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annual review 1 April 2005 to 31 March 2006 - other work we have done

In addition to resolving individual disputes between consumers and firms, our work includes a range of other activities. This includes working with external stakeholders who have an interest in our service - and working internally on the management of operational, policy and legal issues.

This chapter highlights just some of the past year’s activities. Our three-year corporate plan, published in January 2006 and available in the publications section of our website, gives a comprehensive view of our work.

our jurisdiction and powers

As noted in last year’s annual review, National Savings & Investments (NS&I) joined our voluntary jurisdiction on 1 September 2005 - replacing the former Adjudicator for National Savings & Investments.

In November 2005, HM Treasury announced the outcome of its review of the regulation of investment trust companies. It decided that the activities of these companies themselves would not be regulated by the Financial Services Authority (FSA) nor made subject to our jurisdiction. However, regulation by the FSA continues to cover advice on buying shares in investment trust companies and the management of unit trusts and ISAs that hold their shares. Our jurisdiction therefore also covers these areas.

The Consumer Credit Bill was reintroduced following the general election. We worked closely with the Department of Trade and Industry (DTI) and the Office of Fair Trading (OFT) during the Bill's passage through Parliament, and it passed into law on 30 March 2006.

We already cover many consumer credit activities, if they are carried out by any of the 26,000 FSA-regulated firms in our compulsory jurisdiction, such as banks and building societies. When the relevant provisions of the Consumer Credit Act 2006 come into force in April 2007, our new consumer credit jurisdiction will cover up to 100,000 firms in total that have consumer credit licences issued by the OFT. We continue to work closely with DTI and OFT in planning the implementation of this new jurisdiction.

We also worked closely with the FSA on other forthcoming extensions to our jurisdiction, arising from the government’s planned extension of FSA-regulation to home-reversion plans, Islamic mortgages and self-invested personal pensions (SIPPs). And we reviewed with the FSA the implications for the ombudsman service of the implementation of the EU Markets in Financial Instruments Directive (MiFID). We believe that our jurisdiction and powers are likely to remain largely unchanged as a result of MiFID, despite changes in the regulatory underpinning.

During the year the FSA consulted publicly on the £100,000 upper limit on binding awards that the ombudsman can make under the compulsory jurisdiction.

The FSA sets the rules for this jurisdiction. At the same time we consulted on the same upper limit on awards that applies under the rules for the voluntary jurisdiction, for which we are responsible. This limit was first set as long ago as 1981 for the Insurance Ombudsman Bureau. Only 3% of the cases we currently handle involve a loss greater than £100,000. However, we are concerned that the limit should not remain fixed indefinitely into the future, resulting in the erosion of our role through inflation.

In June 2006 the FSA confirmed that the limit would remain at its existing level - and that it would review this matter again in 2009.

national and international

There is significant national and international interest in our work, as mentioned in the chief ombudsman's report.

We liaise regularly with HM Treasury, as our sponsoring government department, and we were particularly pleased to receive a visit by the then Economic Secretary to the Treasury, Ivan Lewis MP, in February 2006. Alongside the FSA, we worked with HM Treasury to facilitate the future operation of the basic-advice regime for “stakeholder” products.

Over the year the chief ombudsman took part as an observer-member in a number of meetings of the Retail Financial Services Group. The group was recently established, at the suggestion of the House of Commons Treasury Select Committee, as a forum for key figures from the financial services sector and the consumer world.

We liaised with the Department for Constitutional Affairs (DCA) on the Compensation Bill. We welcomed the prospect of regulation for claims intermediaries as part of this proposed legislation, but were concerned that the definition was so widely-drawn that it covered some of our own activities. DCA sponsored a Parliamentary amendment to make it clear that we, and other statutory bodies, were outside the Bill’s scope.

The European Commission’s action plan on financial services included a review of the future development of FIN-NET's role. FIN-NET is a Commission-sponsored European network of financial out-of-court redress bodies, designed to ease the handling of cross-border disputes in financial services. The Financial Ombudsman Service was a founder member of FIN-NET - and our corporate director was a member of the review group, whose recommendations were fully accepted.

working with the FSA and the FSCS

The role of the Financial Ombudsman Service is to resolve individual disputes, as an alternative to the civil courts. We are not a regulator. However, we are part of the statutory arrangements designed to underpin confidence in financial services. So we work closely with the FSA - the regulator - so far as this is consistent with our independent roles. This involves frequent liaison with the FSA itself and also periodic liaison with the statutory Financial Services Consumer Panel and the Financial Services Practitioner Panel, as well as the FSA’s Smaller Businesses Practitioner Panel.

During the year, our joint work with the FSA has included operating the "wider-implications" process, which has successfully addressed concerns about potential overlaps between the FSA and the ombudsman service. Full details of the wider-implications process have been published on the special website set up for this purpose which also includes case studies detailing issues that have been resolved to date.

We have worked closely with the FSA on a number of issues - ranging from firms’ handling of mortgage endowment complaints to guidance on the application of the Unfair Terms in Consumer Contract Regulations, and from the development of the FSA’s treating customers fairly initiative to the implications of a move towards more principles-based regulation.

Treating customers fairly encourages a firm’s senior management to create systems that support fair treatment of all customers - but it does not impose any new rules. So although treating customers fairly should improve the way that financial firms treat their customers, it does not affect how we decide individual complaints at the ombudsman service.

We recognise that a move to more principle-based regulation is a key part of the FSA’s strategy over the coming years, and we are keen to play our part. Our role in resolving individual cases is one of the key factors that helps the FSA focus on the broader picture of risk-based and principles-based regulation. Together with the FSA we will continue to review the practical implications of principle-based regulation as it develops. We will be assisted by our existing experience of working with industry codes of practice, and of dealing with complaints relating to sectors of the financial services industry where there are no detailed "conduct of business" regulations.

The industry welcomes information about the ombudsman service’s approach, to help firms resolve as many cases as possible themselves. We will look with the FSA at how to reconcile the provision of such information with ensuring our decisions are not misinterpreted as having a quasi-regulatory status. The ombudsman service has no wish to be viewed as a quasi-regulator, whose decisions fill any “gap” left by more principle-based regulation.

We have worked with the FSA and the Financial Services Compensation Scheme (FSCS) to make our respective roles clearer for consumers and for firms. This has involved producing a joint guide, explaining our separate but complementary roles. So far as is consistent with our respective independent roles and with the relevant data protection legislation, we and FSCS have also reviewed our processes, to ease the transition where we pass on pending cases to FSCS, once FSCS has formally stepped in and declared a firm "in default".

in the courts

During the year the courts provided helpful clarification on two issues directly relevant to our decision-making.

First, the High Court confirmed that an ombudsman may decide - in the circumstances of a particular case - that a fair outcome differs from what the outcome might be in court. Though most of our decisions produce the same outcome as a court, this ruling excited some lawyers. But it does no more than confirm that section 228 of the Financial Services and Markets Act 2000 means what it says, when it requires an ombudsman to determine a complaint by reference to what is, in the ombudsman's opinion, fair and reasonable in all the circumstances of the case.

Second, in a case where the ombudsman had awarded a consumer the maximum £100,000 - with the recommendation that the firm pay a higher figure - the High Court rejected a challenge by the firm to our statement that “if [the firm] does not pay the recommended balance and [the complainant] decides to sue for the balance in court, the court would make its own decision on whether or not to award anything”.

smaller firms’ taskforce

Half of the complaints referred to us during the year related to just 12 of the largest financial services groups. In contrast, less than 10% of our work comes from the 99% of firms that each send us fewer than 25 complaints annually. We have set up an internal taskforce to look at how we handle complaints about firms that have only very few complaints with us. We have already improved the guidance we give to these firms at the initial stages of our process. But we want to look at additional ways of improving the information we give these firms - and at increasing the efficiency with which we handle their cases.


During the year we brought together our various quality-improvement activities at the ombudsman service into a new "quality, information and knowledge" department. This department co-ordinates initiatives and activities across the whole organisation - to help identify, implement and measure improvements to our service. These improvements can be initiated in a number of ways, including:

  • input from consumers or firms;
  • our market research activities;
  • analysis of the results of our own extensive quality-assurance system;
  • complaints about our own service; and
  • suggestions from staff themselves.

We have in place a project-management system for implementing major changes. A small team of project managers leads these changes, as well as supporting colleagues from all areas of the service in implementing numerous smaller-scale changes as part of our programme of continuous development.

We plan to compare our performance with other organisations - starting with benchmarking our customer satisfaction survey results with members of the Consumer Action Network. We aim to extend these benchmarking activities over the year.

Our knowledge management systems continue to help both new and experienced casework staff - with over 85% of regulated products and services now covered by “KIT”, our in-house knowledge-management toolkit. During the year we have significantly extended our research and library service, so that staff have easy access to external information they might need. In addition to the regular "clinics" held by ombudsmen for adjudicators, we also run a series of regular briefings on topical subjects.

We know that, like most organisations, we can and do get things wrong. We believe that an important test by which we should be judged is the way in which we recognise, deal with and learn from any shortcomings. This is why - just like the firms whose complaints we decide - we have a formal complaints procedure, to deal with any dissatisfaction with the level of service we have provided.

A specialist team of complaints handlers - our service review team - works as part of our quality, information and knowledge department and handles all complaints about the level of our service that we cannot easily sort out straight away. Where our service review team cannot resolve a complaint, it can be referred to our own “watchdog” - the independent assessor. The independent assessor provides our board with an annual report, which is published in full each year as part of this annual review.

Our quality system involves measuring our performance and fuelling improvement - to equip our staff to understand and meet the needs of our stakeholders. At a wider level, it is also about engaging externally in the development of complaints-handling standards - within the financial services industry and in other sectors, both nationally and internationally.

communication and information-sharing

Our work gives us a unique insight into how complaints arise and how they might be prevented from arising in the first place. There are valuable lessons from this for both the financial services industry and for consumers - and we carry out a wide range of activities to share our experience and knowledge with the outside world. Over the year these external liaison and outreach activities have included:

  • taking part in industry conferences, seminars and events - including roadshows and regional conferences run by the Association of IFAs, the Association of Mortgage Intermediaries, the Chartered Insurance Institute, the Institute of Financial Planning, Financial Adviser, Money Marketing and the Personal Finance Society;
  • meeting and training consumer advisers - from Age Concern Scotland to Havering Consumer Support Network, from the Cambridge Parliament for people with learning difficulties to Truro Money Matters;
  • running our technical advice desk - a dedicated service for people handling complaints in the financial services sector and the consumer advice world;
  • publishing our regular newsletter, ombudsman news, and distributing over a million copies of our consumer leaflet and other publications; and
  • answering queries and providing information for publications and programmes ranging from the Financial Times to Take a Break, Cumbria News & Star to Health Insurance magazine, Tonight with Trevor McDonald to Kismat Radio 1035AM.

our work with stakeholders and customers

year ended 31 March 2006


We ran 7 flagship workingtogether conferences; 2 workingtogether special-interest forums; and 11 workingtogether regional training-days for consumer advisers - from Truro to Belfast, Glasgow to Cardiff.

tradeshows and consumer events

We took our exhibition stand to 80 roadshows, trade fairs and consumer events including:

  • Mortgage Business Expo at Olympia
  • BBC Good Homes show at the NEC
  • Trades Union Congress in Brighton
  • Business SouthWest show in Exeter
  • Citizens Advice Scotland annual conference
  • NewStart Northern Ireland in Belfast.

speeches and presentations

We spoke at 112 seminars, conferences etc.

meetings and visits with consumer advisers

We took part in 89 meetings with national and regional consumer advice organisations, including trading standards departments and citizens advice bureaux.

visits and training for firms

We took part in 214 meetings with financial services firms - from friendly societies to private client banks.

industry meetings and seminars

We took part in 189 meetings for groups of financial services practitioners - including our industry liaison forums (attended by trade bodies and industry representatives).

media enquiries

We handled 3,500 enquiries from newspapers, magazines and TV/radio stations - and took part in programmes ranging from BBC Watchdog to Farming Today.


We responded to 420 letters from MPs and 176 ministerial enquiries - and provided replies to 21 Parliamentary Questions.

website visits

Over 125,000 people a month logged on to


our technical advice desk(general guidance and advice on ombudsman practice and procedures - for complaints-handlers and consumer advisers)

Our technical advice desk handled 20,595 enquiries, comprising:

  • 18,316 calls from financial services practitioners
  • 1,749 enquiries from consumer advisers
  • 530 calls from trade associations, researchers, official bodies etc.