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accessibility, transparency and complaints handling

speech by David Thomas, corporate director and principal ombudsman, at the complaints seminar held by the British Bankers' Association (BBA)

London, 21 April 2009

Accessibility and transparency are issues that the Financial Ombudsman Service has taken seriously since it was first established. That is why the chief ombudsman proposed, and our board agreed, that we should voluntarily subject ourselves to an independent external review every three years and should publish the results.

The first external review was commissioned in 2004. Our board asked a team from the Personal Finance Research Centre at Bristol University to look at our casehandling procedures and systems, and to examine our performance in relation to quality, consistency, process and value. The report - "Fair and reasonable: an assessment of the Financial Ombudsman Service" - concluded that the ombudsman service was:

a thoughtful, well-managed organisation that is doing a good job under difficult circumstances.

The second review was commissioned in 2007. Our board asked Lord Hunt of Wirral to focus on the accessibility and transparency of our service. As part of his review, he held meetings with a wide range of our customers and people who had an interest in our service, including industry stakeholders.

Lord Hunt

Lord Hunt's report - "Opening Up, Reaching Out and Aiming High" - contained a wide range of far-reaching recommendations that have helped to set a direction of travel for a journey that will take several years to complete.

Our board, all of whose members are non-executives appointed in the public interest, carefully considered these recommendations. Most of them were accepted. Some of the objectives were to be delivered by different means. A few of the recommendations were not accepted.

The board decided not to change the name of the Financial Ombudsman Service. Research shows that it has a comparatively high level of consumer awareness. The board did not accept the recommendation that we should publicly name each year the worst firm in each industry sector. And the board decided not to ask the FSA's practitioner panels to take over the work of our industry liaison groups.

In July 2008 we published policy statements, setting out our strategies on accessibility and transparency. And we established an industry/consumer discussion group to act as a sounding board as we work through the ambitious programmes that these policy statements laid out. At their suggestion, we have published a progress log [updated action-list opens in PDF format], which shows where we are up to in the key tasks.

growing awareness ...

An important aspect of accessibility is that consumers should be aware that we exist and know what we do. There are no current plans to adopt Lord Hunt's suggestion that we consider advertising on daytime television. Instead, we have continued to implement targeted programmes to reach particular groups of consumers, identified from ongoing market research. And we have continued to help consumer groups and advice agencies let consumers know when we can, and when we cannot, deal with their concerns.

... and removing barriers

Once consumers are aware of our service, and if they need to use it, we must ensure they can access it without difficulty. We have taken great pains to make our website user-friendly and welcoming. For example, information for consumers is available as normal text, easy-read, speech, video, mp3, sign language in video and more than 20 languages.

We offer 020, 0300 and 0845 phone numbers - so that everyone can phone us at minimal cost. And, where the cost of a call is a barrier to access, we are happy to phone people back. The opening hours of our consumer enquiry line have been extended, from 8am to 6pm so far - and we have provided a facility to register complaints outside those hours.

We are trialling a process of specialist advisers for vulnerable consumers. Conscious of the need to maintain our impartiality, this involves guiding them through our process but not advising them on what they should complain about or what they should say.

Where consumers come to us before raising their complaint with the relevant financial business, we have always smoothed the path for both sides, by noting the headlines of the complaint and referring it to the financial business - while letting the consumer know they can come back to us if the financial business does not resolve the complaint.

As suggested by Lord Hunt, we have researched whether those who do not come back to us are all satisfied with the response from the financial business. The answer is that unfortunately many remain dissatisfied. Of these, the reasons they do not come back are seldom ones we can do much about. The research shows that a typical reason is that they had more pressing matters to attend to.

industry liaison

Just as we need to be accessible to our consumer "customers", we need to be accessible to our industry "customers" as well. I have already mentioned our three long-established liaison groups - for banking, insurance and investment. And you will be aware of the significant work that our Smaller Businesses Task Force has carried out, to make things simpler for businesses that seldom have to deal with us and are therefore unfamiliar with us and our processes.

Additionally, we have an industry funding forum as well as the accessibility/transparency discussion group that I mentioned earlier. And we sponsored the creation of a working-party to look at the possibility of contextualising complaint data. So the liaison arrangements are extensive, but a little complex. We are currently in discussion with the chairs of the existing liaison groups to see what improvements can be made, including in relation to cross-sector strategic issues.

transparency - and sharing knowledge

In the interests of increasing transparency, we now publish a summary of our board meetings. And we are working on what Lord Hunt called FOSBOOK - which we prefer to call our online digest. This will grow organically over the next few years. We have identified five leading universities with a particular interest in our work, and we are in discussion with them about the publication of selected ombudsman decisions and fostering increasing academic analysis of our approach.

It will also not have escaped your attention that we have announced we will start publishing business-specific complaint data in the autumn. Many of you may not like it - but our board was unanimous. Each six months, we will publish data for all financial businesses that had at least 30 new cases and 30 closed cases during the period - a threshold adopted to screen out data that would not be statistically meaningful.

The data will show, for each regulated financial business, the number of new cases and the percentage of closed cases where there was a change in outcome in favour of the consumer. We will provide totals, and break these down according to the five product groups that the Financial Services Authority is adopting for its complaints return. We will also provide comparative percentages for all our cases, as a yardstick.

We agreed not to publish the first set of data until after 1 September 2009 - about a year on from when we first announced our intentions - in order to give the contextualisation working-party more time to see if the industry and consumer sides can agree how a wider context might be put around the figures. We can see the advantages of this in principle, but we are aware of the difficulties in achieving this in practice.

We have strengthened our resources to deal with all of this and more. In particular, our new director of business-planning and assurance has recently joined us from Goldman Sachs. His area of responsibility includes our already-enlarged quality-assurance team. And our new lead ombudsman (head of practice) has recently joined us from Pearl (having previously been with the Financial Services Authority) in order to co-ordinate the work on laying out clearly our approach to different issues.

redress and regulation

We work closely with relevant regulators - so far as that is consistent with the independent roles given to us by Parliament. We are in close touch with the Ministry of Justice, as regulator of claims-management companies, about various practices that cause concern. But the growth of these companies has a lot to do with the reluctance of many financial businesses to right wrongs unless they receive a specific complaint. Claims-management companies are a symptom, not the cause, of a wider problem.

There is now more open communication between the ombudsman service and both the FSA and the OFT on wider-implications cases. See, for example, the exchanges of letters on payment-protection insurance and on risk-based re-pricing of credit cards that have been published on our shared wider-implications webpage.

The arrangements for dealing with wider-implications issues have worked comparatively well where the issue was identified in advance - for example, the FSA's decisive action on collars in tracker-rate mortgages must have headed off many complaints that would otherwise have come through to us.

They have also worked comparatively well where the issue was identified early on - for example, the FSA's guidance following the hikes in mortgage exit administration fees must have headed off many complaints, and helped to resolve those complaints that had already been made.

The arrangements have worked less well where a large number of complaints about alleged harm has occurred over a period of years - for example, mortgage-endowments or payment-protection insurance. In such circumstances, the financial stakes for businesses are high. There is a strong commercial incentive for financial businesses to ignore affected customers who have not complained - and where complaints are received, to strive to limit the compensation bill and spread it over time.

collective redress

It is because of such situations - in other fields as well as financial services - that there are calls for the creation of a collective redress system. The Department of Business, Enterprise and Regulatory Reform has been doing work on this. The Civil Justice Council has made recommendations to the Ministry of Justice. And the European Commission is looking at the issue Europe-wide.

I suggest eight principles by which any system of collective redress in financial services might be judged. It should:

  • lead to a fair and timely resolution;
  • resolve the issue generically for all affected consumers, not just for those who complain;
  • quantify the total liability of the financial businesses involved;
  • not foster the growth of business for claims-management companies;
  • be a transparent process;
  • take reasoned input - from both industry and consumers;
  • incentivise consumers to accept fair redress rather than pursuing individual court claims; and
  • provide an economic driver to deter future behaviour that is detrimental to consumers.

The British Bankers' Association was kind enough to show me an early draft of the proposals that will be made later this morning for an "improved" wider-implications process. I hope it has moved on from the last version I saw. This, it seemed to me, deferred too much to the industry's commercial incentive and satisfied hardly any of the eight tests I have listed.

over to you

I hope the fact that I am here to talk to you (and ready to answer your questions) demonstrates the ombudsman service's accessibility and transparency. But, as you well know, more than 90% of the complaints made to financial businesses do not come on to the ombudsman service.

So I hope you will forgive me if I end by turning the spotlight on you - by asking what the industry itself is doing about accessibility, transparency, fairness, consistency and quality in its own complaints-handling.

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