number of cases resolved each year
	outcome of cases
	time taken to resolve complaints
	our income and expenditure
	average number of cases resolved weekly by each adjudicator
	our unit cost

We resolved a total of 90,908 cases in the financial year 2004/05 – an 18% increase on the previous year. This figure includes 48,869 mortgage endowment complaints.

In dealing with each case, we use our knowledge and experience of dispute resolution to decide the approach that we believe will be the most appropriate in the individual circumstances – and the most likely to settle the complaint quickly and fairly.

number of cases resolved each year

Generally, the approach we take will begin with an assessment of each case, to see whether we can resolve the complaint using "guided mediation". Mediation is often quicker and more efficient than a formal investigation, which can sometimes be quite a drawn-out process. Mediation usually involves negotiating a constructive way forward – satisfactory to both sides – without seeking to apportion any blame for what may have gone wrong in the past between the firm and the customer. We do not record “win” or “lose” statistics for complaints we resolve at this stage, as this would not be in keeping with the nature of mediation.

During the year the number of cases that we were able to resolve informally through mediation rose significantly – 55% of the total number of cases we resolved, up from 42% in the previous year. This included 32,703 mortgage endowment complaints that we settled informally during the year. In dealing with each case, we use our knowledge and experience of dispute resolution to decide the approach that we believe will be the most appropriate in the individual circumstances – and the most likely to settle the complaint quickly and fairly.

And that figure does not take account of almost 13,000 “potential” complaints that we were able to nip in the bud at the earliest stage – in our customer contact division – without even having to begin the mediation process.

Where we are unable to resolve matters through mediation, we usually issue an adjudication on the case – setting out our recommendations about whether the complaint should be upheld. In most cases, both sides accept the recommendations. But either side can ask instead for a review and final decision by an ombudsman. This happened in around 1 in 14 cases during the year. A decision by the ombudsman is final – it is the last stage of our dispute-resolution process.

The table below shows the number of cases we resolved during the year – at the various stages of our dispute-resolution process.

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outcome of cases resolved at the different stages of our dispute-resolution process	year ended 31 March 2005 number of cases	year ended 31 March 2004 number of cases
cases resolved informally (generally involving "guided mediation")	50,004 (55%)	32,136 (42%)
cases resolved more formally (generally involving an adjudication)	34,434 (38%)	38,263 (50%)
In 45% of cases, the adjudicator found that the firm had treated the customer’s complaint fairly. In 36% of cases, the adjudicator found that the firm had not treated the customer’s complaint fairly. In 9% of cases, the complaint was found to be outside our jurisdiction. In 5% of cases, the customer withdrew their complaint. In 3% of cases, the adjudicator acknowledged that the firm had made an offer to the customer, but negotiated an improved settlement. In 2% of cases, the adjudicator found that the firm had generally treated the customer’s complaint fairly – but the firm still agreed a goodwill payment.
cases resolved by the final decision of an ombudsman	6,470 (7%)	6,305 (8%)
In 48% of cases, the ombudsman found that the firm had treated the customer’s complaint fairly. In 32% of cases, the ombudsman found that the firm had not treated the customer’s complaint fairly. In 11% of cases, the complaint was found to be outside our jurisdiction. In 6% of cases, the ombudsman acknowledged that the firm had made an offer to the customer, but negotiated an improved settlement. In 2% of cases, the ombudsman found that the firm had generally treated the customer’s complaint fairly – but the firm still agreed a goodwill payment. In 1% of cases, the customer withdrew their complaint.
total cases resolved	90,908	76,704

A growing number of mortgage endowment complaints are now starting to fall outside our jurisdiction as a result of “time barring”. This is where the time-limits for complaining – set under the Financial Services and Markets Act – have expired, and so the consumer is too late to bring a complaint. In these cases, more consumers are now challenging our decisions that they are “out of time” – and more appeals are going to the ombudsmen about time-barred cases. In fact, a quarter of appeals to the ombudsmen on mortgage endowment complaints during the year related to whether the rules on time barring had been fairly and properly applied.

Where we uphold a complaint in favour of a consumer – either wholly or partly – there are a number of ways in which we can put matters right. These include:

	awarding financial redress – paid by the firm to put the consumer back in the position they would now have been in if the firm hadn’t got it wrong;
	awarding compensation for distress and inconvenience caused by the firm to the consumer – generally a modest amount of between £150 and £500, where we believe the individual circumstances justify it;
	directing the firm to carry out whatever course of action we believe is needed to put right what has gone wrong. This can range from correcting credit references to paying a previously rejected insurance claim;
	asking the firm to apologise to the customer.

Where we do not uphold a complaint in favour of a consumer, we always aim to give a clear explanation of why we believe the firm has not acted unfairly. In some cases, this is something the firm could have done better itself, to have avoided the complaint in the first place. In other cases, our explanation simply reinforces – from an impartial standpoint – what the firm has already set out clearly for their customer.

We recognise that any decision of ours will be disappointing for the side that does not hear what it wanted to hear. But whatever the outcome, we hope that we will have “added value” by giving our view on the case fairly, authoritatively and independently.

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The table below shows the time it takes to resolve disputes that are referred to the ombudsman service. The very large volumes of mortgage endowment complaints that we are receiving mean we have not been able to deal with these cases as quickly as we would like. On average, a complaint now takes us between six and nine months to resolve.

time taken to resolve complaints

2005	32% resolved within 3 months
	64% resolved within 6 months
	80% resolved within 9 months
	90% resolved within 12 months
2005 excluding mortgage endowment complaints	42% resolved within 3 months
	72% resolved within 6 months
	82% resolved within 9 months
	88% resolved within 12 months
2004	47% resolved within 3 months
	79% resolved within 6 months
	91% resolved within 9 months
	96% resolved within 12 months
2003	44% resolved within 3 months
	76% resolved within 6 months
	90% resolved within 9 months
	96% resolved within 12 months
year ended 31 March

However, the real concern for consumers with mortgage endowment complaints is whether they will be able to pay off their mortgage when their endowment matures – usually at some future date. Generally, no loss has yet materialised in real terms – so a longer waiting period before deciding these cases, while regrettable, is not critical in terms of the loss currently faced by the consumer.

This is why our approach, in the short term, is to give priority to our work on resolving disputes that involve products other than mortgage endowments, where any loss is likely to have materialised already.

We also continue to give priority to cases where the consumer might clearly be disadvantaged by having to wait – for example, through financial hardship or for medical reasons.

The time it takes us to resolve a complaint is also affected by the complexity of the case – and by whether the firm and consumer are willing to accept any conciliated settlement at an early stage, or whether either side instead requests a more formal review, including an “appeal” to an ombudsman.

Cases involving hard-fought arguments and entrenched attitudes are becoming more common, as firms increasingly take a legalistic approach to dispute resolution and consumers become more demanding and less willing to concede. This has a direct impact both on the time it takes us to resolve disputes and on our unit cost and productivity.

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average number of cases resolved weekly by each adjudicator
year ended 31 March 2005 4.4 2004 4.9 2003 4.9 2002 3.7 2001 3.3 2000 3.1

When we consulted in January and February 2004 on our proposed budget and workload for the financial year 2004/05, firms suggested that we were probably underestimating the likely number of mortgage endowment complaints we could expect to receive.

We therefore increased our budget for the year by a further 20,000 new cases – taking the estimated total number of new cases up to 103,000. We also increased by an additional 15,000 the number of cases we estimated we could resolve and close during the year – up to a total of 103,000. To be able to handle this increased workload, we planned on recruiting a further 100 employees during the year. This has resulted in our complement of adjudicators doubling in the last few years – to keep pace with the growth in numbers of complaints.

However, the “lead in” time involved in recruiting and training new adjudicators meant that we were not able to resolve as many cases during the year as we had anticipated. Closing 10% fewer cases than planned for in the budget resulted in less income from case fees (charged when we close cases) – and a reduction of £3.4m in the total income we had budgeted on receiving.

On the other hand, our total expenditure for the year of £45.8m was £3m below budget – almost wholly due to lower than expected staff-related costs, largely reflecting the time-lag between the dates when we made offers of new jobs and the dates when “new starters” were able to begin. However, as we set out in our latest plan & budget (published in January 2005), we expect to see a pick up in the rate at which we can resolve cases, as our recently recruited adjudicators get up to speed and become fully productive.

The amount of bad debts during the year was unusually high (increasing from £0.2m in 2003/04 to £0.5m in 2004/05) as a result of a number of intermediary firms going out of business, leaving case fees unpaid.

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our unit cost *
year ended 31 March 2005 £496 2004 £473 2003 £518 2002 £684 2001 £753 2000 £730
* Our unit cost is calculated by dividing our total costs (before financing charges and any bad debt provision) by the number of cases we complete.

Our unit cost for the year was £496. And our productivity – which we define as the average number of cases resolved weekly by each adjudicator – was 4.4, compared with the figure of 4.5 that we had planned for in the budget. We anticipated in last year’s annual review that our productivity could not remain at the level achieved in previous years. Our productivity has also been affected during the year by having to transfer some of our most experienced adjudicators to help recruit, train, and mentor new staff joining us.

All these factors contributed to a financial deficit for the year of £1.8m – reducing our surplus from £8.6m to £6.8m. Our policy on financial reserves, agreed after consultation with the financial services industry, is to keep no more than 5% of our expected annual expenditure – and to return any amount over this to firms, by reducing the amount of the annual levy in the following years. In line with this policy, we therefore plan to return a further £2m to firms in 2005/06 by way of a reduction in the annual levy.

More information about our finances is available in the detailed financial statements.

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