Ombudsman takes Flac over fairness

A key part of the review involves soliciting feedback from complainants who had been turned down by the ombudsman or who dropped their complaints before he could make a decision. There are plenty to choose from: nearly 1,750 complaints were rejected last year and 1,234 disappeared from the system for reasons unknown to the ombudsman before he could make a determination.

Only 147 complaints were fully successful, and 342 were upheld in part. In another 936 cases, complainants accepted a form of redress without the ombudsman’s involvement.

Deering said he cannot predict whether this pattern will change until the review is complete.

Like his predecessor, he believes the ombudsman should be used only as a last resort for complex disputes that cannot be resolved privately between financial services providers and their customers. The reasoning is that if banks and insurers are fair when they reject customers’ complaints, there should be little reason for the ombudsman to come to a different conclusion.

While the approach sounds logical, it supposes providers can be trusted to do the right thing — quite an assumption in light of recent scandals ranging from cheating customers out of low-rate tracker mortgages to mis-selling worthless payment protection insurance.

New rules that took effect in 2013 give banks and insurers an incentive to take complaints more seriously.

“We can publish the names of providers that have had a number of complaints upheld against them,” he said.

“This is encouraging them to settle complaints. It’s something I’m very strong on encouraging.” Is this enough to ensure fair play? The worst offenders in the ombudsman’s hall of shame last year were Danske Bank and the credit card company formerly known as MBNA.

Neither is open for new business, so they have little to fear from negative publicity. There were few surprises among the others on the ombudsman’s hit list, with the volume of complaints upheld against them roughly in proportion to their market shares.

“I’m determined to ensure . . . providers change the methodologies for how they deal with people, where it’s necessary,” said Deering.

“We can’t just take their word for it. We can’t just hope they’ll do it. We have significant powers between the ombudsman and the Central Bank. We won’t be shy in this regard when the need arises.”

The ombudsman is a neutral referee, however, not an ally in customers’ battles with the banks, emphasised Deering. “We have to ensure each complaint is investigated fairly and impartially, otherwise we’d lose our credibility as an organisation. We can’t move into the space of being the champion of the consumer because that would lose our independence.”

The last independent survey of how customers felt their complaints were handled gave little reason for confidence. Free Legal Advice Centres (Flac) accused banks and insurers of trying to wear down complainants through a war of attrition.

The battle continued for customers with the stamina to take complaints to the next level. Flac found the office was “overly formal, impersonal, onerous and confusing to the extent that many. . . appeared to have become almost completely lost in the process”.

Did Flac paint an accurate picture? “This is why we’re doing the review. The consultants [BearingPoint] will be contacting some of the people who fell out of the system. Flac said it dealt with a small number of people.

“We will have a much broader review. I’ve met Flac myself and the consultants are with Flac today. We will work with Flac. I see them as partners in this process and part of the solution.”

If there were problems in the past, Deering attributes these in part to an avalanche of complaints unleashed by the recession, many resulting from boom-time investments that turned sour when property and stock markets crashed. Complaints peaked at 8,000 in 2012, doubling the ombudsman’s workload in five years. “Like a lot of public bodies the office got hit with a large increase in work without an increase in resources. The improvement in economic circumstances is reducing the number of complaints.”

Volumes returned to more manageable levels last year, with less than 4,500 complaints. So did the amount of compensation awarded — less than €1m compared with €2.2m in 2011.

A consistent criticism of the ombudsman has been the apparent inconsistencies in decisions.

The office must consider each complaint on its merits, unlike the courts, which have the prerogative of establishing legal precedent to guide them in how future disputes should be resolved. The ombudsman cannot be seen to encroach on their turf.

Complainants may see striking similarities between their circumstances and the case studies published by the ombudsman, but this does not mean they can expect the same outcomes.

The issue came to a head this summer when Permanent TSB admitted overcharging nearly 1,400 customers by denying them tracker mortgages. Some complained successfully to the ombudsman — an outcome that the bank appealed against in the courts. Others with identical mortgages had complaints thrown out by the ombudsman.

“If people have exactly the same set of circumstances they could expect similar outcomes. Since I joined the office, consistency has been raised as an issue by providers and consumer representatives. It is something we’re looking at very carefully.”

Part of the plan is to make the ombudsman’s decisions more transparent. “I will be publishing a lot more case studies so consumers and providers can see how we decide matters.”

Even before the review is completed, Deering has decided that mediation will play a bigger role, giving financial institutions and their customers another chance to resolve complaints between themselves.

Consumers are usually willing to try it but once a complaint reaches the ombudsman, providers lose interest in talking. Only 13 disputes went to mediation last year, with eight being resolved at this stage.

“The feedback we received is that providers would engage in mediation only if they had something further to give or they knew they were wrong. That’s a misunderstanding of how mediation works. Mediation provides solutions that need not be financial solutions. Sometimes people just need to be heard; sometimes they just need an apology.”

Deering insists neither side has anything to fear by show- ing their hands at mediation if it later fails to achieve a result. “Mediation is confidential. Nothing said during mediation can be used in an investigation by this office or in a court case.”

The ombudsman’s job is not Deering’s first time in the public spotlight. As taxi regulator, his attempts at standardising fares sparked a national strike by cab drivers in 2006. The walkout coincided with Israel’s invasion of Lebanon, prompting friends to quip that when they switched on the news they were confronted with Deering or Hezbollah.

What attracted Deering to the job as ombudsman, whose salary of €143,000 is similar to what he earned at the Department of the Environment? “This is one of those opportunities where you can make a difference in a significant way to people’s lives. Some of the decisions made in this office are life-changing.”

Just not life-changing enough. This is the message that Deering can expect to hear when the consultants’ review lands on his desk.