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ombudsman news

issue 59

January/February 2007

ombudsman focus on
the ins, outs and aims of FIN-NET

FIN-NET is the Europe-wide network of financial ombudsmen and consumer-complaints organisations - covering the 30 countries in the European Economic Area (or EEA - that's the European Union plus the European Free Trade Area). Its job is to help synchronise communications when a consumer living in one EEA country has a complaint against a financial services business based in a different EEA country.

The Financial Ombudsman Service was a founder member of FIN-NET and principal ombudsman, David Thomas, has been involved with FIN-NET from the start. He tells ombudsman focus all about it.

how did FIN-NET come into existence-

One of the principal tasks of the European Union is to develop the internal market - the cross-border trade between different member states. And it was back in about 1997 that the European Commission began to take an interest in ombudsman schemes.

Of course, that was before the Financial Ombudsman Service had come into existence here in the UK. At that time the different areas of financial services had their own, separate, complaints-handling schemes. I was the banking ombudsman then, and I began being invited to meetings in Brussels. These meetings became more frequent and the remit gradually grew wider as representatives from the insurance and investment complaints-handling organisations started to join us.

The aim of the meetings was partly so that we could learn more about what was going on in Europe. But it was also to help the European officials find out more about how financial services complaints were dealt with in the different countries. We were also looking at how consumers could be given greater confidence to buy financial services cross-border. Clearly, if you buy anything from a different country you want to know what you can do should something go wrong.

Out of that arose the notion of FIN-NET - a network of the various financial ombudsmen and consumer-complaints organisations in Europe. Any scheme or body within Europe that deals with financial dispute-resolution can become a member of FIN-NET, provided it meets certain standards. Members agree to co-operate to assist consumers who have cross-border complaints.

what were the guiding principles agreed for FIN-NET-

The first issue was to decide which ombudsman scheme a consumer should go to, if they're based in one country and have a dispute with a financial services business based elsewhere.

We concluded that it should be the ombudsman scheme in the country where the financial services business was based. This was because - although here in the UK we are used to an ombudsman scheme that's set up by law and has legal powers - that isn't usually the case elsewhere. Many of the member states have voluntary ombudsman schemes with the power only to make a recommendation.

So we recognised that financial services businesses would be more likely to follow a recommendation from 'their' ombudsman, rather than from an ombudsman in another country.

That left the question of how the consumer would be able to identify which ombudsman they should contact. It was agreed that the ombudsman in the consumer's country would fill a 'signposting' role. So if you took your dispute to an ombudsman in your own country - but the dispute involved a financial services business based elsewhere in Europe - you'd be directed to the correct 'home' for dealing with the matter.

were there other practical problems with cross-border complaints-

Yes - and the next task for FIN-NET was to deal with those problems. It was agreed that the various European consumer-complaints organisations would co-operate with each other and exchange any necessary practical information.

So, for example, an ombudsman who was dealing with a complaint from a consumer living in another country - and who needed to know something about the law in the consumer's country - could contact the relevant FIN-NET member for that information. All members signed up to a 'memorandum of understanding' - agreeing both to perform the signposting role and to provide practical co-operation.

do members have to work to the same standards-

Not necessarily. Each member of FIN-NET remains autonomous. But ombudsmen wishing to join FIN-NET have to satisfy the European Commission that they comply with certain minimum standards - or 'principles'. These principles (independence, transparency etc) are laid down in a recommendation from the Commission. And the Commission relies on the relevant home-state government to know what to check.

So when the Financial Ombudsman Service joined FIN-NET, the Department of Trade & Industry (which is responsible for consumer affairs in the UK) was required to confirm to the European Commission that we complied with the necessary criteria.

Members of FIN-NET agree on how to deal with the cross-border referral of complaints, and about co-operation and information-sharing. But once they've actually received a complaint, they deal with it according to their own country-specific rules - whatever they are.

So issues such as whether the decision is binding, the financial limit for awarding redress - all these things will depend on which country's ombudsman scheme is dealing with the dispute.

what do you think is the main difference between the UK's Financial Ombudsman Service and other European financial ombudsman schemes-

The UK was the first country to have a single ombudsman scheme covering all financial services. Ireland and the Netherlands have since followed suit. But the arrangements for financial out-of-court redress vary from country to country - and there are some significant gaps as well.

Most other member states still have separate ombudsmen schemes for the various different areas of financial services. It can get quite complicated! In Belgium, for example, there are two banking ombudsmen, because they have a post-office bank as well as ordinary banks. But the most complicated is Germany, where they have four different types of banks with redress schemes at federal and regional levels. Altogether, they have 14 different banking ombudsman schemes. Although complaint-handling is generally quite well-developed for banking - it's often less so for insurance and investment. So it's in those sectors that there are still quite a lot of gaps.

There is a website,, where consumers can get more information about the financial ombudsman schemes in the different countries.

what happens when a country in Europe has no ombudsman or similar scheme-

In some places the complaints-handling is done by the relevant regulatory authority. For example, banking complaints in Spain are dealt with by the banking regulator, the Bank of Spain. In Scandinavia they tend to have 'consumer-complaints boards' that deal with all types of consumer complaint, not just financial ones. The consumer-complaints board is usually a panel consisting of one industry person, one consumer person and an independent chairman. It's very different from an ombudsman scheme and clearly creates its own organisational challenges.

FIN-NET has been particularly involved in working with consumer-complaints organisations based in the countries that are new members of the EU. Some of these countries had ombudsman-type schemes and some didn't. And those that did usually had to alter their schemes in some way to comply with the Commission's criteria.

FIN-NET members are keen to share knowledge and experience with new members. For example, I've worked particularly closely with complaints-handling counterparts in Cyprus, Slovenia and Lithuania. And we are currently looking forward to meeting officials from Turkey, who are very interested in learning more about the UK's ombudsman service.

how do FIN-NET members work together on a practical level-

As well as co-operating in individual cases, we meet up every six months - usually in Brussels. In 2005, the international FIN-NET conference was here in London, and it's being held here again this autumn.

We've recently set up a steering committee to look at how FIN-NET can become more effective in the future. We have decided to work on enhancing its 'visibility'. There's no point in FIN-NET's existence unless people know about it and can easily get access to it. So that was the first thing. The second issue we've been looking at is the comprehensiveness of the network - because of all of those gaps I've mentioned in what different member schemes do and don't cover by way of complaints.

Here at the Financial Ombudsman Service we work closely with the UK's financial regulator, the Financial Services Authority. But in some countries, the relationship between the regulator and the ombudsman scheme may be very distant. There are some countries where the regulator doesn't even seem to be aware of the dispute-resolution arrangements in place.

FIN-NET is sending a questionnaire to all the member states, asking for details of their ombudsman (or similar) arrangements. This is partly to gather information and partly to engage the relevant regulators' attention. Following this, FIN-NET will be trying to put some pressure on those countries where there are gaps, and encouraging officials in those countries to fill them - so that the FIN-NET network can become more effective.

and what about the future vision for FIN-NET-

Once FIN-NET is a more visible and complete organisation, we would like to become more influential as a kind of 'sounding board' for the European Commission, especially in the early stages of framing EU legislation. In the light of our experience, we can help foresee the sorts of problems that are likely to arise between consumers and the financial services industry. We can explain possible difficulties that the Commission might not necessarily otherwise hear about.

The real strength of FIN-NET is its potential as a learning and support network - in promoting cross-border co-operation and communication in the approach to dispute-resolution. FIN-NET does not, itself, resolve any complaints. It helps consumers across Europe - from Finland in the north to Malta in the south, and from Ireland in the west to Poland in the east - get to the right scheme to resolve their financial dispute. But then it's down to each individual scheme or ombudsman to resolve the complaint in its own way.

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ombudsman news issue 59 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.