provisions, including our own establishing legislation, various codes laid down by the Central Bank and other general legal principles. We adjudicate complaints but they do not establish legal precedents. If we come across any complaints that raise matters of systemic concern, we bring them to the attention of the Central Bank, with which we have a very open and productive relationship. The Central Bank has the powers to deal with FSPs on systemic issues. Our role is clear. We adjudicate complaints based upon the individual merits of each such complaint.
The most recent review, issued last week, contains a great deal of information about us and some of the highlights. In the second half of 2013, complaints were down by 35% on the previous period, the first half of the year. However, as the Chairman stated, the number of complaints requiring full investigation increased by 8% during the year. The reason for this is simple to explain. Complaints that come in go through a screening process. Information is obtained, decisions on jurisdiction are made and then a complaint proceeds to full investigation. The changes we implemented took place only in the first four months of the year. Therefore, the knock-on effect of fewer complaints to a decrease in complaints going into investigation will obviously be subject to some time lag. That explains part of it.
Another explanation for it is that many of the complaints that were not received, because of changes we made, perhaps were complaints that would never have gone to full investigation in the first place. The simple explanation is that the dichotomy is not surprising. We will have to see how the new process works over time. There is some possibility that, over time as complaints go down, there should be some decrease in complaints going into investigation. It is too early to tell. We noticed during this period that complaints handling by FSPs improved generally, with the largest noticeable improvement occurring in the banking sector. The largest source of complaints continued to be about payment protection insurance, PPI, and mortgages. The sale of PPI made up 45% of all insurance complaints and mortgage issues accounted for approximately half of all banking complaints.
As we noted in the bi-annual review, the changes in complaint trends in this period, which we had not observed in previous periods, require some further explanation. The main driver of these changes was the changes we introduced on 1 September 2013. On that day we tightened up our procedures in terms of accepting complaints, which we now do only where there is evidence that the substance of the complaint has been communicated to the FSP and the FSP has been given a reasonable opportunity to respond. This new procedure more closely aligns our operations with the relevant statutory provisions. We have always sought to do everything possible to facilitate greater engagement by the FSPs with their own customers. We have seen much more engagement in the most recent period than before, and this is a positive development.
Also on 1 September 2013, we acquired the ability to provide information in our review about the complaints record of individual FSPs. In previous reviews all the information was aggregated across product lines, industries and other groupings of complaints.
The public would know whether banking or mortgage complaints were up or down but they would not know against whom the complaints were made or against whom they were upheld. That has changed.
It has been our experience that this additional reporting power has led to an increased interest by the financial service providers in the work of the bureau and greater initiative on their behalf to engage with customers and settle complaints, which obviates the need for the bureau to issue findings in some cases. We again see this a positive development and its medium and longer-term significance remains to be seen.
This month I will have been the Financial Services Ombudsman for four years. This is my first appearance before an Oireachtas committee in that role. When I took up the position I knew we had an important job to do. I sought to build on the work established by the bureau in its first five years of operation. I believed at the time - and I believe more firmly now - that if we in the bureau do our job effectively, it should have the effect of raising standards throughout the industry, FSPs should learn from the findings we issue and adjust their behaviour and, in time, we should begin to see an improved performance in complaints handling from the FSPs. The most recent review is the first time that it would be fair to note that some improvement in the performance of FSPs has been recorded. I will be pleased to take members' questions.
2:10 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Prasifka. How are systemic complaints dealt with by his office? What happens when the ombudsman upholds a systemic complaint against a financial institution? I refer, in particular, to tracker mortgages and the misselling of payment protection insurance, PPI. For example, borrowers who were entitled to tracker mortgages when their fixed rate period ended were not offered the tracker rate because the bank said it did not provide the product anymore but the understanding when they went on the fixed rate was that the tracker rate would be restored as per the original agreement. I understand the ombudsman dismissed the defence by the banks and told them to return the borrowers to the tracker rate. What happens after that regarding systemic complaints? Does the ombudsman tell the bank to review all such cases or only the cases that come to his attention? If there are five complainants against a bank, is it only those five cases that are dealt with even though 5,000 people may be in the same position? Has the ombudsman the power to instruct the banks to deal with all cases or must they just deal with the cases the office has addressed? While I understand all the cases must be dealt with individually, if the ombudsman rules on a principle such as in this case or on a particular wording, can that be applied to other cases?
Mr. William Praskifka:
The office has had an enormous amount of experience of the issue of tracker mortgages, particularly from when I first started. One of the big issues then was breaker fees relating to these mortgages. Then the issue arose of the entitlement to trackers in circumstances in which the Chairman outlined where a party takes out a tracker mortgage and goes on to a fixed rate before coming off it to find that the tracker has been withdrawn to the public. Currently, in our work we do not see as many mortgage complaints about trackers as we did. Most of the complaints relate to the mortgage arrears process. With regard to tracker mortgages, when we first took jurisdiction over these cases and began to decide on them, we noticed some financial institutions were learning from our decisions. We had made decisions where people were entitled to tracker rates. Our basic methodology is the subject of a High Court case, which has been appealed to the Supreme Court, but, as the High Court judge properly noted, we take the view that if someone is on a tracker rate and there are circumstances in which the bank asserts he or she is not entitled to it, the underlying documentation has to be clear and understandable to a layman. That is our methodology and the court upheld our decision in that case to put someone back on a tracker mortgage. That case is on appeal to the Supreme Court.
The simple answer to the Chairman's question on our jurisdiction is that our decisions are legally binding on the parties to the complaint. They are binding on the complainant and the regulated financial service provider. They do not create a precedent but in circumstances where we believe the issue is much larger than applies to the parties in a case, whether it relates to tracker rates or any other area, that is the kind of case we refer to the Central Bank. The bank has the powers to investigate the companies and to look back in terms of all their documentation. It has other powers, including levying fines, and the ultimate power is to revoke someone's licence. Our power is simply limited to issuing a decision that is binding on the parties in a case and our decisions are legally binding.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
In the instance of five people taking the case, even though 5,000 people may be affected, the Central Bank must make an intervention to deal with the cases of the remaining 4,995.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
How many cases has the ombudsman referred to the Central Bank where the issue affects many more people than the complainant and where it is systemic? How many recommendations have been made in the past four years?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I refer to the type of cases, not individuals. The issue may affect 4,000 or 5,000 people but it is only one issue. How many issues have been referred to the Central Bank?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is the office happy with the response from the Central Bank? Could Mr. Prasifka cite one or two issues that have been referred to the Central Bank and the action that has been taken?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I refer to systemic complaints.
Mr. William Praskifka:
It happens reasonably regularly about matters both big and small. We have referred matters where we felt that there may have been small improper adjustments in interest rates. I do not have the figures to hand but it is something we do on a fairly regular basis. If I had to give an estimate, it is probably something we do a half dozen times a year.
The Chairman asked whether we are happy with the Central Bank's response. We are the ombudsman and we have an open relationship with the bank. We give the staff there a great deal of information. They have all the information on our complaints trends and against whom we are upholding complaints. It is entirely appropriate that they have that. It is a matter for themselves what they do with it. I assume they use it to prioritise their own work to assist them in targeting areas. The Financial Services Ombudsman is of great use in the entire regulatory framework as an early warning system. We see some problems before anyone else does but I cannot come before the committee and give an evaluation of what the Central Bank does with the information.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
So there is no section in the ombudsman's biannual report about the systemic concerns it refers to the Central Bank.
Ms Jacqui McCrum:
It may not even be a systemic issue. It could be an issue of regulation. I have been in this position since the end of August. When I was racking my brain while Mr. Prasifka was answering the Chairman's question, I recalled two queries from the findings I have come across that I have referred to the Central Bank. They related to the payments services directive with one particular provider.
The other one related to moneylending activities. We would report them once the finding comes through and we would follow it up at our quarterly meeting to make sure it has got it and then it is up to it to take the next-----
2:20 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Would it be possible to furnish the committee with an overview of the systemic issues arising from the Financial Services Ombudsman's examinations?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I wish to deal with the mortgage arrears resolution process, whereby borrowers can appeal the decision of the arrears support unit internally within a bank. When they lose the appeal, they then appeal on the grounds that the lender did not follow the MARP, but they cannot appeal the decision of the bank. In the case of the MARP, how many appeals have been made to the Financial Services Ombudsman?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
What is the breakdown between the cases upheld, partially upheld and not upheld?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Was there a recurrent theme among those that were partly upheld?
Ms Jacqui McCrum:
For those that were partly upheld, the substantive issue was not upheld. It may have been that the providers might not have complied with the code fully. There are various specific steps they need to go through. If we felt they had not allowed the complainant due process going through this, we would partly uphold it and send them back to a particular step to redo that step.
Of all the complaints we received, we could see a trend coming through where people were potentially coming into us where they may have thought a write-down would be involved or they could get some different outcome at the end of it. We are allowed to look at the process of the mortgage arrears resolution process. We cannot get involved in the contractual arrangement between the provider and the complainant. We have notices on our website and we let the complainant know at the outset that is all we can do. That is our jurisdiction. The complainant can then make a decision whether to proceed with that complaint. During 2013, approximately 42% of the complaints that came through did not come back to us again. Many people are not happy with the repayment terms or various other things but they did not actually proceed with those complaints.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I believe 202 out of 2,983 complaints were upheld, which is 7%. The figure seems to be getting smaller. There could be different reasons. Perhaps our financial institutions behave wonderfully or perhaps, as the Financial Services Ombudsman's report seems to indicate, it wants the financial institutions engaging with the complaining customer at an earlier stage. Therefore, they are not coming across the Financial Services Ombudsman's desk and it does not deal with them.
One of the significant changes is that if three complaints are upheld against a particular financial institution, the Financial Services Ombudsman gets to publish that. Avoiding publication may well be an incentive for banks to get the matter dealt with. Is it possible that the publication of offending institutions is being distorted by people coming into negotiations or mediation earlier? Should we review the publication of inappropriate behaviour? If a bank mis-sells a product to me or there is some error with the system and I do not get to hear about a customer with the same product as mine complaining to the Financial Services Ombudsman about it and because it cannot force a precedent and a legal ruling on it, that difficulty will continue for me because I may not be aware of it if the Central Bank does not take any action. Do we need to review the need for three offences leading to publication?
Mr. William Prasifka:
No. Let me try to explain this. The goal of the office is to resolve complaints fairly and expeditiously. We try to do that. I have always believed there is no reason for us to uphold the same complaints over and over again. In this sense people often talk about an imbalance between the financial institutions and the customer. In this sense of course there is, because the provider knows from interaction with us what kinds of complaints we will uphold. Therefore, if we have a consistent message of what should be done, and the banks and insurance companies are doing this, we believe that is a very important service for us to provide.
I will give one example of how this works in practice. Last summer, as members will recall, Ulster Bank had a breakdown of its systems. Many people had no banking facilities for two weeks. They could not get money from the ATMs and their direct debits were not working. This affected up to 500,000 customers. When Ulster Bank representatives came to us, we were able to show them a printout of the banking account complaints we had upheld in the previous 18 months. We pointed out to them how we deal with such things. If missing a direct debit results in someone's insurance policy lapsing or credit rating being affected, we expect the institution to rectify expeditiously everything that has been done, reverse the direct debit, wipe out all the charges, make whatever amendments are needed to the credit record and provide some element of compensation for the aggravation and stress. They knew all this. We told them they needed to deal with their customers. They knew what our methodology would be.
Let us consider Ulster Bank's complaint record for the second half of the year. In terms of accounts, it had two complaints that were partly substantiated. The reason is as follows. While we had received complaints, our experience was that all of its complaints were dealt with in this area in a manner consistent with our previous methodologies. The only complaints that came through to us for final adjudication were ones where there was a complete mismatch between the expectation of the consumer and what we were prepared to give by way of compensation.
We then need to ask what the best way forward is. If we were not transparent in the way that we dealt with these cases and if we were not giving clear signals to the providers, they would have no ability to resolve these cases. They would not have any instructions. Therefore, yes, we would receive many more complaints and we would uphold many more complaints. However, is that better customer service? I hold the view that an important part of our job, as I said in my opening contribution, is to lift the standards throughout the industry, sending it very clear signals. Going beyond the figures, we know that since we got these powers on 1 September, the institutions have a renewed interest in what we do. They are anxious to align their methodologies with ours in a way that we had not seen previously. I regard that as a very positive development.
I believe we should keep the current system. We need to see how it works over time. We have questions over the knock-on effects, but what is very clear to us by both our experience with the providers and looking at the complaints outturn is that the effect of the additional powers we have has certainly raised the profile of complaint handling in the institutions. We think this is a very positive development.
2:30 pm
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The number of complaints about payment protection insurance to the office dropped across the board in the latter half of last year but it is different in the UK, where according to figures published in recent days complaints have dropped apart from a huge upsurge in PPI complaints. Is there a reason we see a drop here while there is an increase there?
Mr. William Prasifka:
I thought the most recent figures from the UK on PPI, which were released last year, showed a drop in the trends from previous times. Of course it is accurate to state the experience of PPI in the UK is very different from the experience here. In the UK upwards of 400,000 complaints are received per annum, which is a huge difference. We have not seen this level of complaint. One reason for this is we report on complaints trends and we are not an industry advocate or apologist. Some people have speculated there was a different business model of sale in the UK. I state no opinion on this. I just look at the complaints experience here, which is quite different.
Ms Jacqui McCrum:
We examine complaints based on contractual evidence. Each complaint is examined individually so just because one has been examined does not mean a precedent applies across all of them. Each complaint must stand on its own. We examine whether there was contractual evidence the customer knew what he or she was stepping into and that it was an optional product. We adjudicate our findings based on this. In many cases through our investigations we found contractual evidence to show the provider and customer engaged at the very outset and that the customer knew what he or she was getting into, which is why they are not upheld.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
With regard to PPI?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What is the percentage of upheld complaints with regard to PPI? In the UK it is approximately 56%.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Speaking hypothetically and generally, are complaints upheld from public servants who bought PPI and who have jobs for life, or is each case examined individually?
Mr. William Prasifka:
We do not break down complaints or experience by the type of complainant or their status. International comparisons are sometimes very helpful but in comparisons between us and the UK, what must be understood is the Irish model and our operations are completely different from those in the UK. We operate with a very high level of formality. The UK operates with a high level of informality. The UK strives to have many decisions made on a preliminary basis but we have no ability to do this and we must go to a final determination. Many of the UK determinations and decisions are kept very brief and are on one page. I have signed determinations which go to 10,000 words or 20,000 words. We operate with a completely different level of judicial oversight than in the UK and this drives many of our procedures. We have had some intervention from the courts on the legal standards which must be used, and this guides us and we must learn from it.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Prasifka very helpfully wrote to my colleague, Deputy Michael McGrath, on his views on the six year rule and I have a copy of the letter. Deputy McGrath requested this meeting and we are very glad Mr. Prasifka came before the committee. We were both surprised it is the first time he is here. We should have known because we are members of the committee.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Senator Byrne should commend the Chairman.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I commend the Chairman. We blame ourselves because we have been members of the committee for more or less the same period. I accept the six year rule is a matter for the Oireachtas and the Government. What are Mr. Prasifka's views on it and how does it impact on the operations of the office?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We understand this.
Mr. William Prasifka:
If the rule is changed so there are more complaints, there will be a resource issue and this is obvious. If we have a standard which requires a mini-finding, this will also have resource implications and will also perhaps cause delay in reaching a final determination. What must also be kept in mind is it must be considered in a larger framework. The consumer protection code requires financial institutions to keep records for six years so if we are to look beyond this, it must be taken into account. If we are faced with a complaint relating to matters which took place not six years ago but ten years ago or longer, it puts us in a difficult position if the basic evidentiary material is not available, such as if people are claiming their rights under a contract or policy which no one has or can find, and this must be considered. As I stated, it is very appropriate that we examine this matter and whatever the Oireachtas comes up with, I assure the committee we will adjudicate complaints on that basis in as fair a way as possible.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Will Mr. Prasifka state for the record how many complaints received every year are immediately rejected because they are outside the six year rule?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
By this does Mr. Prasifka mean mainly geography or time?
Mr. William Prasifka:
Included are complaints outside of our jurisdiction because of time and the six year rule. It also includes other issues. It could be complaints that are not about regulated service providers. The main reason is the six year rule. We made some calculations that in the past year we could not deal with approximately 1,000 complaints because of the six year rule.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I believe in his letter Mr. Prasifka told my colleague, Deputy Michael McGrath, and I am not testing him as I have the figures in front of me but I am offering him a chance to put them on the record, that approximately 12% of complaints received are outside the jurisdiction because of the six year rule and this is mainly with regard to PPI. Is this correct?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Perhaps Mr. Prasifka does not know this, but I imagine it is fair to state most of these people became aware of the problem or the potential cause of action or complaint recently, which puts it outside the six years. People are not sitting around for years thinking about going to the Financial Services Ombudsman.
Mr. William Prasifka:
I am fully aware of this. The typical insurance complaint we receive, whether with regard to payment protection, home or motor insurance, is the claim was not paid and the claim only arose recently. The question which must be examined is the reason for this. The difficulty we have is if the reason given is that the policy was missold, we must go back to the sale, and if it is beyond the six year rule, we cannot deal with it. What we can do is deal with the issue of whether the policy was administered according to its terms and conditions, but if this is not the complaint, and the complaint is missale which took place more than six years ago, we have no legal ability to examine it.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Will Mr. Prasifka clarify this? With regard to a person going to the Financial Services Ombudsman who has lost his or her job and has not been paid on the policy as he or she expected, did Mr. Prasifka state that a potential defence to this was that the policy was missold? Am I missing the point completely?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Sorry, I was wondering.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I presume Mr. Prasifka can examine the existing terms and conditions at that moment in time-----
2:40 pm
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Even though they were sold six years ago.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The bottom line is that about one in eight complaints to Mr. Prasifka's office are simply out of time because they relate to sales and the sale took place more than six years ago.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is the figure Mr. Prasifka gave Deputy Michael McGrath.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We have produced a Bill to deal with that. Mr. Prasifka has expressed some concerns about issues and they will have to be reflected on but I think it is a matter on which the Oireachtas and, perhaps, this committee could make recommendations as there are many people whose complaints are not being upheld.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I call Deputy Kieran O'Donnell.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I welcome Mr. William Prasifka and his colleagues. If Mr. Prasifka issues findings in favour of the complainant, what is their legal standing?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What was the total number of findings made in the past year? I think Mr. Prasifka said that 8% were upheld for the complainant. Is that correct?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What was the total number of complaints?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Some 1,883.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Deputy O'Donnell-----
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 7%, have all of the those-----
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 202, were all of those-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Sorry, Deputy, I hear a telephone ringing inside. I ask that it be turned off as it is interfering with the transmission of the meeting.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 202-----
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I want the total number upheld, which I think was about 202 for the year, and in respect of those 202 have all the recommendations been implemented? It is all very well to say that are legal but how many were implemented?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Correct.
Mr. William Prasifka:
Our experience has been that on occasions where the providers have not paid them up, it is often in circumstances where the provider is in liquidation or experiencing trading difficulties. Where that happens, where a complainant makes us aware that the direction in a finding has not been complied with, the first thing we do is write to the provider telling them we expect them to comply. If they do not respond we indicate that if they do not comply that we have the ability to issue proceedings. There have been occasions on which we have gone into court seeking to enforce our judgments. By and large, they are cases of smaller providers, some of whom were in liquidation, receivership or have trading difficulties.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 202 findings that were upheld on behalf of the complainant in 2013, does the Financial Services Ombudsman keep a track to see how many are implemented? Does the ombudsman keep a physical track, an audit trail?
Mr. William Prasifka:
No, we are certainly aware of all cases where the claimant has come back to us and has informed us and we certainly pursue all of those. With those, sometimes it is simply a matter of judgment. For example, there was a recent case where we had learned that a provider is in liquidation. In those circumstances we contact the liquidator and take all reasonable steps to ensure that the direction is complied with but at the end of the day, our direction only goes to the provider. If that provider does not exist any more, there is nothing that we or the complainant can do.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I was looking down through the regulated providers that come within the ambit of the Financial Services Ombudsman. Do the subprime mortgage lenders and the moneylenders fall within your remit?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Licensed money lenders
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Yes. I do not see any of the subprime mortgage lenders - perhaps I am missing them - within the list of named regulated providers in terms of-----
Ms Jacqui McCrum:
The Deputy is looking at the bi-annual review. Those powers only came into effect from 1 September 2013. All the Deputy will see on that are those that had three or more substantiated or partly substantiated complaints in the period from 1 December to 31 December. Not everybody is mentioned on that because they may not have had those three complaints.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Looking down through it, is it correct to say there is no subprime mortgage lenders on that list? This is from the bi-annual report.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We have many people coming to us and the issue of mortgages and the subprime lenders comes up frequently. There does not appear to be any mention of the subprime lenders in this list. The figures for the traditional ones are as follows: MBNA has 33; AIB is the next highest with 24; Ulster Bank and Bank of Scotland have 15 each; Bank of Ireland has 14; Permanent TSB has 12; and Irish Life has ten. I am looking at the top seven. The subprime lenders do not appear to feature in that list. Do moneylenders feature in the list?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That is what I am saying.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What has been your experience of your interaction with the subprime lenders, and the licensed moneylenders? It is an issue that arises on a regular basis in dealing with constituents; first, the rate of interest subprime lenders charge and the aggressive approach they take and, second, the excessive rates charged by moneylenders. Are people making complaints to the Financial Services Ombudsman on those two areas?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Can Mr. Prasifka speak in the generic sense about subprime?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Either the subprime or the licensed money lenders.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
There would be a very small proportion. I am surprised at that.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That comes as a surprise to me. I shall move on to the two areas that stand out. Clearly, they are the mortgage arrears which make up 50% of all banking complaints and the sale of payment protection which makes up 45% to 50% of all insurance complaints. It is clear from the complaints that AIB had 24 complaints published, where they had three or more for the period 1 September to the end of December. Of the 24, nine related to mortgages, approximately 40%.
Some 50% of all complaints in relation to Ulster Bank were mortgage related and approximately two thirds of all complaints in relation to Bank of Scotland were mortgage related. Perhaps Mr. Prasifka might elaborate on the reason the level of complaints in respect of both of those institutions were so high. For example, only two of the 12 complaints in relation to Permanent TSB were mortgage related and two of the 14 in relation to Bank of Ireland were mortgage related. In regard to AIB, nine of the 24 complaints, or 40%, were mortgage related, ten of the 15, or two thirds, of complaints in regard to Bank of Scotland were mortgage related and seven of the 15 complaints in relation to Ulster Bank were mortgage related. Perhaps Mr. Prasifka would explain the reason for that.
2:50 pm
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Perhaps Mr. Prasifka would speak specifically to the institutions I have mentioned.
Mr. William Prasifka:
I will try to speak responsibly. I will put it in my context and then we can take it from there. We have found that in particular areas some providers are better than others. In regard to the mortgage arrears process, given the number of people in mortgage arrears we had identified this as a big area even before we started receiving complaints. As the financial institutions were coming to talk to us about what they could do to improve their records, we knew mortgage arrears was going to be a big area. We noticed when we first began to receive these complaints - they only started coming into us last year - that some providers were doing better than others. The code of conduct on mortgage arrears requires that institutions go through a certain protocol and memorialise every step of what they are doing. Some institutions were doing this better than others.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In Mr Prasifka's view is the payment protection issue directly linked to the mortgage arrears issue?
Mr. William Prasifka:
No. Payment protection is largely income protection. In this regard, we are seeing a different dynamic. Complaints regarding payment protection spiked a year ago and have been reducing since then. We do not see payment protection insurance claims being the type of long-term issue that the mortgage arrears issue will be.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In regard to mortgage arrears, what needs to be done to ensure that complaints of the type being made about AIB, Ulster Bank and Bank of Scotland are not being upheld?
Mr. William Prasifka:
The banks need to comply with the code of conduct on mortgage arrears and have to demonstrate to us that they are complying. This is an area in which we have engaged extensively with the financial institutions. We have also engaged on it with the Central Bank. If we have particular issues with any of the individual institutions we will take up those issues with the institutions and also with the Central Bank.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Has the Financial Services Ombudsman's office engaged directly with the banks at this point?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is that dialogue ongoing?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
When are those discussions expected to conclude and will the result be a new protocol?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
No.
Mr. William Prasifka:
We are here to do our job, which is to adjudicate fairly. It is appropriate that we do that in a transparent, predictable way with the aim of getting the institutions to adjust. As far as I am concerned, that work is never done. There is always going to be dialogue and always room for improvement because there are always new issues arising. Going forward, if we are upholding more and more complaints in regard to the financial institutions and their obligations on the code of conduct on mortgage arrears, that will be a problem. The banks understand that.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
But there is an issue in regard to mortgages.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
As I need to leave soon I will try to keep my questions brief and ask for brief responses. Reference was made earlier to the financial ombudsman in Britain and so on and there was a line of questioning in relation to PPIs. I would like to focus on mortgages and credit availability and the complaints upheld in Britain and the North of Ireland in relation to two financial institutions that are the dominant financial institutions in this State. I raise this issue because it appears that complaints to the ombudsman in Britain are in the main being upheld while here the opposite is the case. For example, in regard to AIB five complaints have been substantiated and 23 have been partially substantiated. In regard to Bank of Ireland, six complaints have been substantiated and 13 have been partially substantiated. We know from the case studies outlined earlier what is meant by partially substantiated. However, in respect of Bank of Ireland in Britain 19%, or 38, of the 190 complaints made during the last quarter of last year in relation to mortgages were upheld. In regard to banking and credit, at least 55 complaints were upheld. Leaving aside insurance, close to 90 cases in one quarter were upheld in Britain. Here, only six cases in one quarter were upheld. The percentages are very low. We are all aware of the dominant space which Bank of Ireland has here. Is it that the bank is better behaved in Ireland than it is in Britain or is it the case that we are applying different rules or that the way in which the Ombudsman's office here is set up is different?
Mr. William Prasifka:
As I indicated previously, we are familiar with the UK financial ombudsman service. We have a very good relationship with it and participate in many exchanges and activities with it. As such I am very familiar with its methodologies. It operates completely differently than we do. It has a high degree of informality and is not subject to any judicial review in the same way as the Irish Financial Services Ombudsman. It does not operate according to the same degree of legal formality. We largely apply legal principles and stray from those, as we are entitled to do under our legislation, only where we believe there is substantial reason to do so and are able to clearly set that out in a transparent way. The British office operates a high level of informal decision-making whereas our decision-making is very formal. There appears to be an alignment of our methodologies in many cases which the financial institutions are taking on board, which we do not see in the UK. For example, it has been dealing with the payment protection insurance issue for some time. I find it difficult to understand why, when the financial institutions in Britain know what the outcome will be, they are not settling their cases. The one thing I have learned from being an ombudsman is that much is dependent on the culture and legal system of each jurisdiction. It is fair to say that the way in which we do things and the outcome is very different in Ireland than it is in the UK.
3:00 pm
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
That is clear and it is probably fair to say that a customer of Bank of Ireland in Britain is more likely to have the ombudsman rule in his or her favour than in this jurisdiction because of the informality, as the witness mentioned, of the decision making compared with the more restrictive nature of how the Irish ombudsman applies decisions.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Yes, as 7% is substantiated here. As I have said, the figure for AIB and Bank of Ireland is 29% and 21%, and that takes in mortgages rather than insurance. Mr. Prasifka recently hit out strongly at elements of the Judiciary in this State. There is a statutory function in the office and one must consider separation of powers. Mr. Prasifka mentioned the legally binding nature of the office, which is important. One decision has been struck down by the courts and Mr. Prasifka felt it important to speak out about that and to challenge the Government about what it wanted to do with his office, as it could not have oral hearings in all cases. That is not what the Judiciary suggested. Does Mr. Prasifka seek amendments to the legislation because his office, as a statutory body, cannot ignore the rulings of the courts? Should there be amendments to the legislation that would prevent the office from having to hold an oral hearing in certain cases, such as the example before the courts?
Mr. William Prasifka:
No, we do not seek any amendment to our legislation. To be very clear, we have been highlighting in cases before the Judiciary that there have been two separate lines of decisions from the High Court. Some decisions state quite clearly that the decision as to whether to hold an oral hearing falls within our jurisdiction as the ombudsman, and when we make a decision it can be set aside only for rather exceptional reasons. The second alternative view, which is also stated clearly, is that the decision to hold an oral hearing does not fall within our jurisdiction, and therefore it is something that potentially can be set aside for lesser reasons by the Judiciary. Our experience in the past 18 months, looking at just the number of cases, is that the first view, which is that the decision to hold an oral hearing is within our jurisdiction, is perhaps the more dominant view. Whatever the courts decide on this issue, it is something we as a statutory body can only comply with.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
In regard to the latest case, the courts have stated that the ombudsman should have held an oral hearing with the couple. I am not saying the office was wrong but it felt it important enough to challenge that position. There was also talk that parliamentarians such as ourselves - although the office was more focused on the Government - could shut down the agency if that is the direction we go. Why would it not seek clarification in legislation on the issue of oral hearings?
Mr. William Prasifka:
We have sought clarification from the courts with cases on appeal before the Supreme Court. That is the road we have taken. To correct the Deputy, he referred to the most "recent" decision. The most recent decision reported in the media indicated the second view that the oral hearing was not within our jurisdiction. The most recent case, which unfortunately was not reported, took the opposite view that it was within our jurisdiction. It is quite simple. We are an alternative dispute resolution mechanism and we already operate with a high degree of legal formality. If we are pushed in the direction of having more formality, we will reach a point where the fundamental ability of the office to carry out its mandate comes into question.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Those points are well made. There is a major debate regarding IBRC and across much of the political divide there is frustration at the idea that the bank is selling its mortgage book to unregulated institutions. An element of the debate is that people will not have recourse to the financial ombudsman. My party has called for the sale to be suspended but the mortgage holders would still not have recourse to the financial ombudsman even in that case. That is a position disputed by the Minister for Finance. I have a letter from Mr. Prasifka's office to an IBRC mortgage holder, and it points out that sections in the relevant Act mean the office is prevented from examining the issue. I also have a reply to a parliamentary question from the Minister for Finance indicating that he has been advised that the Financial Services Ombudsman is not precluded from investigating complaints by mortgage holders against IBRC due to the Act. Has the matter been discussed with the Minister for Finance? Why is such a restrictive approach being taken? If the legal advice for the Minister for Finance is that the office can deal with the issue, why not do so and let the State-owned IBRC challenge the office? The only party which could challenge the office is a State institution but the Minister is on the Dáil record as saying that will not happen.
Mr. William Prasifka:
These matters came to our attention shortly after the legislation was passed. At the time we had 17 complaints in front of us, and the legislation clearly states there is a stay on all legal proceedings, which under the IBRC legislation includes any form of legally binding dispute resolution. That fits us to a tee. We took the view then, as we have it now, that there is a stay on proceedings. We cannot deal with these unless the stay is lifted. We have no objection to having any stay lifted. There are 17 complaints in the context of thousands, so they are not the issue; the issue is what is the ombudsman, and there is a disagreement about whether we are a regulatory authority. Simply put, we are not a regulatory authority for very simple reasons. One can go to the 2005 Act or the Central Bank Act 2004 which established us, which defines "regulatory authority" as what was then the Financial Regulator and which is now subsumed into the Central Bank. That was not done for a trivial reason but rather to establish a clear separation between the regulator and the Ombudsman. We adjudicate complaints and the regulator has a different function, as it makes rules, can investigate companies and can fine or take licences from bodies. It is very important that we are not a regulatory authority for our independence, which is fundamental.
We receive many complaints from many angry people, who may be angry for very good reasons. The question may be "Why would we trust you?". People might think we are just like everybody else, as we come from the same-----
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The office was in dispute with the Minister for Finance. The only party which could challenge the office's hearing the complaints is IBRC, which is owned by the State. The Minister for Finance has legal advice that under section 6(6) of the Act, the office is entitled to carry out the investigations. Has anybody from the office sat down with the Minister and sorted this out?
Mr. William Prasifka:
There have been many discussions and exchanges with the Minister. I will finish my point. It is very important that we are not a regulatory authority because if we were, it would undermine the independence of the office. Anybody making a complaint would ask why he or she would trust us, as we would be the regulator, ensuring the banks and insurance companies are solvent. We would be asked why we would ever decide anything against them. We operate in a jurisdiction with a high degree of legal oversight.
What would happen if the courts took the view that we are a regulator? How would they look at our procedures? We are supposed to operate informally and expeditiously, but then somebody appeals a decision saying, "They are a regulator. They must have an entirely new set of procedures". The reason we took that view is that, first, it is firmly grounded in the legislation and, second, to take any other view would, I believe, act as a significant threat to the future of this office. I was not prepared to do that.
3:10 pm
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I have a final question. During the passage of the legislation-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Briefly, Deputy.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
-----which gave the ombudsman the power to name and shame the institutions to the public, I argued strongly that the Office of the Financial Services Ombudsman should be able to issue a report regarding the naming and shaming. That report would give the public information as to what AIB, Bank of Ireland or any other financial institution might be doing. I offered the example of a bank which might have moved its customers from tracker mortgages to variable rate mortgages and the ombudsman upheld three decisions where that was wrong on the part of the institution. I said the ombudsman should be able to say that in the case of AIB, for example, three claims were upheld and should further be able to say that not only was it just mortgages, but it was about tracker rates. The reason is, and there was a lengthy discussion on this in the House, that it informs the public so people can check their documentation to see if they should make a complaint to the ombudsman. The Minister accepted the premise and put forward an amendment, No. 77. He said it was the considered view that there had been a response to Committee Stage proceedings and the need to free up the opportunity for the Financial Services Ombudsman to describe such complaints in his report, and there was no difficulty around that. He went on to say that the amendment-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Deputy Doherty.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
This is the last part.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
You must respect the Chair.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
He inserted the words "and the different descriptions of those complaints". To date, the ombudsman has not given a description as was suggested and which was the reason for the inclusion of that amendment. He has not given a description of any complaint, aside from the category into which it falls. Why is that?
Mr. William Prasifka:
The answer is simple. There is a statutory instrument which sets out the level of detail we are allowed to give in respect of financial providers. It simply indicates what we have done, which is to set out the providers, to divide it between banking, insurance and investments and to further break it down by the various sub-groups which we had in the previous bi-annual reviews. That is what we are permitted to do, and that is what we have done.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Did that come from the ombudsman's office?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will call the Deputy again, if he wishes. I call Senator Hayden.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I wish to focus on the witness's description of his objectives. He said he provides an impartial alternative dispute resolution, ADR, process. I assume that in using the word "impartial" he means a fair dispute resolution process. I will frame my questions around that ADR process. The perspective I bring to it is that of somebody who has worked within another ADR process. The witness said when responding in a law conference in Dublin that his was one of the most powerful ombudsman offices in the world and that he could award compensation of up to €250,000 and that his findings were legally binding. I assume that is legally binding subject to the High Court on a point of law or subject to judicial review. Clearly, the witness has a significant power in the context of alternative dispute resolution.
I will outline my concerns. First, I noted that the witness accredited the fall in the number of complaints to the fact that he is now asking applicants to give him evidence that they have communicated the substance of their complaint to the original financial service provider, FSP, and that the FSP has been given a reasonable opportunity to respond. Having practised as a solicitor, I am conscious of the fact that there is a very significant difference, in most instances, in the capacity of somebody dealing with a financial institution and the capacity of that financial institution. That is the reason there is the contra proferentumrule in law. In other words, the contract should be constructed against the person who drafts it where there is any issue of unfairness. I am concerned with the statement that the substance of a complaint must be communicated. How high a bar is that level of communication? Does he offer any assistance to people who are making complaints to financial service providers to enable them to make an adequate complaint? That is the first part of one question.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Will you ask the second part now?
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
The second part is somewhat related. It relates to the holding of oral hearings. I listened to the witness's response to Deputy Doherty. My concern is from a different perspective. I note the courts criticised the fact that oral hearings were not held. In that instance, it related to the complexity of the complaint. Many individuals who approach the ombudsman's office might have difficulties, including difficulties in communicating. As the Financial Services Ombudsman does not provide the service of an oral hearing, I assume all of the business is done through the exchange of documents. In my experience of dispute resolution processes, that is extremely difficult for people with low levels of education, for the sake of argument, or who have difficulties with language and so forth. How does the ombudsman try to balance the field for somebody who is trying to deal with his office when complaining about a financial institution? He said he operates on a very high level of formality, so how does he try to level the playing field here?
Mr. William Prasifka:
The first question was about how high the bar is before we will entertain a complaint and what level of service we provide for somebody at the initial stage. As I said our objectives are to be informal, expeditious, fair and accessible. That is a very important part and an important distinction. We are accessible. People come to us and the only thing they know is that they have lost money, their investments have gone down or perhaps their insurance claim has not been paid. That is all they know. We engage with them at the initial stage. We do not expect them to do anything more than to give us the information they have. It might be their policy, their terms and conditions or their exchanges with the financial service provider. In terms of framing the complaint, putting it into a legal framework, looking up the relevant provisions of the consumer protection code and looking up the relevant provisions of law, those are the things we do.
In terms of accepting a complaint and my comment that we look for the substance of the complaint to have been given to the provider and the provider to have been given a reasonable opportunity to respond, that is doing nothing more than repeating what is in the legislation. As to how high the bar is, we do not think it should be a bar at all. We have people at the initial stage to take people through the process. Let us be very clear here. Sometimes people say we are putting words in their mouths. We are not doing that. We are putting it into a structure that can allow us to have adjudication. We think that is working reasonably well.
Second, with regard to the point about oral hearings, we hold more oral hearings now than we ever have because of legal direction. I believe we will continue to do that. The oral hearings have a high degree of formality. What do we do to balance it?
It is very simple. There was an oral hearing a few weeks ago at which an individual represented himself against a provider that had a full legal team. In these circumstances the burden falls on me, as ombudsman, to cross-examine the witnesses for the provider. We tried to make it as sympathetic a setting as possible and I was there to hear what the complainant had to say and ensure the questioning by the provider was fair. It was my job to bring out what evidence I thought should come from the complainant, as well as to cross-examine the bank's providers. Obviously, my role is quite different in circumstances where both parties are legally represented.
I am seriously concerned about moving to an ombudsman scheme under which there will be more oral hearings. By comparison, my counterparts in the United Kingdom, for example, do not have oral hearings of the same kind. When one reaches that level of formality, there is an imbalance; therefore, we must become more proactive during the actual hearing and process. For example, we had one case in which the complainants had great difficulty, were in substantial financial distress and inexperienced, but they were also deaf. We brought in sign language interpreters.
3:20 pm
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
The ombudsman gave a good explanation and I am much clearer on how he brings fairness to the process. If I understood the statistics correctly, the ombudsman found in favour of 202 applicants out of a total of 7,700, which seems to be a very low figure and implies one of two things. First, people are applying with absolutely no idea of what they are applying for and have no chance whatsoever of winning. Perhaps they should be told this from the outset, rather than allowing them to engage in the process. Alternatively, the low level suggests something is wrong with the system. I will briefly focus on the code of conduct on mortgage arrears. The ombudsman has indicated that over 50% of cases revolved around mortgages, to some extent or other. He has said 81% related to mortgage arrears resolutions processes and that he can only judge on the basis of a contractual arrangement. Therefore, it seems that there are some serious difficulties with the protection offered by the code of conduct on mortgage arrears if the number of findings in favour is so low. Does he accept my view? As he mentioned in his evidence, he has made proposals to the Central Bank about cases that he feels should be brought to its attention. With regard to the mortgage arrears resolution, CCMA, process, is he at liberty to tell us what improvements he has recommended to the Central Bank?
Mr. William Prasifka:
There were about 3,000 complaints upheld in the second half of the year. The Senator is right that the figures speak for themselves. In the most recent period we did not uphold 78% of the complaints made. Why is that figure so high? A lot of complaints are driven by anger and frustration. As I said, there has been a paradigm shift in the country. It used to be the case that a bank manager was someone who garnered a combination of respect and awe from the local community such that people were reluctant to make complaints. We are now in an entirely different situation. A lot of people are suffering from financial distress, which drives a lot of complaints. We have seen some institutions taken our methodologies on board such that they know which complaints to settle and which to allow go forward. Let me outline an important part of the service provided by my office. When someone makes a complaint, he or she may know little about the underlying situation, other than he or she does not like the outcome and insurance was not paid. We must explain everything to him or her such, including the policy, what he or she was told and what his or her reasonable expectations were. This is an important service to provide. Complaints are not going to change significantly until the economy changes, but we can lay the groundwork now to try to restore confidence in the sector.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I will repeat my question. Has the ombudsman made recommendations on the code of conduct on mortgage arrears to the Central Bank on foot of the cases that have come before him?
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
One can easily fall out of the code of conduct on mortgage arrears by simply failing to respond to a piece of correspondence or whatever it happens to be. Does the ombudsman have evidence from the cases that have come before him that the CCMA has provided very weak protection for the consumer?
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I am not confused about the write-down of debt; I am talking about the process involved.
Mr. William Prasifka:
That is what we have to look at. The code sets out a protocol and if the financial institution is properly resourced and staff are properly trained, they should be able to follow the protocol. If, at the end of the day, it is deemed to be insufficient protection, the code of conduct must be amended.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
Has the ombudsman made that recommendation?
Ms Jacqui McCrum:
I wish to clarify the matter because it is an important one. With regard to the code of conduct on mortgage arrears and the figures I gave, 1% were upheld, 21% were partly upheld and 78% were not upheld. As time has passed, we have seen very few of these cases being upheld because banks have complied with the code of conduct. We have not seen systemic non-compliance. Perhaps my explanation might give some comfort to the Senator. The banks are complying with what has been laid down in the code.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
That is my point - a lot of people are complaining. Clearly, protection is weak because very few people are getting through the system.
Ms Jacqui McCrum:
A specific system must be followed. It is difficult for both parties, particularly the complainant, because a lot of information is required, but that is part of the process which was agreed with the Central Bank. Obviously, it considers that is a way to deal with cases, to go to the nth degree. The banks are complying with the code and that is what we are required to do.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
Therefore, it is the code that is at issue.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I wish to flesh out an issue that was also raised by Senator Aideen Hayden. A question was asked about whether the Central Bank was notified when systemic errors or a broad range of similar difficulties were identified. The flipside of the argument is where the ombudsman receives many complaints about the same issue but does not uphold the cases made. There may be a lot of people who think there are grounds for a grievance, but the process has been dealt with and it has been found that there are no grounds for a grievance on that issue. Does the ombudsman post this information on his office's website? Is there a way to obtain this information?
3:30 pm
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I thank the financial ombudsman for coming into the committee. It has been illuminating. After two and a half years in the Dáil, I am still wading through the complex machinery of State and public oversight. Today, I have learned quite an amount about what the Financial Services Ombudsman does. The job of the Financial Services Ombudsman is to ensure the financial institutions play by the rules and by the law but it does not make the law.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
After two and a half years, the Deputy gets a yellow star from the Chairman.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
The Financial Services Ombudsman adjudicates on complaints. Does it have any role in alerting the Central Bank or the Government to problems or injustices that may not be illegal or outside the regulations but that any reasonable person might consider to be a problem? Does the Financial Services Ombudsman have any role in that area?
Mr. William Prasifka:
If we look at the grounds on which the Financial Services Ombudsman can uphold the complaint, it is on the basis of legal principles. There is also a wider remit in terms of upholding complaints. We do not adjudicate on the basis of legal technicality. That is provided for in the Act, which also provides we can uphold a complaint if the conduct complained of was in accordance with law or established regulatory practice but was otherwise unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant. We have always taken that to mean we have a more broader equitable jurisdiction in terms of deciding complaints. This analysis is also reflected in the consumer protection code, which requires the provider to get to know the customer and give the customer suitable products. This is a more equitable type of jurisdiction. We have a more equitable jurisdiction in deciding complaints but Deputy Boyd Barrett asked a different question about us advising the Central Bank and the Government about broader issues.
Properly working, the Financial Services Ombudsman could be part of the early warning system of the financial services sector. Many issues first emerge in terms of the Government framework with us. That is why we have an open relationship with the Central Bank and we bring it to the attention of the Central Bank when we feel it appropriate.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
A number of points occurred to me. Mr. Prasifka places an emphasis on the difference between the formal and informal approach of the office as opposed to the UK office. From the statistics, it appears the formal approach leads to a lower level of complaints being upheld while the informal leads to a higher level of complaints being upheld. If I understand the statistics correctly, the ombudsman in Britain upholds more complaints, which appears to be linked to the fact that it is more informal. If I am correct, Mr. Prasifka seems to be concerned that he is being pushed in a direction that is too formal. The further we go down that road, the more problematic it becomes. Should we move to a more informal approach? The informal approach appears to favour the complainant more.
Mr. William Prasifka:
We can look at an alternative dispute resolution body. There are many different models throughout the State and in other jurisdictions. Looking at them all across the spectrum of formality, some have low jurisdictional limits and operate very informally. In some cases, the jurisdictional award can be a few hundred euro. As far as I am aware, we operate the most formal form of dispute resolution in the entire world. That is simply a fact.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
How will this differ? Can Mr. Prasifka elaborate on what informal means in the context of the alternative model that operates in Britain?
Mr. William Prasifka:
It is very simple. Many decisions could be made on a preliminary basis, where people come in and we give them a preliminary view on where they are going. Second, in terms of the actual proceedings, there is no requirement to hold a formal hearing with each ombudsman having discretion on how to decide cases. They could decide cases through people coming into a room and having a chat, with no stenographer and no lawyers. It can be done quite informally. As someone who has spoken out in the area, I must say that we need a word of caution. With a high degree of informality, it is much more difficult to come up with a predictable and transparent decision-making process. Our primary goal is to decide cases fairly. If we can do so in a transparent and predictable way, we can raise standards within the financial services industry. The operators will know what to expect. If we become very informal, what we gain through ease of decision-making, we may lose in terms of its effect on the industry.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
There is a very strong parallel between that and politics. It is the difference between sorting out cases with the Department at the level of the clinic and pushing for policy change. It is an interesting balance. Perhaps we can have a bit of both. Perhaps there could be an informal starting point. If it does not work or if it is not appropriate, there can be a higher threshold of formality.
Mr. William Prasifka:
In our own way, we have tried to do so by effectively identifying certain types of cases where there is not a huge evidentiary issue and trying to fast-track them. We have had limited success in doing so because we can catch a lot of cases that are appropriate to fast-track but the question is how to avoid including in that collection, cases which are not appropriate to deal with at that level.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
We will not sort that out today but I appreciate it. That is something to be examined.
There are two areas I want to ask about in respect of the volume of complaints. In respect of reckless lending, there is no legal prohibition and no category of reckless lending. Some of us argue there should be. Did the Financial Services Ombudsman receive many complaints about reckless lending, which is something that may be hard to prove? In many of the cases I have heard about, it amounted to a bank manager or someone selling loans in a bank saying that it is a good deal and that people should get on board. That is difficult to prove. Were there many complaints in the area?
There was uproar in England about RBS and Lloyds and what they did with their restructuring divisions for small business, with claims that, in order to maximise the money they could get back on loans that were in trouble to businesses that were generally held to be viable by the people in the businesses, the banks put massive pressure on the small businesses to liquidate assets. This amounted to doing things to effectively close down the business so that the banks could get back the money. Is this something the Financial Services Ombudsman came across? One person told me that the global restructuring division of Ulster Bank is essentially trying to put him out of business.
They were getting direct rental revenue and they were holding back VAT which should have gone to the Revenue Commissioners and were going into people's personal ---
3:40 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I cannot let the Deputy go into specific cases.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Sorry but this was well publicised.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
It does not matter if it was publicised or not. I cannot let the Deputy get into a specific case at this meeting.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Is the Ombudsman receiving a lot of complaints about restructuring divisions and their relationship with small businesses? Is there an apparent problem here?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Yes, I do.
Mr. William Prasifka:
In those circumstances, of course, there is a High Court decision which indicates that there is no tort in Ireland of reckless lending, which we have to take on board. Second, I have to say that in my experience over four years, the number of cases of complaints of reckless lending is less than one can count on one hand. It is not an issue that has driven complaints. In terms of small businesses, restructuring and issues that have come up in the United Kingdom, our jurisdiction is limited to eligible consumers, namely persons in companies with a turnover of €3 million or less. Therefore, larger businesses cannot make a complaint to the Ombudsman. In my experience, we have not seen this as a significant source of complaints. I cannot say it has not happened but it is certainly not something which comes to us in any great volume.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I have one case and I will not mention names but it concerns a complaint about ATMs. A couple had €800 taken out of their account. The bank suggested that they had taken it out themselves but they were adamant that they had not done so. They had been customers of the bank for many years, both were working and were in a different part of the country at the time that the money was withdrawn. They lived in Dublin and the money was taken out somewhere in Limerick. They made a complaint but it was not upheld. It would appear from this case that it comes down to one person's word against another's. We know there are mechanisms through which cameras taking photographs of people inputting their PIN can lead to money being taken out of people's account without their knowledge. What if someone cannot prove it one way or another? How does the Ombudsman deal with a case like that? If the Ombudsman does not uphold such a complaint because there is no evidence to prove the case one way or the other, is there somewhere else such people can go? These people feel that their good name has been impugned because the suggestion implicit in the decision is that they must have taken out their own money and then tried to con the bank.
Mr. William Prasifka:
Complaints regarding unauthorised withdrawals from ATMs are governed by the Payment Services Directive which, if it is shown that the withdrawal was unauthorised, requires that the money be repaid by the financial institution unless that institution can demonstrate that the customer or the complainant is guilty of gross negligence and the burden is on the financial institution to demonstrate that.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
To show gross negligence?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
What would gross negligence amount to?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Do some cases come down to one person's word against another, in which case there is no evidence on which the Ombudsman can adjudicate.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I am confused as to why a complaint like the one to which I referred would not be upheld.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I understand that.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
If the Ombudsman does not uphold a complaint, what can the complainant do?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
That is an expensive business.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will call Senator Thomas Byrne in a moment but before doing so, I ask Mr. Prasifka to clarify a number of points. Does the Ombudsman deal with complaints about the availability of house insurance or more specifically, the inability to access same upon renewal because of issues such as subsidence or flooding?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Domestic, household insurance is not an issue for the Ombudsman?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is the office precluded from examining this or is it just that such complaints are not submitted to the Ombudsman?
Mr. William Prasifka:
We can only look at it in the context of what we are permitted to do under the Act. We would have to reach a determination that in the circumstances, the provider was doing something that was unreasonable, unjust or discriminatory in the individual case. That is the conclusion we would have to reach to uphold a complaint.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Has the Ombudsman had complaints from home owners about not being able to get insurance? Regardless of whether they are germane to the office, have homeowners complained to the Ombudsman about not being able to buy household insurance?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Has the Ombudsman made rulings on any such complaints?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Have rulings been made on whether the complaint is relevant to the office or not?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Would it be possible to obtain a synopsis of some of the Ombudsman's rulings or judgments in that area? We do not need information on the particular households or individuals but a general outline of how those complaints were interpreted.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That is fine, thanks. The UK Financial Services Ombudsman gives guidelines on its website on how it views particular issues. I have looked at the Irish website which is more matter of fact. The British website gives a more macro view of issues. Is that something the Ombudsman would consider doing or is his office unable to do that?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That happens here with the Private Residential Tenancies Board. All of its decisions are published.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is that a resource issue?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Having examined the Ombudsman's report, AvantCard seems to be the agency with the most substantiated and partly substantiated rulings against it, at six and 27 respectively. Is there a theme running through all of those judgments or was there a broad range of complaints made against that agency? I ask the question because undoubtedly every person in this room has an account with at least one of the dozen or so agencies listed in the report, whether that be Bank of Ireland, Allied Irish Bank, Ulster Bank, AvantCard, Permanent TSB and so on. If I happen to be browsing on the Internet and I see that there were 11 partially substantiated rulings against Bank of Ireland, nine against Irish Life, 19 against Allied Irish Bank and so forth and I am a customer of one of those institutions, how would I go about finding out whether the complaints that were upheld might also apply to me?
3:50 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
If we changed the system, it could change.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is there a legislative prohibition on the Financial Services Ombudsman giving a descriptive account on a ruling made by the ombudsman?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Let me push out this point. I am going to pick an institution randomly, as I do not wish to pick any one in particular. Let us take Danske Bank, which is part of the Lloyds Banking Group, in which there are two substantiated complaints and four partly substantiated complaints.
Ms Jacqui McCrum:
We were allowed to give a breakdown by sector, for example, investment, banking and insurance sectors. We further broke down cases into our headings. The Chairman has asked about the cases in Danske Bank. Two cases were substantiated and four cases were partly substantiated in relation to accounts. That is as much detail as we are allowed to give. We cannot go down into the detail of the specific issues. We looked at the themes coming through the review. As we have discussed this afternoon, the themes related to payment protection insurance and the mortgage arrears process. For the first time in our bi-annual review we have put some cases at the back and they demonstrate where findings were upheld, partly upheld and the type of complaints coming through. We would have published that on our website and in our annual report that comes out once a year. We have sought to try to inform people as far as we are allowed to do within the confines of the legislation.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
What can the Financial Services Ombudsman not say? Can the person who made the complaint be named?
Mr. William Prasifka:
No. A very important part of the office is that the complainant's details are always confidential. We never talk about complainants with anyone. We never talk about complaints with anyone other than the complainant and the financial service provider against whom the complaint has been made.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
What financial and product training do the staff of the Financial Services Ombudsman get to enable them to understand complaints? There could be a suggestion that the staff do not understand the nature of investment risks, that the decisions are made by lawyers rather than people who have an understanding of finance. Is the office of the Financial Services Ombudsman comprised mainly of staff with legal qualifications? Does the office employ an actuary or those who are chartered financial analysts?
Mr. William Prasifka:
We have a very highly trained staff. Our head of administration can elaborate on the training budget, which is quite extensive. There is continuing professional development. We have staff who are lawyers, as well as from a variety of backgrounds and they are continually taking additional professional qualifications run by the major training bodies in the country. Training is a very high responsibility. At the end of the day, the office is the staff and its expertise and its collected inherited knowledge.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I would not expect Mr. Prasifka to have the answer to this question this afternoon, but I ask him to furnish the committee with some general outline on it. My question relates to the six-year time limit. Will Mr. Prasifka indicate how many complaints he gets, the sectors to which the complaints refer and how many he will have to refuse to hear because of the six-year time limit? I understand there is a time limit in respect of all complaints.
A number of members dealt with the IBRC. The liquidators and the Department of Finance appeared before the committee last week. It is indeterminate as to where the IBRC loan book will end up and all we know is that the phase 2 bidders have agreed to a voluntary code of conduct, but it may not develop to phase 3. The loan book could end up in NAMA and not be sold. Bearing in mind Mr. Prasifka's earlier comments, if the loan book is taken over by NAMA or an organisation that has agreed to a voluntary code of conduct, will he be able to hear complaints about them?
Mr. William Prasifka:
The legislation is quite clear, the only entities against which we can adjudicate complaints from eligible consumers are regulated financial service providers. If there are complaints against unregulated financial service providers, we have no legal capacity to adjudicate that complaint.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
If the loan book goes into NAMA, which is not a financial service provider-----
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is the practice of oral hearing prescribed by statute or is it that the Office of the Financial Services Ombudsman must conduct hearings in a fair manner?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
If the Oireachtas were to stop the Office of the Financial Service Ombudsman holding oral hearings, would that help in its work, or would decisions still be fair? Do oral hearings take up a great deal of time when things could be dealt with more informally?
Mr. William Prasifka:
The fact of the matter is that oral hearings are taking up more and more of my time. I am becoming effectively less a chief executive of the organisation and really a hearing office. That is the reality. The difficulty is that one is talking about the interface of constitutional rights and legally binding decisions. Under the current jurisprudence, if one were to eliminate our requirement to have an oral hearing one would have to take away our ability to have legally binding decisions. That obviously is a very significant trade off.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The Constitution is often cited by officialdom as the reason things cannot be done. It is cited regularly when we table Private Members' business. As Shakespear said, "The devil can cite Scripture for his purpose," officialdom in Ireland - I am not including the Office of the Financial Services Ombudsman, Mr. Prasifka in "officialdom" - can cite the Constitution for its own purposes. The question is not the law, because I am familiar with the reasons for the law. However, if Mr. Prasifka were prevented from holding oral hearings or decided as a matter of policy to stop holding oral hearings, could he do his work just as well at a lower cost?
Mr. William Prasifka:
The office had the position before I joined it - and I fully buy into it - that there would be certain circumstances and certain types of complaints in which an oral hearing is necessary. That has never been the source of contention. The difficulty arises ex post facto, after a decision has been made, one can always look back and invalidate that decision on the ground that an oral hearing was not necessary.
I receive letters from people whose complaints were adjudicated years ago, long before I appeared on the scene, wanting to know why they did not get an oral hearing. We know that every time we get an appeal, one of the issues will be, "Did we or did we not hold an oral hearing?".
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Would it be possible to envisage a system similar to that operated by the actual Ombudsman, in which decisions are not technically legally binding but are in practice. I know the Ombudsman is dealing with the State and that is different from the private sector.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It is not possible.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I will take that point back. We do not want to go back to those days.
Mediation is provided under statute, is that an avenue for the type of informality that applies in the UK?
Mr. William Prasifka:
The Senator is correct that it is provided for under statute. As a part of our process every single complainant and provider is offered mediation. We have trained mediators within the office but it is rarely taken up. We fully accept the fact that by the time a complaint comes to the Office of the Financial Services Ombudsman, the parties are too far apart for mediation. It has always been my belief that there is scope for more mediation and that providers should consider it more often. Very often when they come in they find it is quite productive but it is never going to be a substantial source of dealing with many of our complaints.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
There is an appeal in respect of tracker mortgagers, independent of the Office of the Financial Services Ombudsman. I know from referring people that adjudications from the office of the Financial Services Ombudsman are in limbo until that appeal takes place.
How many tracker mortgage cases would be awaiting the outcome of the appeal?
4:00 pm
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Do most of them come from the same institution?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It is, therefore, Permanent TSB and there 60 or 65 tracker mortgage cases. I note from one of the examples, partially upheld, which was just about the processes, the substance was not upheld and that the compensation was €300. It was said earlier that the Financial Services Ombudsman is a powerful institution which can impose penalties of up to €0.25 million. How is compensation calculated? Does the office have a model for calculating the compensation? In terms of the three strike rule, following which one can be named, how many companies have had a finding upheld either partially or substantially by the office but have not been named? I am not asking Mr. Prasifka to name them. How many companies such as Carphone Warehouse - I am not suggesting it is one - are there where only one or two cases were upheld and, therefore, they have not been named? Perhaps the witnesses would give the committee an idea as to whether it is just one company or two or three or four that fall into that bracket.
Mr. William Prasifka:
First, in relation to how we calculate compensation, we do not operate a system of penalties. A penalty is an issue for the regulator. We operate a system only of compensation. In terms of dealing with the substance, if the financial provider has not lived up to its responsibilities under the consumer protection code or under various legal principles or equitable principles, the goal is to put the customer in the place he or she would have been if everything had been done. It may, therefore, mean the claim is paid on the insurance policies, that they get their money back. It is a separate issue, apart from the economic loss about stress, inconvenience and getting the run-around, so to speak. Within the office we have a certain protocol whereby we grade things generally up to €250 to €500 and €500 up to €1,000. If one is getting more than €1,000 in terms of stress, one is talking about things which are getting into the substance of it generally.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Okay.
Mr. William Prasifka:
We try to do that. To give the providers some guidance we break out separately the substantive complaint, for example, should the claim be paid? Let us say, we think the claim did not have to be paid, however, someone was given the wrong information or it was not dealt with expeditiously, we separate that out and, effectively, give that person a sort of customer service award.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
How many companies have been affected by the three strike rule?
Ms Jacqui McCrum:
We will not be able to give the Deputy an exact figure now. The total number of complaints we substantiated for that period of time that we are allowed to declare, up to 31 December, is 42. The total number upheld in the third and fourth quarter if we doubled up would be 84, but that is not quite right. There are certainly another 20 or so companies. They may have only one complaint or there could be a company with two complaints and just missed the three strike rule.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Would it be preferable if the number were reduced to one, given that in the executive summary the witnesses have mentioned the name and shame rule - that is not what it is officially called - has assisted the office but, more important, has assisted consumers because they are afraid of it and, obviously, are dealing better with the issues? Would that be of more assistance from the office's point of view?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Yes.
Mr. William Prasifka:
It is, however, dealing with a higher level of complaints. One can understand that if one is dealing with one organisation that has one complaint upheld every ten years it could skew it. At some point in time it could be identified as one of the worst providers which may be unfair. I do not believe there is any magic number and I do not believe that the additional incremental benefit of going down to two or one complaint is demonstrable.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Can I ask a final question which follows on from what the Chairman and I started with? Does the Financial Services Ombudsman Council still exist?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Are the original members appointed in 2008 still in place?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The organisation's website "About Us" shows that appointment in 2008 is only for a five year term, which would mean the term would have been up in October 2013. I do not see any reference to new appointees replacing the five who were appointed in 2008. They should have been allowed to remain in those positions for only five years.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Were all five individuals replaced?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The law setting up the council provides that a member of the council will hold office for a period not exceeding five years.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Why are the original five still on the council given that they were appointed on 29 October 2008?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
How are those two members still on the original council, given the section I have just read out?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
So they have been reappointed. That is fine.
We were talking about the issue, for which I argued forcefully and which was accepted by the Government, that a description of the upheld claim could be given by the Financial Services Ombudsman. Mr. Prasifka said the office is statutorily debarred from doing that. Is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The Financial Services Ombudsman is not permitted to provide a description as contained in the original legislation.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Mr. Prasifka claims the statutory instrument in question came from the Minister for Finance.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The statutory instrument came from the Financial Services Ombudsman Council. It did not come from the Department of Finance and or from the Minister but from your own council which sets regulations on how the office deals with these matters.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Can we clarify the following issue? A person was involved in this matter which was supported across the House. Amendment No. 77 to the legislation specifically allowed for a description of a complaint to be given in an upheld complaint. A lengthy debate on the issue took place over a number of days and it was the Financial Services Ombudsman Council, not the Minister for Finance or the Department of Finance, who decided not to allow that in the reporting schedule.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does the witness now acknowledge that it is within the council's gift to set its own rules and regulations in accordance with section 57BD of the original Act and amended by the legislation we dealt with last year. Therefore, it is completely within the council's gift to outline the regulations in the form it will report, as it has done, as long as it is laid before the Houses and has the consent of the Minister. Did the witnesses seek to give effect to the amendment which was made to the legislation that the office would be allowed to give a description of the upheld claim?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The Financial Services Ombudsman Council did not seek-----
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Why not? This was a major part of the debate in the House on the way the Financial Services Ombudsman would report.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
So it is a bureau. There is the council which advises the office and sets regulations and the bureau comprising the witnesses which furnishes this report, but this was done hand-in-glove. The council and the bureau worked hand-in-glove on this matter right through the whole process. The bureau knew this was the type of statutory instrument that would have been given effect. Is that correct?
4:10 pm
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The statutory instrument, which the ombudsman has said bars the office from giving a description was laid before the House on 25 February, just last week. Only then was it decided that the ombudsman cannot give a description under this reporting scheme. The ombudsman published the report the following morning. Is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Did the ombudsman have to start writing the report when he found out that this statutory instrument would deny him the right to give a description as contained in the original legislation, or as I claim, was this hand-in-glove - did he know all along that he would not give effect to part of the legislation, which allowed him to describe the substantive claim?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I acknowledge that completely.
Mr. William Prasifka:
I apologise for that. It was quite clear from all our interactions that it took an enormous effort to get this over the line, to enable us report on individual providers. My understanding is that this was less a case of the ombudsman and the bureau hand-in-glove, we were hand-in-glove with the Department of Finance, which guided us on what it would be appropriate to include in this report. It was quite clear that the statutory instrument would be very prescriptive, setting out what we were permitted to do. We drafted the report fully in anticipation of what was going to happen.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
For the record, I acknowledge the bureau is independent of the council and it is the council and the Department who are examining these regulations.
A Government amendment allowed for the description of a substantiated claim to be reported. It is my view, and it was the Government’s view, that the report should not describe every substantiated claim because some may be minor or insignificant and have an undue effect on the company. Where, in Mr. Prasifka’s opinion, it should be set out this concerns, for example, people being moved from a tracker to variable rate, that should be reported on. Does Mr. Prasifka support that part of the legislation that allows his office to report the description of a substantiated claim?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Deputy Doherty, you need to be mindful of Standing Orders. You can only ask whether an official is holding to that part of the legislation, not whether he agrees with it.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does Mr. Prasifka support the powers that part of the legislation confers on his office? Is it something he would like to use?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Sorry, Deputy Doherty, I have to intervene here. Any public servant or official who is charged by the State cannot be asked whether he or she agrees with policy. One can ask whether he or she complies with the policy. Asking somebody whether they support the legislation is a political question. I understand what the Deputy is saying but I have to ask him to rephrase the question.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I will do it but I do not know why the Chairman is getting uptight about this issue.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will explain very simply, you received correspondence from me two weeks ago, as did every member of the committee, with regard to the protocols for examining officials as opposed to politicians when they come before a committee. Maybe you have not read the letter but it was very clear about the difference regarding examining witnesses’ positions about policy. I will have it re-issued to you.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I do not want the letter re-issued. I am talking about consistency. If you wish, Chairman, I will point out where a Senator questioned a witness about the six-year rule, with no intervention from the Chair. It was a completely appropriate line of questioning.
I do not intend to put Mr. Prasifka on the spot by asking whether he supports legislation or the rule of law in the State. Does he think it would be of benefit to the office if he had the discretion to describe a substantiated claim where he or his office felt it appropriate, as the legislation allows?
Mr. William Prasifka:
I am very happy to answer Deputy Doherty’s question. I will answer it this way. Generally speaking, I would support anything this office can do to make its decision-making and findings more transparent and easily available. The UK has gone down a long road, for example, of publishing individual decisions, with the identity of the complainant redacted. We could go further down the road. We have tried for four years to be able to publish what we were able to publish last week. I was extremely anxious to get that over the line, to do what we did. I fully accept there is more to be done but one has to stand before one can walk and run. That was a very important first step. I am happy we got over that, we published the information, and guess what, the next day the sun rose and set. Institutions did not collapse. We think it has a positive effect. Can we learn from what we did? Can we improve? Can we make it better? Of course we can but it was very important to get past that first step and we did that.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Prasifka. I know my line of questioning might have been critical. I was considering some of the challenges facing the office but I commend Mr. Prasifka. Many of my constituents have approached the office and been dealt with speedily and kept up to date, even pending an appeal. I commend Mr. Prasifka and wish him the best, and good luck for the future. I hope we can take those necessary next steps together in a shorter time than it took to take the first one.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I welcome Mr. Prasifka and his colleagues. They have stepped into a difficult breach. The work they do presents big challenges. The Ombudsman is really the non-cost crushing opportunity for people who buy services from the financial institutions, have a very unhappy experience and want it sorted out. The Ombudsman’s objective is to be transparent within the privacy of the resolution hall, and to be fair. That is great. I have been there. In the early 1990s I approached the Insurance Ombudsman on a personal matter. One needs the patience of Job to get there with the financial institutions.
Over the past few years, I have wondered whether the industry should not be called the financial self-services industry, rather than services industry because the institutions really put it up to their customers when things do not go right. They are always inclined to think they cannot have an exception because if the exceptions are multiplied by their many thousands of customers they will be at Armageddon. That is why they bring down the shield.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy should move to asking questions.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I want to ask this question. I know of a case-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Be careful, Deputy Mathews-----
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
The names will be redacted. I will give the framework of the case.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Please keep it general.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I know about that but otherwise we might as well not be here.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I cannot allow you to use individual cases. You can generalise any case you want.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I just want to say the principle of what happened here is that several years after the unhappy experience occurred, and there was a dispute, the matter was shuffled along in a reluctant way and the financial services side was not forthcoming with evidence of what went on. That is not good enough.
They eventually say, "No, take your case to the financial ombudsman and you have the right to take it to the High Court." It may be a minor matter but it is a matter of principle. I do not think this is acceptable. If there is a request from a complainant to be heard and the financial services provider says, "We prefer it to be dealt with on a file review basis", that is not good enough. Even though they have been asked under freedom of information and in other ways, to produce all the evidence, I know for a fact in the case that not all the evidence is there and that evidence that had been given back to the financial institution has not surfaced for review purposes. That is not a happy situation. If that type of case occurs it should be an automatic full hearing situation. If the money amount is small there is no chance of it going to the High Court and that is absurd.
4:20 pm
Mr. William Prasifka:
Our services are provided at a low cost. The provider has an obligation to inform its customer - in this case, the complainant - that he or she can make a complaint to the Financial Services Ombudsman and we try to deal with the complaint as expeditiously as possible. People who do not have legal training can come before us. They do not have to frame the complaint in a legal manner because we can take care of that aspect. We provide an accessible service and we try to deal with cases in a timely manner where this is possible. Although the service is accessible we also adjudicate fairly, which is our remit.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Has a financial institution the right to say it does not wish a case to go to oral hearing because it wants the case to be dealt with as a file?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
That is good.
Mr. William Prasifka:
The decision to hold an oral hearing is entirely for the ombudsman. We decide whether an oral hearing is to occur. Occasionally some complainants have said they do not wish for an oral hearing. One complainant said he would drop the case. Some complainants are unable to attend because of illness and in those cases we need to act appropriately and take that into account at all points trying to deal with the situation as fairly as we possibly can. We have had cases where the complainant has come to an oral hearing completely unprepared and at sea and intimidated by the situation. In such a case, as the ombudsman, I must take a more proactive role in terms of cross-examining witnesses from the provider and assisting the complainant in bringing out the relevant evidence. We are accessible but at the same time we must be fair in adjudication.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I have in mind a case in which the complainant is very well prepared for an oral hearing but the response has been a decision to deal with it as a file case. Can the complainant insist on an oral hearing?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
There is a lottery element to how the case is determined.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
In the realities of life, the ombudsman has to deal with a deluge of cases. It takes time and work to prepare for an oral hearing. It is easier to be able to control the digestion of a case on a file review basis but it may not be the way to get to the kernel of the situation, particularly where it would be interesting and very instructive to hear the evidence, to hear how a David can take on a Goliath.
Mr. William Prasifka:
We have more experience with oral hearings or making decisions on oral hearings than probably any other ombudsman in the entire world. In literally every single case that comes before us we have to decide whether it is appropriate, necessary, desirable, to have an oral hearing. We do this even if none of the parties has requested it.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I know that in the case I have in mind there is a great deal of experience which is not solely contained on paper. Therefore, it would lead to a better judgment of the case if there were to be an oral hearing. That fact alone would suggest there should be an oral hearing.
I refer to the insurance case of which I have knowledge. It was declined by the insurance ombudsman but I am a persistent person and I brought the case and the evidence to the chief executive and director of the insurance company-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Please, Deputy Mathews.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
He saw that if the story was told-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy's microphone has been cut off.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
-----to the media-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I cannot allow the Deputy to cite individual cases.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
There are principles at stake.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I have two questions following from earlier comments. Is there a conflict between the legislation which informs how the ombudsman is to operate and a statutory instrument which disagrees? The ombudsman is governed by the statutory instrument in the publication of details of individual judgments. That situation is bizarre.
Mr. William Prasifka:
I do not believe there is a conflict. As I recall, the legislation provides that in circumstances where the ombudsman is directed to issue a report, the manner of publication is governed by regulations that are issued. The legislation provides that whatever enabling provisions must be implemented by way of regulation.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I am not fully following that point.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I understand that. However, I find it strange and bizarre that the legislation can allow for the ombudsman to do one thing and then the regulations put in place - presumably to implement the legislation - preclude the ombudsman from doing something that the legislation allows it to do, namely, a quite important issue of being able to report on individual rulings made by it.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
That appears to me to be an anomaly.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I refer to people with mortgage arrears going through the MABS process. In almost every case of mortgage difficulty that I encounter, people tell me that they are making great efforts to contact financial institutions to engage with them but they receive no response or else merely a letter written by rote. I wonder about this. The banks have come to our meetings telling us that they are making great efforts and that the distressed mortgage-holders are not contacting them. Which is the correct version? I have met a series of individuals who have shown me the correspondence they have received from the banks. They told me that they begged the banks to meet them in order to have a proper discussion of the situation.
They are minimal, tick the box requirements. Does Mr. Prasifka receive many complaints about banks acting bureaucratically but not really engaging and how much latitude does the legislation allow him in terms of telling the banks they ticked the box but did not try to engage?
4:30 pm
Mr. William Prasifka:
When we review a provider's obligations under the code of conduct on mortgage arrears, essentially we examine how it dealt with the specific circumstances of the complainant. That is what we are entrusted with doing. The code of conduct is quite prescriptive and it requires that certain stages and options are pursued. We examine whether the provider has done this in the context of the individual circumstances of each complainant. Template letters which do not address that are not in compliance with the code.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Prasifka, Ms McCrum, Mr. Byrne and Ms McGovern for a very interesting and worthwhile discussion. I hope it will not be another four years before we get a chance to meet them again. I join other members of the committee in commending them on the vital role they play in overseeing financial services and making sure people get fair play.