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Consumer Credit Act 2006 - launch event

Walter Merricks, Chief Ombudsman

London, 25 May 2006

who are we?

Many of you here will already know us well, but some of you might not. So it may be helpful if I first explained who we are, how we got here - and why the creation of the ombudsman service for consumer credit is a good thing for both consumers and firms alike.

It was 25 years ago that the first financial services ombudsman was set up - the Insurance Ombudsman Bureau. Another six followed. And in the year 2000 these merged to form the Financial Ombudsman Service, the biggest ombudsman service in the world.

The coverage of the ombudsman service has continued to grow since then. In the last 18 months, for example, our jurisdiction has extended further to include mortgage and insurance intermediaries. The addition of consumer credit to our portfolio is therefore a natural extension of our existing role.

It has always been our aim to offer a one-stop service for resolving complaints about matters that ordinary consumers would regard broadly as "financial". I don't think most consumers with a complaint about a financial problem are aware, or should have to be aware, of the different regulatory frameworks that apply if they have borrowed money from a bank, as opposed to a credit lender. And for the credit industry, this will end an anomaly for competing firms offering the same products.

Extending our role to cover consumer credit disputes also fits in well with our workload management - as the influx of new consumer credit cases will probably coincide with the expected decline in mortgage endowment cases, currently our largest commitment. The addition of consumer credit to our remit was, of course, overwhelmingly endorsed by both industry and consumers, when DTI consulted on this before the Consumer Credit Bill was published.

key principles

What, then, is the purpose of the ombudsman service? Our role is to resolve disputes between consumers and firms in an informal, fair and reasonable way - while avoiding the need to go to court. And the purpose of this, ultimately, is to improve consumer confidence in the industry. So the industry benefits from a market that has more confidence in it. While consumers benefit from easier redress if things go wrong.

The Financial Services and Markets Act gives us four main principles:

  1. We are independent and impartial.
  2. We are informal.
  3. Our decisions are based on what is fair and reasonable in all the circumstances of the case.
  4. Our decisions are binding on the firm but not the consumer.

In addition to these statutory principles, there are two additional ones that we believe are essential to give us the continuing right to operate:

  1. Expertise in financial services. We cannot do our business without first-class knowledge and experience in this area. This includes expertise in credit products, where we already deal with the consumer credit activities of FSA-authorised firms. In the past few months, we have started a programme of deepening our relationships with the trade associations and firms in the credit sector.
  2. Expertise as an ombudsman. Given our size and economies of scale, we have adapted our processes and services to provide more than just the resolution of individual disputes. These "added value" services include "triage" - immediate pro-active intervention, to sort out problems and complaints as early as possible, a process that leads to our resolving six out of seven initial complaints without our needing to become "officially" involved. We also offer mediation as a further means of finding practical "no blame" solutions to complaints. And we provide a technical advice service to firms and consumer advisers, to help prevent cases coming to us in the first place - a vital part of our general "complaints prevention" work.

We will shortly be consulting stakeholders on how the ombudsman service for consumer credit will work in practice, in line with these principles.


I am delighted that the credit industry and consumers supported the extension of our remit to include consumer credit. We are working hard with them and with DTI and OFT to deliver this from 6 April 2007. This is a natural extension of our existing role. Later today we will be outlining our detailed project plan for doing this - as well as our programme for consultation on the details. We will, of course, very much welcome feedback from both industry and consumers as part of this consultation exercise.

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