Mr. Ger Deering:

Good morning Chairman, Deputies and Senators. I am pleased to have the opportunity, together with the deputy Financial Services Ombudsman, Ms Elaine Cassidy, to engage with the committee as part of the pre-legislative scrutiny of the financial services and pensions ombudsman Bill and Deputy Doherty's Private Members' Bill. The Government has decided to amalgamate the offices of the Financial Services Ombudsman and the Pensions Ombudsman and the legislation the committee is considering here today, if enacted, will enable this. We have undertaken considerable work in preparation for the amalgamation, including administrative integration and co-location. I was appointed as Financial Services Ombudsman in April 2015 and appointed Pensions Ombudsman in May 2016. Currently, I hold both of these offices in separate capacities under the relevant legislation. My colleague, Ms Cassidy, was appointed deputy Financial Services Ombudsman in January this year. She is deputy ombudsman designate for pensions as the current legislation does not provide for a deputy Pensions Ombudsman. She will assume that element of the role when the legislation under consideration here today is enacted. We look forward to fully amalgamating both offices on enactment of the legislation. We also look forward to the enactment of the other provisions in the Bill which will provide greater protection for consumers. I will comment further on this later but first I wish to provide some background to our work and its current legislative basis. In particular, I wish to provide details of a major transformation that we are implementing in our office.

The long and well-established role of an ombudsman is to seek to redress the difference in power and resources between the individual and large institutions. My job, therefore, is to address the very significant imbalance of resources that exists between the consumers and providers of financial services. The Office of the Financial Services Ombudsman, FSO, was established in 2005 to deal independently with complaints from consumers about their dealings with regulated financial service providers. The operation of the office is funded by a levy on the industry. Complaints can be taken by individuals as well as limited companies and unincorporated bodies such as partnerships, charities, clubs, trusts and sole traders with an annual turnover of no more than €3 million. A time limit of six years for making complaints to the Financial Services Ombudsman is set out in the Act. The Office of the Pensions Ombudsman was set up under the Pensions Act 1990. The Pensions Ombudsman investigates and rules on complaints from members and beneficiaries of pension schemes regarding complaints about occupational pension schemes, personal retirement savings accounts and trust retirement annuity contracts in both private sector and public sector schemes. Generally, the Pensions Ombudsman operates under a six-year time limit but there is also a three-year awareness provision. The Pensions Ombudsman has some discretion to consider a complaint or dispute outside these timeframes. Subject only to an appeal to the High Court, the decisions of both offices are binding on all parties.

The 2004 Act establishing the Financial Services Ombudsman is very strong in its intent to establish a true alternative to the adversarial court system. It clearly sets out that the principal function of the Financial Services Ombudsman is to deal with complaints made by way of mediation and, where necessary, by investigation and adjudication. It also sets out that the Financial Services Ombudsman is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form. These very important provisions have been supported by the High Court in a number of challenges to findings of the Financial Services Ombudsman. It is clear from the legislation as endorsed by the courts that the intention of the Oireachtas was to establish a system for resolving complaints against financial service providers that is informal and in which the preferred method of resolution is mediation. Only where necessary is it intended to resolve complaints by investigation and adjudication. However, I must acknowledge that this is not how the service has developed over the years. Until February of this year, fewer than 1% of complaints were resolved through mediation. This meant that a significant number of complaints required full investigation and adjudication. In the main, this was because financial service providers refused to engage in the mediation process.

While the 2004 Act clearly promotes mediation as the preferred method of resolving complaints, it also provides strong powers for the ombudsman to adjudicate. A complaint may be upheld on a very broad range of grounds including that the conduct complained of was contrary to law, unreasonable, unjust or improperly discriminatory in its application to the complainant, or that the conduct complained of was otherwise improper. This showed great foresight on the part of the legislators in 2004. It allows me to go beyond simply looking at contractual terms and, instead, to take a much broader view of the fairness and equity of an issue. Where a complaint is upheld, the 2004 Act contains a wide range of powers which are available to the ombudsman. I can direct a financial service provider to pay compensation of up to €250,000 and I can also direct rectification. Such rectification can be very significant as it can involve putting a person back to the position in which they previously were before the complaint arose. In some instances, such as where a home or life insurance policy has been voided or an income continuance or life insurance claim denied, this is potentially more important for the complainant than compensation. In addition, I can require a financial service provider to change a practice relating to that conduct. I can publish the names of financial service providers who have three or more complaints against them substantiated or partly substantiated in a year.

Furthermore, I can make a report to the Central Bank where I have concerns that the conduct of a provider could have negative repercussions for other consumers.

While it is clear that significant powers are available to the ombudsman, a view had emerged that the Financial Services Ombudsman was not making maximum use of these powers in the interest of consumers. To tackle this, I commissioned a strategic and operational review jointly with the then Pensions Ombudsman, Paul Kenny. This independent review consulted widely with our stakeholders, including a large cohort of complainants who had used our service. It examined current operations and business processes in both organisations. It also took into account the findings and recommendations of the FLAC report, Redressing the Imbalance.

The review report, which is available on our website, recommended that we should adopt a more proportionate, informal and preventative approach to dispute resolution. We have responded to our service users' feedback and the review recommendations by putting in place a three-year programme of change, which commenced in February 2016. This is already delivering significantly improved outcomes for users of our services.

All our stakeholders told us that they wanted a faster, less formal, simpler dispute resolution service. For this reason we introduced a new dispute resolution service through which we seek to achieve a fair resolution at the earliest possible stage through the use of mediation techniques which are flexible and informal. The new service involves considerably more interaction with the parties, particularly in terms of listening to them at an early stage of the process and giving everyone a chance to be fully heard. We use a combination of face-to-face meetings, phone calls and e-mails, and this approach is delivering a faster, more efficient and effective service that puts the needs of service users at its core and gives both parties the opportunity to develop a shared understanding of the complaint and work towards reaching a swift and fair resolution that both parties can accept.

Although it has to be acknowledged that it is very early days, I am pleased to report positive levels of engagement in the new process and very positive feedback from complainants who have used the new service. A total of 1,881 complaints were resolved through the new dispute resolution service between 1 February 2016 and 30 September 2016, compared to 70 complaints resolved by mediation in 2015, in itself a significant increase, and 822 cases settled directly between the parties in 2015. To evaluate its effectiveness and to enable continuous improvement we have now begun to undertake ongoing user surveys. The results of the first survey undertaken since the changes were introduced are very encouraging and demonstrate a more positive experience for service users, indicating that we have laid a strong foundation on which to build. The key findings include increased satisfaction among those who responded across all of the indicators. We have set these out in the document we have submitted and I do not propose to go through them in detail. While we are naturally pleased with these encouraging responses, we are also conscious that it is early days and that these responses do not include complainants who had their complaint adjudicated. All cohorts will be included over time.

Despite the success of the dispute resolution service there will inevitably be complaints that will not be resolved through these early interventions and there will be complainants who may not want to use this process. In such cases, the parties continue to have the option of having their complaint independently adjudicated by the ombudsman and a legally binding finding issuing. We are also making changes to our adjudication process and in 2017 we will commence issuing a preliminary finding to both parties. This will allow parties to make submissions relating to possible errors of law or significant additional points of fact prior to a legally binding finding issuing.

I again thank the committee for the opportunity to engage with it as part of the pre-legislative scrutiny for both Bills. I also thank the officials from the Department of Finance, with whom we have had considerable engagement. We welcome the financial services and pensions ombudsman Bill as published. We welcome the general consensus that appears to exist on the need for its provisions. The Bill as published retains the many excellent and important provisions of the 2004 Act, which gives the Financial Services Ombudsman significant powers to redress the imbalance between consumers and financial service providers and empowered us to implement our new processes. I believe the new Bill provides additional and very important powers. I particularly welcome the extension of the six year rule, the provisions relating to a complainant who is or becomes unable to act for herself or himself, the suspension of the limitation period during internal dispute resolution procedures, the specific provision to issue a preliminary decision, the provision to publish decisions while maintaining the confidentiality of the complainant and the provision to publish reports on any investigation as the ombudsman sees fit. The Bill as presented continues to strike the right balance between our ability to resolve disputes informally and, where this is not possible, to provide redress through investigation and adjudication.

Our promotion of, and emphasis on, informal dispute resolution and mediation should not be mistaken for some form of light touch approach. This approach is designed to provide complainants who use our service with a simple, effective and speedy resolution of complaints against financial service providers. However, I have very significant powers in terms of providing redress for complainants and I have not been, and will not be, found wanting in using these powers without fear or favour as they were intended. I assure the committee that, together with the deputy ombudsman and our entire team, I am fully committed to using any powers afforded to the financial services and pensions ombudsman by the Oireachtas to the fullest extent possible. I thank the Chairman and committee members for their time and I look forward to the discussion.