Peter Fitzpatrick (Louth, Independent) | Oireachtas source

I welcome the opportunity to speak on Second Stage of the Financial Services and Pensions Ombudsman (Amendment) Bill 2023 and will support its progress today. The Bill states that the FSPO has the statutory power to investigate complaints against a financial services provider that was regulated at the time of the conduct complained of, even if the provider lost its regulated status before the complaint was made to the FSPO. The amendments also give the FSPO the power to decide whether to hold any oral hearings required during an investigation in public or in private. Another section of the Bill is aimed at ensuring that all mediation conducted by the FSPO is carried out in private. These targeted amendments will better equip the FSPO to withstand any potential challenge to its operations, and will provide improved legal clarity to reinforce the statutory basis of the FSPO. This is a key element of the consumer protection framework in Ireland. The proposed changes will safeguard consumer protections and access to the FSPO for customers of financial services providers who have left the Irish market.

The Financial Services and Pensions Ombudsman, Mr. Liam Sloyan, has reported that his office received 4,781 complaints in 2022. Despite the planned exits of Ulster Bank and KBC Bank Ireland, the office received fewer than 100 complaints identified as relating to market exit last year. Mr. Sloyan has expressed concern that the highest increase of complaints related to customer service at banks and other financial services firms, rising from 23% in 2021 to 28% in 2022. Customer service issues can include a provider’s failure to provide information, complaint handling issues, and accessibility and communication issues. Many of the consumers making complaints to the FSPO could have had their complaints addressed by their provider at an earlier point in time. This is especially the case with the rise in online payment firms.

The pre-existing decline in the use of cash was accelerated during the pandemic, which unfortunately resulted in the exclusion of people, especially older people, from functioning in society. Alongside this, the sharp rise of online payment firms and digital-only banks has brought consumers increased choice, like speedy technology and lower costs. Their advance has been accompanied by growing complaints, as users are hit by everyday mishaps and by financial fraudsters. Garda figures show a 560% jump in the number of bank accounts being taken over by fraudsters since the pandemic, with phishing frauds up 417% in the past three years. The fraudsters try to lure them into providing sensitive data such as banking and credit card details, and passwords. The number of fraudsters targeting older people means that such activity is rife. From eFlow toll scams to customs charges, everyone has got text messages to click on links and enter bank details. Often, people do not know better and their bank accounts are cleaned out by the criminals. These problems are exacerbated by patchy customer services and incomplete consumer protections covering companies licensed as so-called e-money providers, as opposed to banks.

On one of finance’s newest frontiers, fintech companies offer online-only services in everything from payments, currency conversion, lending, investment and crypto. Oftentimes, these payment firms sit outside Ireland’s financial services compensation scheme, so if they collapse, customers are not automatically rescued. For example, when a friend of mine first joined Revolut, their account details had a Lithuanian IBAN. However, once Revolut turned into a fully-fledged licensed bank, as it did in January 2023, it migrated accounts, replacing the Lithuanian IBAN with a brand new Irish IBAN. The benefit of this was that any complaints, after going through the internal process, could be taken to the FSPO in Ireland, rather than the Bank of Lithuania, in respect of services provided by the Irish branch.

The same person’s account was frozen and access to her balance was denied. She does not know if she breached any anti-money-laundering rules, under which banks can suspend accounts without giving reasons, and after many fruitless sessions with the Revolut messaging service, she still does not know why the online group froze her account.

Revolut communicates with its customers exclusively over a messenger function in its app, where customers are often passed around by operators who cannot give them answers about their missing or frozen moneys. This specific account was eventually unfrozen. However, if she was unhappy, she could have made a complaint to the Financial Services and Pensions Ombudsman. This shows that the problems that emerge in the early stages of a digital company’s life do not necessarily fade as the business grows, even when they turn into fully-fledged licensed banks. Hence the requirement of this new Bill and the powers of the ombudsman.

E-money firms’ clients can also fare worse if they are duped into sending money to scammers, a fast-growing crime known as authorised push payment fraud. Revolut in February warned customers to be alert to phishing scams after a surge in attacks and the Irish ombudsman is reportedly dealing with a jump in complaints. We need to do more to protect people from the possibility of financial harm from fraud and, hopefully, the implementation of the Bill will work towards that.

The Financial Services and Pensions Ombudsman also said that a quarter of complaints, or 24%, related to insurance – mostly claims handling, customer service and rejections of claims. Yet, while insurance complaints decreased 10% year-on-year, there was a 25% uptick in the number of pension complaints. Some 139 new tracker mortgage interest rate complaints were received in 2022, with the Financial Services and Pensions Ombudsman having over 1,000 tracker complaints on hand at the end of 2022.

The Financial Services and Pensions Ombudsman, Mr. Sloyan, acknowledges that the ombudsman has been receiving complaints relating to tracker mortgage interest rates since 2008. While the number of new tracker-related complaints is on a downward trajectory, it is notable that 139 new complaints of this nature were made to the Financial Services and Pensions Ombudsman in 2022. Just a few years ago, a bank was fined €21 million for harming over 2,000 tracker mortgage customers and breaching 42 Central Bank regulations, ranging from significant overcharging to the loss of 12 family homes. Even after the Central Bank tracker mortgage examination, there are still customers out there who are victims of the tracker mortgage scandals. Banks and insurance companies often drag their heels and fight cases instead of being proactive, identifying these customers and providing redress for the harm caused. This is where the Bill can make a difference.

The combined value of compensation directed in legally binding decisions, following either the Financial Services and Pensions Ombudsman’s dispute resolution service or its formal investigation process, was €616,686. In cases where early-stage mediation does not work, the case may be transferred to a formal investigation. The ombudsman can direct a provider to rectify the conduct that is the subject of the complaint and there is no limit to the value of the rectification that can be directed. The administration of justice is normally preserved for the courts system but the Supreme Court found in the Zalewski case that the administration of justice, as carried out by the WRC adjudication service, was permissible as the administration of justice was limited, leading to legislation that allowed the WRC to continue to exercise its functions.

Where the ombudsman determines that it is appropriate or desirable for a complaint investigation to include an oral hearing, the ombudsman shall decide whether to conduct any such oral hearing in public or in private, having consulted the parties and having considered the nature or circumstances of the complaint and whether it is in the interests of justice to do so. The proposed amendments, if accepted, would enable the Financial Services and Pensions Ombudsman to continue to carry out its statutory functions in line with the Constitution. With that in mind, this is an important Bill that, once enacted, will provide enhanced legal clarity for the statutory operation of the Financial Services and Pensions Ombudsman. It will also clarify that customers of financial service providers that have left the Irish market will continue to be able to access the existing services and consumer protections afforded by the Financial Services and Pensions Ombudsman.

With a history of financial scandals and the move to more digitalised banking and financial models, it is clear that the risk of fraud has also increased. These targeted amendments will better equip the Financial Services and Pensions Ombudsman to withstand any potential challenge to its operations, and the improved legal clarity will reinforce the statutory basis of the Financial Services and Pensions Ombudsman, a key element of the consumer protection framework in Ireland, safeguarding critical protections for consumers and small businesses going forward. For these reasons, I will back this Bill on Second Stage.

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