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ombudsman news

issue 78

July/August 2009

see-through complaints: transparency and openness at the ombudsman service

David Baker joined the Financial Ombudsman Service in March 2009 as a lead ombudsman and our head of practice - a new role created as part of our commitment to being increasingly open about our approach to casework and the way we arrive at decisions on complaints.

In his new role, David has responsibility for coordinating and documenting information and guidance on issues relating to our casework policy - including the ombudsman's approach to decision-making.

In this ombudsman news feature he tells us about his role, his initial thoughts on the ombudsman service, and the current challenges for his fellow ombudsmen.

how do you see the challenges of openness for the ombudsman service?

I think many of the challenges in being open ultimately come down to what it is we put in the public domain - and why and how we do this. An important reason for wanting to be very clear about the approach we take to deciding complaints is to help the businesses covered by the ombudsman service handle complaints more effectively themselves in the first place.

But let's not forget, every year we issue thousands - literally - of letters to financial businesses, setting out our decisions on individual cases. So this should already be helping larger firms in particular to understand how we approach the issues behind many of the types of complaints we see time and time again from their customers.

And disappointingly, despite receiving repeated explanations from us about our approach - in the context of individual cases - some of the businesses we deal with don't seem to have learned lessons from the complaints we frequently find against them. So being clear and open about our approach, and how we apply this in the circumstances of individual cases, is unlikely on its own to lead to improved levels of complaints handling across the financial services industry - and to fewer complaints being referred on to us - if individual businesses choose not to act on what we are telling them.

On the other hand, we do expect that publishing complaints data about named individual businesses - as we will be doing this autumn - should focus minds across the financial services industry and help improve standards of complaints handling by businesses.

While individual businesses and consumers are given a direct insight into ombudsman 'thinking' in the context of each separate case we decide, others who are not involved in the disputes we resolve - for example, key stakeholders such as trade associations, consumer groups and the media - are less likely to see at first hand how ombudsmen and adjudicators go about deciding cases.

At present, few of our decisions are seen by anyone beyond the consumer and business directly involved. But that can make it difficult to observe the approach the ombudsman actually takes in deciding cases - unless you have direct previous experience of a similar dispute. Hearing it straight from the horse's mouth has to be preferable to having to rely on hearsay, rumour and reports filtered through those who may have their own vested interests. So we believe strongly that a whole range of people would be empowered by having a closer understanding of why and how we reach our decisions.

Lessons learned from where others have got things right or wrong are generally the best way of encouraging positive change. Businesses and consumers could all benefit from knowing more about why we reject or uphold complaints - and this must surely mean the ombudsman service would have to step in less often to sort out disputes in future.

so does this mean publishing every case the ombudsman service handles?

We're looking to resolve over 150,000 cases this year - so probably not! Too much information can sometimes be worse than too little. And making reams of data available can be counterproductive, if it just turns people off. Being open isn't just a question of putting it all on the website and letting people make of it what they can. To be really effective, opening up our casework to public scrutiny is more about analysing and editing information - to help people make sense of it and draw clear conclusions - rather than publishing each and every word we write.

And obviously, in publishing information about actual cases, we need to respect the privacy of each individual consumer - as well as protecting any confidential or market-sensitive information that businesses might give us.

We also need to bear in mind the risk that some consumers and businesses might misuse the information we publish, either by "coaching the witness" about the right evidence to give to secure a successful outcome to the complaint, or by giving a selective and misleading picture of the actual position we take.

My role is to help us find the right balance in all this. Of course, this isn't a new challenge for the ombudsman service. For many years it has been setting out its approach to different types of complaints. By now, at least a thousand or so case studies have been published in ombudsman news, covering every area of our work - from pet insurance to spread-betting. This information, together with the material already on our website - and the additional material we will be publishing there - hopefully goes a long way to helping people understand how we are likely to view particular issues. Our aim is to show our real commitment to taking a consistent approach within the specific context of each individual case we handle.

as the "new boy", what are your first impressions of life at the ombudsman?

I was truly surprised both by the scale of the operation here - handling almost a million consumer enquiries and 150,000 disputes this year - and also by the fact that the workload shows no sign of reducing.

The ombudsman service sees only a very small proportion of the total number of complaints that consumers raise with financial businesses. This makes me realise how much work needs to be carried out by businesses to handle their customer complaints - and just how many consumers feel they have some grounds for dissatisfaction with the service that businesses have provided. I hope the steps that we are taking at the ombudsman service to increase the transparency of our work can really contribute to improving that picture - to the benefit of businesses and their customers.

and how does your work fit in with that of the ombudsmen?

Working alongside our teams of adjudicators in handling our substantial caseload are 41 ombudsmen - of whom I'm the latest recruit. Grouped in small teams under my fellow lead ombudsmen - each of whom has responsibility for a particular sector of the financial services market - our ombudsmen are able to share best practice across product areas, to help ensure consistency of approach. I hope that our work to be increasingly open about our approach to casework policy will help 'lift the lid' on the issues our ombudsman are engaged with.

what are the main casework issues keeping the ombudsman service busy at the moment?

On the insurance front, the biggest issue by far is the very large volume of complaints we're receiving about the sale of payment protection insurance (PPI) policies. Regrettably, these cases continue to expose poor complaints-handling by many businesses. We're still receiving 750 new PPI complaints every week, and we're currently upholding most PPI cases in favour of the consumer.

As we highlighted in our recent annual review, the number and type of complaints we receive has clearly been affected by the recession. The credit crunch has led to increasing financial insecurity and money worries for many consumers, and this is reflected in the mortgage, banking and credit-related cases we see, where indebtedness and financial hardship are significant issues. We are also seeing the impact of disruption in financial markets being reflected in a steadily growing workload of investment-related disputes. As we go through difficult economic times, businesses, too, tighten their belts and are more likely to take a tougher line with their customers.

any tips for businesses on complaints handling - from what you've seen so far?

Broadly speaking, it's true that many situations could have been better handled - and prevented from escalating into hard-fought disputes - simply through improved communication on the part of the business concerned. We still see some businesses responding to customer complaints defensively and legalistically - where a more measured and sympathetic approach might have defused the situation and helped the consumer better understand and accept the position.

I know that consumers can sometimes raise complaints in an unbalanced - even intemperate - way. But this doesn't automatically mean that their complaints are vexatious or without merit. For example, we are currently seeing an increasing number of complaints from consumers who are angry about poor investment performance during the recent market downturn. Businesses can sometimes be too quick to reject these grievances as invalid - on the simple basis that poor performance is a fact of life - without properly dealing with any related concerns the consumer may have been raised, for example about the appropriateness of the advice that was given, or the suitability of the underlying investment.

Our recent annual review noted a significant rise in investment-related complaints that turn on the assessment of product risk, customer suitability, and the way in which relevant information was disclosed at the point of sale. Good record-keeping means that businesses can provide important evidence in cases like this, should there later be any dispute about the way the product was sold or the advice was given.

Clearly, too, some of the patchy complaints handling we are currently seeing reflects a lack of resources in some businesses - and sometimes a lack of senior management commitment and focus - to address customers' complaints fairly and properly. This takes me back to the need for us to be more open about fair outcomes in individual cases.

what happens next?

Our strategic approach to transparency (published in July 2008) set out an ambitious agenda of developments to further improve openness. Much of my immediate work will be focused on the delivery of that agenda. With everything from payday loans to self-invested personal pensions to consider, there is a lot of ground to cover. Producing a complete review of our approach will be a long-term task - so as far as possible I want to prioritise our work to best meet the needs of consumers and businesses.

photo: David Baker lead ombudsman

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.