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the independent assessor's annual report for 2008/09

by Michael Barnes CBE to the board of the Financial Ombudsman Service

The independent assessor's role is to carry out a final review of the level of service provided by the Financial Ombudsman Service, in cases where a user of our service has already referred a complaint to our service-review team for investigation but remains dissatisfied.

Under his terms of reference, the independent assessor can consider complaints about our level of service, our procedures and the behaviour of our staff. His remit does not cover disagreements about the actual merits of decisions. The independent assessor is authorised to make findings and recommendations for redress in cases where he believes it is justified.

During the year ended 31 March 2009 a total of 265 cases were referred to me, compared with 281 in 2007/08.

Of these cases, 185 required a full investigation and review of the file (an increase of 15 on the previous year) - of which I upheld 83 cases, either wholly or in part. In all but five of the complaints I upheld, I made recommendations for financial compensation.

The amounts of compensation that I recommended during the year ranged from £50 to £600, with most awards falling between £200 and £450. In around one in five of the complaints that I upheld, the Financial Ombudsman Service's in-house service-review team had already offered apologies and/or some compensation - but not always enough, in my view, to provide sufficient redress.

Of the cases which did not require my investigation, 44 were referred to me too early in the process (before the ombudsman's service-review team had been given the opportunity to deal with the complaint); 25 were general enquiries; 11 were outside my jurisdiction because they were "out of time" or unrelated to the ombudsman service; and two cases were withdrawn by the person complaining.

During the year, complaints about the way in which the ombudsman service had dealt with mortgage endowment complaints continued to figure prominently among cases referred to me - with delay being a frequent cause of complaint. The volume of mortgage endowment complaints referred to the ombudsman service in recent years (though now declining) has been such that I have had to accept that many investigations would not be completed within the service's normal timescales.

In the small number of cases where mortgage endowment complaints had been with the ombudsman service for as long as two to three years, I have, however, looked carefully to see whether there were any periods during which delay might perhaps have been avoided. And I have recommended compensation for the inconvenience caused, where I considered that to be appropriate.

The ombudsman service has introduced various measures in recent years designed to speed the throughput of mortgage endowment cases. One of these measures has involved senior adjudicators carrying out further assessments of complaints - in addition to the assessments carried out by adjudicators at an earlier stage in the investigation. I understand that the purpose of these further assessments is to clarify, as far as possible, any outstanding issues - so that the reviews and final decisions by the ombudsmen can then be carried out more swiftly than might otherwise be the case.

I see no objection to this in principle - provided that adjudicators are alert to the fact that there will be some cases where the need remains for a fully-detailed review by the ombudsman. In two cases I handled during the year, I felt that not enough account had been taken of the importance of this.

Delay has also been a feature in the handling of a number of complaints that I reviewed during the year about Equitable Life. To some extent, this was an inevitable consequence of the "lead case" procedure adopted by the ombudsman, under which various groups of similar cases were put on hold, pending the outcome of the linked "lead case". Occasionally, however, cases have been held back longer than they need have been - for example, where there was an error in categorising cases at an earlier stage. I have recommended that the ombudsman service pay compensation for inconvenience caused in these cases.

Given the large volumes of complaints handled by the Financial Ombudsman Service, the practical arrangements that form part of its administrative procedures can sometimes give rise to problems referred to me to review. During the year I handled a clutch of complaints about the customer-contact division's practice of sending all paperwork back to a consumer - if key items were not included with the complaint. The two key items required by the customer-contact division are a signed complaint form (giving the ombudsman the authority to pursue the complaint with the business or any other party involved) and the business's final response letter.

As I understand it, the reason for returning incomplete paperwork is that the sheer volume of documents handled by the ombudsman service means it is not practicable to file some papers, while waiting for others to arrive later. I understand that consumers may also need to refer to documents they have already sent in - for example, if they subsequently have to complete a complaint form or request a final response letter from the business they are complaining about.

In my view it is reasonable for paperwork to be returned to a consumer once - or perhaps even twice - before a complaint can be processed. But it is not acceptable for this to happen three times - or even four times, as in the case of one particular consumer who complained to me about this.

I understand that staff in the customer-contact division do sometimes retain documents sent in by consumers, while waiting for other items to be sent in later. I consider it particularly important that this is done when there appears to be a continuing problem, preventing progress, which needs to be resolved. For example, it may only need a phone call to one or other of the parties, to sort out any misunderstanding about whether the necessary final response letter has been issued within the eight weeks given to businesses to respond to a complaint.

In one case I saw like this, a business had not treated the consumer's letter as a complaint, even though the consumer began with the words, "I am writing to complain in the strongest terms ...". In this particular case, it was not until seven months later that the business eventually issued a final response letter that met the requirements laid down in the FSA's rules - and gave the consumer the right to refer his unresolved complaint to the ombudsman service.

In my previous annual reports I have drawn attention to the difficulties that can arise after an ombudsman's final decision has been issued - in cases where the ombudsman has made a "formulaic" award. In many of these cases, only the business has the data needed to calculate the actual amount of the award. However, the ombudsman service is able to check calculations in a limited number of cases, where there are particular reasons for doing so.

In one case I saw during the year, the consumer was unwilling to accept that the business's calculations were correct, and two years after the ombudsman's final decision had been issued, the award had still not been paid. In this case, the ombudsman service's in-house actuary had carried out various calculations, but the ombudsman had not provided them to the consumer for comment before indicating the basis on which he considered settlement should be made.

At this point, the consumer referred his concerns to me. I suggested that the ombudsman service should disclose its actuary's calculations to the consumer and - once the consumer had been given the opportunity to comment - the ombudsman should issue a further direction, to settle the matter once and for all. The ombudsman service agreed to do this.

Disclosure is an issue that consumers feel strongly about. A complaint I reviewed during the year involved a retired solicitor who had received an adjudication early on in an investigation and who was in no doubt that certain documents should have been disclosed to him. I took the view that the adjudication had been issued prematurely. I asked the ombudsman service to send the solicitor a copy of the document that the business had provided - as (in their words) their "defence" to the complaint - so that the solicitor would be able to comment on it, before he had to make his own final submission to the ombudsman.

The ombudsman service is obliged to disclose to someone with a complaint only the evidence or arguments that an ombudsman is likely to rely on, in reaching a decision on their case. The ombudsman service can do this either by sending a copy of the actual paperwork in question or by providing it in summary form.

In the cases I see, submissions to the ombudsman service from businesses only rarely contain confidential or privileged information. I consider that it is always preferable to disclose in its entirety - at an early stage - information on which an adjudicator or ombudsman is likely to rely. If this is not done, people with complaints will often suspect that important evidence is being withheld from them - or that the summary of the business's case may not accurately reflect what the business has said.

Some of those who contact me complain that they have been denied an oral hearing. My understanding is that an ombudsman would normally consider holding a hearing only in cases where the documentary evidence is inconclusive and credibility is an issue. That is likely to apply only in a very small number of cases. The expectations that either party to a complaint might have, that a hearing will be held, are therefore frequently going to be disappointed. In fact, no case has been referred to me in recent years where a hearing has been held - and my impression is that they take place only very rarely.

Ombudsmen sometimes decline to hold a hearing on the grounds that they are not able to require the parties to a complaint to give evidence under oath. In my view this misses the point, because an ombudsman's hearing should not be a "court-like" procedure. A hearing would be conducted informally, and would provide an opportunity for the ombudsman to take into account (among other things) the general demeanour and credibility of the respective parties. In my opinion, the ombudsman process would be the poorer if the provision in the rules for hearings to be held fell into disuse.

During the year the areas of financial services most frequently involved in the complaints referred to me were banking matters of one kind or another - no doubt a sign of the times - and mortgage endowments. I received fewer complaints about the handling of insurance claims than in recent years.

Complaints referred to me by businesses - all independent financial advisers (IFAs) or brokers - increased to 24 during the year (compared with 13 in 2007/08). Most of these complaints were about the case fee charged.

In conclusion, I should make clear that the complaints referred to me represent only 0.16% of the ombudsman service's total workload. So care should be taken in applying any conclusions drawn from my work to the ombudsman service's work as a whole.

 

Michael Barnes CBE
April 2009

The independent assessor, Michael Barnes, presented this report to the board of the Financial Ombudsman Service, having discussed his views and findings in detail at an earlier meeting of the board's sub-committee on quality. The board accepted the report and its recommendations in full and undertook to use the independent assessor's findings to help improve service quality.