Michael Noonan (Limerick City, Fine Gael)
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I welcome the opportunity to brief the committee on the Government’s priority legislation concerning the Financial Services Ombudsman and the Pensions Ombudsman. The purpose of these heads of Bill is to provide for the amalgamation of the Financial Services Ombudsman and Pensions Ombudsman and to update the legislation generally on their roles and responsibilities. The Government decision to amalgamate both offices follows the recommendation of a critical review under the public service reform plan. In the drafting of these heads, a full analysis was undertaken by my Department, including a public consultation process and consultation with relevant stakeholders, both public and industry representatives.

The Financial Services Ombudsman is an independent statutory officer who deals with unresolved complaints from consumers about their dealings with regulated financial service providers. The statutory role of the Pensions Ombudsman is to investigate complaints of financial loss due to maladministration and disputes of fact or law in relation to occupational pension schemes, trust retirement annuity contracts and personal retirement savings accounts. The Pensions Ombudsman performs these functions independently and acts as an impartial adjudicator. The heads of Bill propose to harmonise the rules under which the Financial Services Ombudsman and the Pensions Ombudsman can investigate a complaint and extend their strongest powers to the new financial services and pensions ombudsman. While the ombudsman will, of course, continue to be an independent officer, the draft legislation now provides that he or she shall resolve complaints in a manner that is appropriate and proportionate to the complaint. It gives the ombudsman a new role in improving the public understanding of the role and functions of the office, which compliments the current role of improving the public understanding of issues related to complaints.

With the amalgamation of the two bodies, the council and its oversight role of the Financial Services Ombudsman has been maintained but with some changes. I propose to remove the regulation making power of the council with respect to how the ombudsman operates. The Minister for Finance rather than the council will now have the power to make regulations relating to the operation of the ombudsman on the advice of the ombudsman and the council. The council will continue to keep the efficiency and effectiveness of the office under review but will no longer be responsible for the appointment of the ombudsman or deputy ombudsman. The council will have a new role in approving the draft statement of accounts prepared by the ombudsman before they are submitted to me.

To reflect the unique funding arrangements of the new body, which involve both industry and the Exchequer, the council will continue to prescribe by regulation levies or fees to be paid to the ombudsman by financial services providers. To reflect the changing workload of the council, I propose to reduce its membership from a maximum of ten to a maximum of seven people. One member should have pensions experience, one financial services knowledge and now at least two members must have knowledge of consumer protection or consumer issues. The proposed legislation provides that I will now hold the responsibility for the appointment of the ombudsman and deputy ombudsman following an open competition run by the Public Appointments Service. I am also extending the role of the deputy ombudsman to the new financial services and pensions ombudsman, which is an improvement over the current situation whereby the legislation for the Pensions Ombudsman does not provide for a deputy.

With regard to the functions and powers of the ombudsman, the heads of Bill include significant amendments. The heads of Bill identify the number of options available to the ombudsman for dealing with complaints, ensure the ombudsman maintains and establishes systems and procedures and require the ombudsman to adopt and publish rules of procedure for dealing with complaints. These changes are suggested with the intention of providing clarity and certainty for the consumer as to the process for dealing with complaints and on what to expect when the ombudsman is dealing with a complaint. To further enhance the current reporting arrangements in respect of the ombudsman, annual reports will be required to include the breakdown of the manner in which all complaints submitted to the office were dealt with and the outcome of all investigations concluded or terminated, including those that were settled.

The ombudsman will continue to report a summary of all complaints and a review of trends and patterns of complaints. I am also continuing with the name-and-shame reporting powers of the ombudsman with regards to complaints against financial services providers which was introduced in 2013. In addition to this, the ombudsman shall publish determinations made by him. The intention of these amendments is to improve transparency and better reporting of complaints.

The most significant change in the draft legislation is the amendment of the time limit in which complaints can be made to the ombudsman. Providing the necessary protection to the consumer over the longer term is of paramount importance but needs to be achieved within the law and be able to operate practically. After significant consideration and consultation with stakeholders, I propose to extend the time limits for complaints about certain long-term financial services to the same time limit which currently applies to pension products, namely six years from date of the conduct complained of or three years from the date the complainant knew, or ought to have known, about the conduct. This greatly improves access to the ombudsman for consumers of long-term products who may not become aware of an issue until well after the original six years had passed. The rationale for this expansion is that those who have long-term financial services may not become aware of an event to be complained of until their service or product matures and they should have some access to the ombudsman at that stage.

For short-term financial services, the time limit for complaints to the ombudsman is unchanged at six years from the date of the conduct complained of. This approach was taken as it was considered to be a balance between the concerns of the consumer representatives to give consumers greater protection, as well as those concerns of industry about record-keeping and availability of documentation.

I am retaining the requirement for consumers to first try to resolve the matter with a provider's internal dispute process. However, I am now allowing the ombudsman to waive the internal dispute process in certain cases, such as when the ombudsman determines a complaint is of such importance as to warrant waiving the process. This means that in cases where the provider may be seen to frustrate the process, the ombudsman can intervene.

The heads of Bill strengthens the role of the ombudsman in promoting engagement in the mediation process, as well as continuing to provide for mediation as a tool for the ombudsman in cases where he sees fit. I am informed by the ombudsman that he is already taking a proactive role in mediation pending the introduction of this legislation. Following a significant strategic and organisational change programme with the objective of putting mediation at the centre of the ombudsman procedures, a minimum of 60% of cases will be resolved in the future by dispute resolution using mediation techniques. This is up from 1%.

Once the ombudsman has considered the complaint, he may now issue a preliminary determination which will indicate the potential decision to be made and the evidence considered in arriving at this. This ensures all parties to the complaint are aware of developments in a complaint and have to opportunity to ensure the ombudsman has all evidence necessary for making a final decision.

Other examples of improved measures include the broader powers of the Pensions Ombudsman to compel witnesses and documents will now be extended to financial services complaints; the ability of the ombudsman to continue with a case on the death of a beneficiary; the ombudsman to issue preliminary determinations on cases to provide some level of expectation or guidance to both the provider and the complainant before completing the investigation; and the requirement for the ombudsman to publish guidelines for all procedures, the publication of cases for the Financial Services Ombudsman, and sample cases for the Pensions Ombudsman. If, following a complaint or investigation, the ombudsman considers there is a persistent pattern of complaints, he can now inform the relevant authority of such a concern.

The measures I have outlined should strengthen the functions of the new ombudsman, as well as improving the experience for consumers of both pensions and financial services. We look forward to debating these issues and any differences that may arise. My team and I are happy to take questions.