Michael McGrath (Cork South Central, Fianna Fail)

The Bill I am moving is straightforward legislation concerning the operation of the Financial Services Ombudsman. It proposes to give the ombudsman's office the power to publish the complaints record of individual financial services providers that come within his remit.

The Bill is designed to deal with an important issue of public interest, namely, the need to fully inform the people of cases where serious complaints have been made against financial service providers and the Financial Services Ombudsman has investigated and upheld those complaints and awarded compensation to the customers concerned.

The Financial Services Ombudsman's bureau played a vital role in bolstering consumer confidence in the effectiveness of the regulatory regime for certain financial service providers. Its role is in addition to that of the Central Bank in safeguarding consumer interests. The legislation I am introducing is designed to further enhance its current role. Given the damage done to the reputation of a range of financial services providers in the past four years, the need for this measure is now all the greater.

Under current arrangements, when a financial services provider's own internal complaints mechanism has not provided a satisfactory outcome, a customer can bring their case to the ombudsman. The ombudsman will ensure it is investigated, mediated and adjudicated upon. Where it finds against an institution, it may recommend that compensation be paid to the customer.

The ombudsman publishes a report every six months and a detailed annual report. The information covers a number of categories, specifically that complaints are divided into investment, banking and insurance. It does not cover pension related activities. As Members of the House will be aware, there is a separate ombudsman for the pensions sector.

Currently, the report is published in aggregate form such that no individual provider is identified throughout the report. While it does include case summaries, these are on an anonymous basis. In addition, details from the findings are presented such that neither the complainant nor the provider can be identified. I believe the absence of information regarding the identify of firms which have been found wanting is a clear deficiency in the current system.

An overview of the Financial Services Ombudsman's report for 2011 shows the importance of this office. A total of €2.25 million was repaid or awarded in compensation to customers of financial institutions last year on the direction of the ombudsman. Almost 7,300 complaints were made to the ombudsman against financial services providers in 2011 relating to the three broad sectors of banking, insurance and investments. There has been a 67% increase in complaints to the ombudsman since 2007. A total of 50% of complaints related to the insurance industry, a third were about banking and less than 15% related to various investment products. Compensation regarding investment complaints far exceeded those for banking or insurance complaints. That is logical given the scale of the figures involved in respect of investment products.

This office was established in 2005. In that regard I would like to pay particular tribute to Mr. Joe Meade for his role in the job. His easy-going manner and ability to empathise with consumers did an enormous amount to de-mystify the work done by his office. In July 2009, Mr. Meade wrote to the late Brian Lenihan to request that he be given the option to name institutions that had been subject to one of his decisions where he felt this was justified in the public interest.

He acknowledged that there were some potential difficulties that needed to be considered before a definitive conclusion could be drawn. First, customers might be slower to come forward to make a complaint if they felt their name could come into the become domain. Second, he had a justifiable concern that institutions might be more likely to appeal findings to the courts if they felt they would be named in any event. A long drawn out legal process would undoubtedly prove stressful and potentially costly for customers seeking redress.

Despite these reservations, on balance, Mr. Meade said he was requesting the option to name publicly an institution that had acted wrongly under certain criteria. The purpose of this Bill is to essentially give effect to that request. Therefore, I am not putting forward this Bill in a party political manner and I acknowledge that this request from the ombudsman's office has been on the books for some time, and was under consideration by the former Minister for Finance, the late Brian Lenihan, on leaving office.

The benefit to the public of such a move is clear. In the first instance, it would help foster a culture change within the banks. Essentially, the risk of wrongdoing being publicly aired, once identified, would lead to it being resolved more quickly and would make future such acts less likely. I record the support for this particular measure from the incumbent in the post of ombudsman, Mr. Bill Prasifka, who equally has made his views known, as has his predecessor, Mr. Joe Meade, on bringing greater transparency to the work of this office and to supporting their work by allowing them to publish the complaints record of individual institutions.

In order to respect the rights of financial services providers, the ombudsman put forward the very sensible suggestion that he be given sole discretion as to whether an institution should be named and that as a matter of good practice he would not be required to provide names in every case. This makes practical sense. In 2011, nearly 1,800 complaints were upheld and the number of cases dealt with by the ombudsman has been rising steadily as the economic crisis unfolded.

I accept that providing the name of financial services firms in each case could represent an information overload and would leave the public no wiser. However, by aggregating information across product type and identifying companies at this level, in addition to selective case summaries, the public could get a fair, clear picture of wrongdoing that has taken place, allowing them to make informed financial decisions. I concur with the recommendation that in order to re-assure the public, complainants should not be named and that statutory privilege would cover the naming of institutions.

The need for such a measure can be seen from reading the serious issues covered in the ombudsman's reports year after year. Typical of the types of cases that come up and are reported on every year include the following: inappropriate investment advice given the customer's risk preferences, break fees being applied incorrectly to moving from a fixed rate to a variable rate mortgage, unfair applications of restrictions relating to insurance products, customers being sold payment protection insurance on loans they do not need, medical expenses not covered due to an incorrect claim that the patient had a pre-existing condition, changing terms of loans without reference to the borrower and over-charging of fees by banks.

By way of illustration I would like to highlight three cases in particular that have come before the ombudsman in recent times that I believe accurately summarise the type of cases the ombudsman's office must deal with and adjudicate upon on a regular basis. The first case relates to a couple in their 70s who had deposited their life savings of €345,000 in a bank. In 2005, they were encouraged to put their money in a managed fund to get a better financial return, or so they were told. In 2008, they were again approached by the same bank which told them of a significant drop in the value of the fund. It was only at this point that they were fully informed about how the investment was managed, in particular that 70% of the investment was based on the performance of the stock market. To make matters worse, if they withdrew their money at that stage they would be hit with a €9,000 penalty. Thankfully, in this case the ombudsman found in their favour and they received full redress in line with the recommendation of the ombudsman.

The second case I wish to highlight relates to a customer who had a fixed rate mortgage. In early January 2009, she contacted her mortgage lender, another building society, seeking clarification as to whether a break fee would be applied to her mortgage account if she elected to change from a fixed to a variable rate of interest. She stated she was advised no break fee was applicable to her mortgage account. When she elected to proceed with the change from fixed to variable, she was advised that in fact a break fee of €20,000 was applicable.

Following a review of the evidence the ombudsman noted it was indisputable that the mortgage lender provided the complainant with incorrect information. The ombudsman also noted, with surprise, that the mortgage lender initially justified the application of the break fee on the basis that the complainant did not submit a written request to avail of the original no mortgage breakage fee. The ombudsman was cognisant of the fact that it was only upon the referral of the matter to his office that an accurate account explaining the reason, that is human error, for the incorrect breakage fee quotation was given. The ombudsman found the mortgage lender's responses to the complainant which predated the referral of the matter to his office were inadequate and unsatisfactory.

While the ombudsman accepted in this case that the mortgage lender made a genuine mistake and/or improper misrepresentation, nevertheless the complainant acted in good faith and within the prescribed time period. Therefore he directed that her mortgage account be immediately switched from the fixed to the variable rate, backdated to January 2009, and awarded her €1,000 for the distress caused for reneging on the offer made.

This case shows the importance of the role played by the ombudsman. We all know that in recent years the banks have tried in whatever way they could to induce and encourage people to move away from tracker mortgages. This individual brought her case to the ombudsman and it was upheld. This complainant and the office of the ombudsman did a great service for all other bank customers on tracker mortgages. Having read this report banks will think twice about forcing or inducing customers to move away from tracker mortgages on the basis of a false pretence. This case as much as any other in recent times highlights the vital role the office can play in ensuring consumer rights are protected.

In the third case I wish to highlight a financial provider was ordered to buy back a bond from an elderly couple for the original investment of €300,000, plus €5,000 compensation, for what the ombudsman described as the "mis-sale" of the product. The husband and wife, aged 85 and 84, were living with their son and his wife. The money invested in December 2006 was from the proceeds of the sale of their house. The husband died within 18 months. The ombudsman found that recommending to them an investment product with a six-year term as well as hefty penalties for early encashment was a dereliction in the provider's duty of care. What the ombudsman uncovered in this case was an abuse of the basic consumer right to be sold a product appropriate to one's circumstances. Highlighting such a case will make providers think twice about being of a mind to try to mis-sell to vulnerable elderly people products clearly inappropriate for their life stage.

A report in today's Irish Examiner highlights another class of cases which are a cause for grave concern in regard to the banks. According to the report, thousands of customers who were erroneously sold payment protection insurance are expected to win millions of euro in compensation as a result of a Central Bank investigation which found the problem was systemic. The Central Bank investigation concentrates in the main on the mis-selling of payment protection insurance to the self-employed, those close to retirement, and those on contract, the bulk of whom were ineligible to be insured under such policies. The report suggests that millions of euro in compensation and refunded premiums will have to be paid to thousands consumers who were wrongly sold these products. This investigation is ongoing and let us see where it takes us. It again highlights that despite the work of the ombudsman going through cases and issuing comprehensive reports year in year out some behaviour has not changed and products are still being mis-sold. This is why we propose to name and shame people in institutions who sell such products, so they will be held to account and their records made available for consumers to assess.

While these represent quite diverse cases, the common theme running through them is that of customers having to go to considerable lengths to vindicate their rights against a powerful financial institution. While the ombudsman plays a key role in vindicating these rights the public are left in the dark as to who the offending party is.

As the Minister is aware, in 2011 the Financial Services Ombudsman initiated a consultation process on the issue of publishing the complaints record of individual financial service providers. Several submissions from financial institutions raised the issue about how information on the complaints record of financial service providers might be presented. Assurances were sought that the information would be presented in a manner that was verifiable, robust, properly contextualised and not misleading.

The Financial Services Ombudsman's proposal is essentially that the biannual review would, for each financial service provider, include the total number of complaints, the number of complaints upheld, the number of complaints upheld in part, the number of complaints not upheld and the total amount of compensation awarded. To give an accurate picture of the complaints record of each financial service provider, information about the relative market share of the provider would also be provided. It would be important that where the ombudsman sees fit to highlight individual cases which are adjudicated upon, the offending institutions should be named in the report and the Bill provides for this.

The Minister addressed this issue in the Dáil last month when my colleague, Deputy Dara Calleary, tabled a matter for the Topical Issue debate. The Minister indicated he was considering the proposals from the ombudsman's office in this regard and that he was considering the legal issues. One website is reporting this evening that the Minister is considering accepting the Bill. I hope this is accurate and if it is I welcome it. We should act on it quite quickly. There is no need to allow this merely to pass Second Stage and then be put in cold storage. I am sure the Government can table amendments to improve the Bill. Every Member of the House has the right to make his or her views known and I fully respect this, but I see no reason this straightforward simple legislation cannot be enacted without further delay.

I will wrap up the debate tomorrow evening and make concluding points. The essential point is that this is about trying to raise standards in the financial services sector. It would also allow those providers with a good record in dealing with complaints to have their performance highlighted as well as those whose performance is not so good. It would have a number of benefits, chief among them being that key information would be made available to consumers about the complaints record of each individual institution. If they are of the mind to research such records at least they will be available in the public domain. This would do a great service for consumers and would help to weed out the remaining bad practices that unquestionably exist throughout the financial services sector. Such a measure would not only enhance its transparency but also over time would greatly enhance the reputation of financial services in Ireland. We all hope and plan it will be a central contributor to our economic renewal.

I enthusiastically commend the Bill to the House. I hope the Government will accept it in the spirit in which it is offered. I look forward to a full debate on it today and tomorrow. I hope the matter can advance quickly and be put into effect.

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