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.