the independent assessor's annual report for 2009/2010
by Michael Barnes CBE to the board of the Financial Ombudsman Service
The independent assessor’s role is to carry out a final review of the level of service provided by the Financial Ombudsman Service, in cases where a user of our service has already referred a complaint to our service-review team for investigation but remains dissatisfied.
Under his terms of reference, the independent assessor can consider complaints about our level of service, our procedures and the behaviour of our staff. His remit does not cover disagreements about the actual merits of decisions. The independent assessor is authorised to make findings and recommendations for redress in cases where he believes it is justified.
During the year ended 31 March 2010 a total of 262 cases were referred to me, compared with 265 in the previous year. The number of complaints referred to me that required a full investigation and review of the file was 165 (a decrease of 20 cases on the previous year), of which I upheld 67 either wholly or in part. In all but seven of the complaints I upheld, I made recommendations for financial compensation.
Of the cases which did not require investigation, 45 were referred to me too early in the process (that is, before the service-review team at the Financial Ombudsman Service had been given the opportunity first to deal with the complaint); 25 were general enquiries; 17 were outside my jurisdiction because they were “out of time” or unrelated to the ombudsman service; and two cases were withdrawn by the person making the complaint.
The amounts of compensation that I recommended during the year ranged from £50 to £1,500. 24 awards I made fell between £50 and £250, 29 between £250 and £500, and six between £500 and £1,000. The award for £1,500 was the only one I made in excess of £1,000. In around 40% of the complaints I upheld, the service-review team at the ombudsman service had already offered apologies and/or some compensation – but not always enough, in my view, to provide sufficient redress.
I made the £1,500 award in an unusual case where the ombudsman, in upholding a complaint in favour of the consumer, had given the business two different options for providing redress. The complaint related to a “market value reduction” (MVR) which had led to an amount being deducted from the consumer’s “with-profits” bond. The ombudsman had agreed with the consumer that this MVR had not been properly explained by the business that advised him on the bond.
One option for redress involved a formula set down by the ombudsman to calculate the loss. The other option, more simply, was the refund of the MVR that had been deducted – with interest added. In previous annual reports I have criticised the use of complex formulae by ombudsmen – and have said that ombudsmen should instead calculate the actual amount of money payable, wherever that is possible. So I understand why the ombudsman in this case may have wanted to clarify the formula with a second method of paying redress.
Unfortunately, however, the business delayed paying redress to the consumer using either option. And when the consumer asked the ombudsman service to work out for him the exact amount of redress payable under the formula – so he could enforce it in court – this figure came out at considerably more than the simpler method of just returning the amount of the MVR, with interest added.
The business then paid the lower amount of redress – which the consumer felt was unfair. I recommended that the consumer should be compensated for the confusion and disappointment this had caused – and the ombudsman service agreed.
People who refer complaints to me sometimes ask me why there is no right of appeal against an ombudsman’s decision. I have to explain that it is the nature of ombudsman schemes that this is so. Ombudsmen arrive at a view of the issues on which any particular complaint turns – and they then determine it accordingly. The process they are following is not a strictly legal one.
Ombudsmen provide a form of dispute resolution which is an alternative to the courts, and which leaves open the possibility of legal action, if the person with the complaint rejects the ombudsman’s decision. To build in a right of appeal against an ombudsman’s decision would risk blurring the important distinction between ombudsmen and the courts – and could make the ombudsman service’s procedures seem altogether too “court like”.
There is, however, one very special set of circumstances where it may be possible for someone bringing a complaint to have their case looked at again by the ombudsman. This is where material new evidence comes to light, which is compelling in nature and which was genuinely not available during the original investigation. In these very rare cases, this can provide the basis for a fresh complaint to be made about the matter in dispute.
These criteria are hard to meet, because it is not enough simply for the new evidence not to have been put forward at the time of the original complaint. The new evidence has to have been unavailable – or not been known to have existed – when the ombudsman originally considered the complaint.
In a case I dealt with during the year, the consumer had found a document in a file he had managed to obtain from the financial business under the Data Protection Act. The document had not been known about earlier – and cast a new light on the consumer’s long-running complaint. The ombudsman accepted that the criteria had been met for the case to be re-opened.
The ombudsman subsequently decided that the newly-discovered paper would not have made a difference to the outcome of the original decision. Nevertheless, I still felt that the ombudsman could have done more to press the business on why the document had been missing from the file provided in the first place. I recommended that the consumer be paid £500 for the distress and inconvenience caused.
Several cases I handled during the year highlighted the importance of adjudicators at the ombudsman service keeping the parties to a complaint fully informed as to the course an investigation is taking. One case involved advice given in the 1990s by an independent financial adviser to transfer preserved benefits in a final salary scheme into a personal pension plan. The adviser had already retired when his client complained to the ombudsman service about the advice.
The adjudicator at the ombudsman service initially issued an assessment in 2006, upholding the consumer’s complaint. Following representations from the retired adviser, the adjudicator subsequently issued a further assessment in 2007, rejecting the complaint. The adviser then heard nothing further until the following year, when he received an ombudsman’s provisional decision, holding out the prospect that he might have a binding award of £100,000 made against him.
This came as a real shock to the former adviser, particularly as he was ill at the time. I agreed that there had been a clear failure to keep the former adviser informed of further developments relating to the complaint between 2007 and 2008. Although the consumer’s complaint against the adviser was eventually not upheld, I recommended that the ombudsman service should pay £750 compensation to the former adviser.
In another case, a firm of solicitors complained to me, on behalf of a client, that they had not been told about the further efforts that the adjudicator in their case was making, to mediate a settlement with the bank, while the complaint – about a charge on property that the bank was unwilling to release – was awaiting an ombudsman’s final decision. When the firm of solicitors heard about the adjudicator’s informal proposals, they were unhappy, because they regarded the point at issue as a matter of contract law, on which they had expected an ombudsman’s final decision.
I took the view that the ombudsman service was entitled to continue to seek a mediated resolution of the complaint, while the case was waiting for an ombudsman’s final decision. However, I felt that this should not have been done without keeping the firm of solicitors informed about what was being proposed. I therefore recommended that the ombudsman service should pay £400 compensation for the inconvenience caused by what had happened.
As in previous years, in the cases referred to me as independent assessor, delay continues to be the main reason for complaint. However, paradoxically this year I received several complaints that the ombudsman service had proceeded too precipitately.
In one such case, the adjudicator issued his initial view only three days after writing to the consumer to introduce himself – and to give her the opportunity to provide any further views or comments. When the consumer wrote back with some further points, she was told that her case had already been passed to an ombudsman for a final decision. At this point, the consumer contacted the service-review team at the ombudsman service. They gave her a further deadline for making final representations for the ombudsman to consider, and the consumer responded just in time.
However, the ombudsman had already issued his decision slightly ahead of the deadline – and before he had the opportunity to see the consumer’s letter. The ombudsman confirmed that the consumer’s final comments would not have altered his decision. However, responses that seem too hasty can give the impression that comments and representations may not have been fully taken into account. In this case, I therefore recommended that the consumer be paid £250 compensation for any inconvenience caused.
Banking services of one kind or another continued to be the category of financial services most frequently involved in the complaints referred to me about the Financial Ombudsman Service.
I received 20 complaints from businesses (24 in the previous year) – mainly from independent financial advisers and brokers, and often about case fees charged when the complaint was judged to be without merit or outside the jurisdiction of the ombudsman service. If this is not immediately apparent when the ombudsman service first receives the complaint, the case has to be passed for assessment – which means a case fee is charged. This is something that smaller businesses sometimes find hard to accept.
This is my last annual report, as I am about to retire from the position of independent assessor. I have acted in this capacity for eight years. These years have passed very quickly and have given me a fascinating insight into the workings of the Financial Ombudsman Service. I have come to have a high regard for the organisation and its staff, particularly those in the service-review team and the board secretariat, with whom I have worked most closely.
I am grateful to those consumers and businesses who have taken the trouble to thank me for my investigations on their behalf. To those who have asked me to whom they should complain about me, I have had to explain that they have reached the end of the line, with no provision for complaints to be taken any further – something I know some have found hard to accept.
Finally, I would like to thank the chairman and the board of the Financial Ombudsman Service for giving me the unique opportunity to act as their independent assessor – and for the support they have given me as I have carried out my work in this role.
Michael Barnes CBE
The independent assessor, Michael Barnes, presented this report to the board of the Financial Ombudsman Service, having discussed his views and findings in detail at an earlier meeting of the board’s sub-committee on quality. The board accepted the report and its recommendations in full and undertook to use the independent assessor’s findings to help improve service quality.