Dara Murphy (Cork North Central, Fine Gael) | Oireachtas source

I thank Deputy Pearse Doherty for his Private Members' Bill on the topic of the Financial Services Ombudsman. Unfortunately the Minister, Deputy Noonan, and the Minister of State, Deputy Eoghan Murphy, are unable to be here today so I am taking the debate on their behalf. They both understand the intention behind the Bill, which seeks to provide for the strengthening of the functions of the Financial Services Ombudsman, the consumer complaint procedure and related matters. While we support the intention behind the initiative overall, the provisions as set out do not necessarily achieve all of the aims. I will address the reasons for this in a moment.

As the Deputy has seen from the Government's legislative programme, we are progressing legislation to amalgamate the Financial Services Ombudsman and the Pensions Ombudsman and to consolidate and generally update the legislation. The Government decision to amalgamate both offices follows from the recommendation of the critical review under the public service reform plan. The Financial Services Ombudsman is a statutory officer who deals independently with unresolved complaints from consumers about their dealings with all regulated financial service providers. This role is to investigate complaints of financial loss due to maladministration and disputes of fact or law in 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 Pensions Ombudsman is funded by the Exchequer.

The detailed heads of a Bill relating to the amalgamation were recently submitted to the Committee on Finance, Public Expenditure and Reform, and Taoiseach by the Minister following a full analysis and consultations with relevant stakeholders. This is priority legislation for the Minister, Deputy Noonan. The most significant change in the draft heads of the Bill is the amendment of the time limit in which complaints can be made to the Ombudsman in respect of financial services.

Providing the necessary protection to the consumer over the longer term is paramount but needs to be achieved within the law and be able to operate practically. The design of the appropriate mechanisms to achieve this is complex as it involves a range of considerations, including the interface with the Statute of Limitations, existing consumer protection laws, complaints mechanisms and availability of records.

After significant consideration and consultation with several stakeholders, the Minister for Finance proposes to extend the time limits for complaints about certain long-term financial services to the same time limit that 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 has passed.

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 and those concerns of the industry about record-keeping and availability of documentation.

The draft Bill will provide that the power to appoint the ombudsman and deputy ombudsman for the financial services and pensions office will be the responsibility of the Government and the candidate should be appointed following a Public Appointments Service competition. The heads of the Bill will also provide for the addition of a deputy financial services and pensions ombudsman. The draft heads will harmonise the rules under which the financial services and pensions ombudsman can investigate a complaint and extends the strongest powers of the Financial Services Ombudsman and the Pensions Ombudsman to the new financial services and pensions ombudsman.

The heads of the Bill will require that the ombudsman implement measures to increase the understanding of complaints against financial and pension providers as well as the basis for decisions made by the ombudsman across pensions and financial services issues by issuing preliminary determinations, publishing anonymised determinations and case studies. The ombudsman will also be required to report in more detail information on all investigations, including those terminated and settled.

The heads of the Bill will remove the requirement for mediation in all investigations. The lack of engagement from institutions in the process can be source of frustration for complainants. The draft legislation will strengthen the role of the ombudsman in promoting engagement in the mediation process and will continue to provide for mediation as a tool for the ombudsman in cases where he sees fit. Finally, the draft legislation will provide for carryover of and any necessary changes to the naming-and-shaming provisions for complaints against regulated financial services entities.

These measures have the potential to strengthen the functions of the Financial Services Ombudsman under the new body, the proposed financial services and pensions ombudsman, as well as improving the consumer complaints procedure and experience for consumers of both pensions and financial services.

I will now address each of the main sections proposed by Deputy Pearse Doherty in the Central Bank and Financial Services Authority of Ireland (Amendment) Bill 2014.

Section 2 proposes to bring the definition of "consumer" in line with the version used in both the consumer protection code and in the Consumer Credit Act. The Deputy's intention is to bring the definition of "consumer" in line with versions used elsewhere, but I note that the proposed definition excludes unincorporated bodies. This may have the unintended consequences of narrowing the definition to exclude small businesses, sole traders, and bodies such as charities. The recast definition of "consumer" in the heads of the Bill prepared by the Minister for Finance, Deputy Noonan, will provide for the personal consumer and commercial consumer, as proposed by Deputy Pearse Doherty, and for unincorporated bodies, such as charities. This is the most appropriate definition to use.

Section 3 removes the requirement for the ombudsman to act in an informal manner and deletes the words "without regard to technicality and legal form". These deletions are designed by Deputy Doherty to reflect the fact that many complaints involve the alleged breaches of statutory rules. The provisions outlining that the ombudsman need not have regard to technicality or legal form is considered by the ombudsman to be a valuable and fundamentally important provision upon which reliance can be placed, while the ombudsman nevertheless complies with the requirements of natural justice. Additionally, it is noted that the phrase in question has never prevented the ombudsman from technical or legal argument when the need arises. After extensive review, the Minister's own draft legislation makes minor changes to this provision with the addition of the term "undue" into the phrase "without regard to technicality and legal form". It is hoped this change will continue to allow for the informality, while also acknowledging that such formality is to be bounded by an appreciation for due process and fair procedures.

Section 4 provides for a two-year extension of time to make complaints to the Financial Services Ombudsman in respect of the conduct of regulated financial service providers. I have already mentioned comparable provisions in the Minister's draft legislation earlier. It is proposed in the Minister's heads of the Bill to expand the broader time limits currently applicable for complaints for pension products to long-term financial service. The rationale for this expansion is that, for those who have long-term financial services, they may not become aware of an event to be complained of until their service matures, such as with endowment mortgages, and should have some access to the Financial Services Ombudsman.

Section 5 seeks to put greater pressure on the financial service provider to engage in the mediation process. We agree the existing provisions for mediation can be improved. The Minister's heads of the Bill will provide for the proactive approach of the ombudsman to encourage participation. In addition to this, I note Deputy Pearse Doherty's Bill was published at a time when the use of mediation in the Financial Services Ombudsman was less than 1% of all cases. I am informed by the ombudsman that, following a significant strategic and organisational change programme with the specific objective of putting mediation at the centre of the its procedures, a minimum of 60% of cases will be resolved in the future by dispute resolution using mediation techniques.

Section 6 allows for a greater range of findings on completion of an investigation. Currently the possible findings are limited to substantiated, not substantiated and partially substantiated. The Bill allows for findings of upheld, substantially upheld, substantially rejected or rejected. Transparency and better reporting aims may be at the source of the amendment. We support the intention behind this provision. Any change to the determination categories would need to operate harmoniously with the name-and-shame provision to be effective in increasing transparency. As currently drafted, it could operate to limit the name-and-shame provisions. This proposal would benefit from further consideration by the Attorney General's office.

Other steps have been taken in the comprehensive set of heads drafted by the Minister for Finance, including the introduction of preliminary determinations, more detail and publication of all determinations for financial services complaints, as well as more transparent information in the annual report on all investigations, including those terminated and settled.

Sections 7 and 8 allow for an appeal of the determination to be taken to the Circuit Court rather than the High Court, with subsequent appeals to the High Court. This would be a full rehearing of the complaint, and a period of 60 days should be allowed for this appeal to be lodged, as the Deputy said. The purpose of the ombudsman is to be a free alternative to the courts system for consumers. The intention behind section 7 may be to improve consumer protection by offering a de novoappeal in the Circuit Court to avoid the expense of the High Court, namely, the expense for consumers, but we have some concerns. A de novoappeal to the Circuit Court would involve the Ombudsman as a notice party only. This would mean that if the financial services provider appealed a decision that favoured the complainant, the complainant would have to defend the appeal in the Circuit Court, with all of the consequent or attendant expense. The provider is in a considerably stronger position, in terms of finances and resources, both to go to the Circuit Court and to succeed owing to the lack of inquisitorial powers of the Circuit Court.

In the existing statutory appeal to the High Court, the complainant is shielded by the high threshold that is applied to the statutory appeal and by the fact that the Financial Services Ombudsman can be a party to the complaint and thus take the role of defending its own decision. Neither of these factors operates in a Circuit Court de novoappeal so the real effect is not only that the provider is in a stronger position on a case-by-case basis but also that the existence of the threat of an appeal by the provider operates as a deterrent to consumers generally. In addition, in a High Court appeal, the ombudsman can defend his decision as a party to the statutory appeal. This has the effect of protecting the consumer from the costs or threat of costs of a High Court appeal made by the provider. Furthermore a re-hearing could allow for a situation where people use the ombudsman as the first step in litigation before inevitably going before the courts and taking their case again to the courts if unsuccessful. This could result in a floodgate scenario for the office, which would have implications for staffing and the effectiveness of the office to process and determine complaints. Time limits for appeals should be within such limits as the relevant court determines. This issue seems to be one that could be teased out in much more detail on Committee Stage.

We do not oppose this Bill because we recognise the need to extend the time limits and make other improvements to the existing legislation. We look forward to debating these issues and any differences that may arise at pre-legislative scrutiny stage or during the passage of the legislation through the Oireachtas. I therefore commend this decision to the House.

See this speech in context