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ombudsman news

issue 96

September / October 2011

ombudsman focus: our response to business feedback

As part of our regular surveys of businesses covered by the Financial Ombudsman Service - from major financial groups to sole traders - we invite comments and suggestions from financial services practitioners in all sectors of the industry on how we can improve our service for them. Here are a selection of the comments made in the latest postal survey - and our replies.

When you forward complaint forms to us, they don't always have the relevant attachments.

Under the FSA's complaints-handling rules, businesses have up to eight weeks to sort out a customer's complaint - before the ombudsman steps in and investigates. But consumers often come to us before raising their complaint with the financial business involved.

When this happens, we forward the complaint to the business - giving them the opportunity to try to resolve the problem at this early stage. This may also involve our sending the business the complaint form that the consumer has already completed - together with any relevant paperwork the consumer has enclosed along with their form.

Businesses have given us feedback that it isn't always clear which attachments the consumer has sent - or whether all the documents have been attached. And we know that consumers don't always remember to include the documents that they have referred to when completing the form.

As part of our recent re-design of our complaint form (which resulted in reducing it from four pages to three, saving a million pieces of paper a year), we looked at how we might help minimise this problem. And following suggestions from businesses and consumers, we have added specific tick-box prompts at the bottom of the complaint form. These remind consumers, when they sign and date the document, to check they have included any relevant documents.

The prompts also help us make sure we send on the right documents to the business, if we need to forward the complaint for investigation before we have any formal involvement with it.

When it's a joint complaint, the ombudsman needs to make sure that both consumers have signed the complaint form.

Again, we looked at this as part of the re-design of our complaint form. We added a reminder that each person needs to sign individually, where a complaint involves accounts or policies held jointly.

This reminder is right underneath where consumers sign the form - so it's very obvious.

You should be clearer that consumers still have to sign the complaint form, even if they have appointed someone else to handle their complaint on their behalf.

As we explained in issue 94 of ombudsman news (June/July 2011), over half of all cases are now referred to us by third parties acting on behalf of consumers. Although these are mostly claims-management companies, they also include family members, friends and a wide range of consumer advisers who are helping people for free with their complaints. In fact, a consumer can ask anyone to represent them with their complaint - and we will deal with that representative, as long as we have the consumer's permission to do so.

So that we can be certain the consumer has given their permission in these cases, we have revised the text on our complaint form - making it very clear that consumers still need to sign the form themselves, even if someone else completes it for them.

You ought to reject complaints that are patently ridiculous.

We do. Of the 164,899 complaints we settled last year, we concluded that 1,447 cases (0.9% of the total) could be categorised as 'frivolous and vexatious'. In these cases, we do not charge a case fee to the business complained about.

But just because we don't uphold a consumer's complaint does not mean that the case was 'frivolous and vexatious'. Similarly, the failure by a consumer - or their representative - to present a reasoned argument does not automatically mean a case has no merit - or that it should be dismissed without any investigation. We look at each case individually and make a decision based on its own particular facts.

Consumers can sometimes pursue complaints in an unfocused way and this may make them appear unreasonable to the business they complain to. On the other hand, businesses sometimes respond to customer concerns unhelpfully and defensively - aggravating problems that might have been resolved with a clear, helpful and sympathetic explanation.

For example, a complaint referred to us about a mis-sold PPI policy could, in some cases, be categorised as 'frivolous and vexatious' if the consumer (or their representative) persisted in bringing the complaint to us when they should clearly have known, from information already available to them, that no policy was ever sold to them.

You should publish more guidance so the ombudsman's approach is more transparent.

Some in the industry ask us to publish more guidance, to help them resolve complaints themselves. Others criticise us for publishing guidance at all. They claim this means we are stepping outside our role and 'making rules' about how financial businesses should behave.

The guidance we publish is based on real cases that we have investigated and decided. We don't tell financial businesses what they should or should not do, in general terms. Our aim is to show how we are likely to approach particular types of complaints if they are actually referred to us.

In his independent review a few years ago into the openness and accessibility of the ombudsman service, Lord Hunt concluded that this was the right approach. And he encouraged us to publish even more guidance. He didn't believe that our doing this was incompatible with our impartial role in settling individual disputes.

This confirmed the crucial role we play in sharing insights from the complaints we see, in order to help prevent future problems. Being clear about our approach to complaints involving different products and issues also helps consistency. It clarifies the general framework against which we decide individual cases on their own particular facts and merits.

Since Lord Hunt's review, we have developed and expanded the online technical resource on our website. It now covers our approach to complaints about the financial products and services that make up over 90% of our total workload - from pet insurance to spread betting, debt collecting to mortgages.

It includes case studies, links to other resources and publications across our website, and details on how we are likely to approach complaints based on our previous extensive experience.

Why don't you consult on your technical notes before you publish them formally?

The technical notes we publish are based on real cases that we have investigated and decided. They set out the general approach we are likely to take to the complaints we see most often about a wide range of financial products and services.

Deciding cases is a 'quasi-judicial' task. It involves our taking into account the evidence and arguments from the two sides in each dispute. It would be wholly inappropriate for us to consult about the outcomes we arrive at in these cases.

We publish our technical notes as part of our online technical resource on our website, and we welcome feedback from users. There's a feedback form on each page, to make it easier for you to tell us about anything you think we could clarify or explain better. Following user comments, we regularly update these pages to try to make things as clear as possible.

We keep our published approach under review, in the light of the cases we continue to receive, and to reflect any changes in the law and regulatory standards.

We don't always understand how you arrive at the 'distress and inconvenience' awards you tell us to pay.

We have very well-established guidelines on our approach to compensating consumers for non-financial loss - such as distress and inconvenience. These guidelines are available from our online technical resource on our website, and we regularly summarise them in ombudsman news with relevant case studies (most recently in issue 93, April/May 2011).

These guidelines set out clearly that we do not automatically award compensation just because we uphold a complaint in favour of the consumer - or just because the consumer has experienced some distress or inconvenience.

In our latest annual review we explained that we told the business to compensate the consumer for distress and inconvenience in 28% of the cases we upheld - generally awarding between £150 and £500.

Our guidelines also establish three broad categories for compensation - depending on the circumstances of the particular case. Where we tell a business to compensate a consumer for non-financial loss, the payment involved will usually be modest (less than £300). But we may award significant compensation ( £300 to £999). And in a small number of cases, we tell businesses to pay exceptional compensation ( £1,000 or more).

In addition to publishing these guidelines, we also illustrate, through many of the cases we include in ombudsman news, how we apply the guidelines in real-life situations. Looking at published case studies, based on complaints we have actually dealt with, is a good way of seeing - in context - how the guidelines work in practice, as a simple 'rule of thumb'.

If, in a specific case, you don't understand or agree with a recommended payment for distress and inconvenience, you should talk to the adjudicator involved. It will help if you can refer specifically to our published guidelines - with examples that you believe support your case.

You should share more statistical information more regularly, so that stakeholders can see trends emerging sooner.

This suggestion led to our deciding to publish detailed figures every quarter in ombudsman news. These figures show the number of new cases, and the proportion we resolved in favour of consumers, in relation to the fifty or so financial products or services that make up 99% of our complaints workload.

We have received very positive feedback, indicating that it is now much easier for people who are interested in these numbers to see trends emerging throughout the year. Previously they only got to see the figures annually, after the financial year ended and the figures appeared in our annual review.

In issue 95 of ombudsman news (July/August 2011) we published the complaint figures for the first quarter of the 2011/2012 financial year (covering April, May and June 2011). In issue 97 this autumn we will be publishing the figures for the second quarter (July, August and September 2011).

Why can't you provide more updates on 'open' cases?

The way in which we update businesses on the progress of cases depends very much on the size of the business and the number of ongoing cases involving them that we have. With ten of the UK's financial services groups accounting for three-quarters of our workload, the exchange of information between us and these businesses is pretty much a continuous process. It is on such a scale that 'bulk updating' by spreadsheet is generally the norm, rather than sending individual letters.

Some businesses, however, only ever come into direct contact with us if an isolated case happens to be referred to us by an unhappy customer. For example, last year 2,131 businesses each had only one complaint with us. We recognise that for many of these (mainly small) businesses, this can be an unfamiliar and worrying experience.

So we automatically send a special factsheet to all businesses that we identify as not having had a complaint with us before. This sets out the steps involved in having a complaint referred to us. It also signposts the range of information and support services available to businesses. These include our technical advice desk, our online video guide for smaller businesses, and the FAQs on our website (which are based on the questions we're usually asked by businesses dealing with us for the first time).

The message we're especially keen to get across to smaller businesses - and to those who have few complaints and little direct contact with us - is that if they have any questions or concerns they should talk to the adjudicator dealing with their case. This is particularly important if they don't appear to have heard from us for a while - and just want to check on progress.

Meanwhile, as part of our longer-term plans for greater use of web-based technology, we are looking at developing an online portal, allowing consumers and businesses alike to log on securely and check the progress of their case.

So will you be improving electronic communication with businesses?

In our plans and budget, that we consulted on publicly at the start of this year, we said we would be increasing the 'e-enablement' of our operations - internally (in terms of our own systems) and externally (in the way we exchange information with our customers). As well as helping to improve our own effectiveness and efficiency, this should help reduce the costs for the industry of 'doing business' with us.

Our 'e-enablement' plans have moved forward and we are working closely with key stakeholders to ensure, wherever possible, that what we do will link with their own processes. We have had initial discussions with five of the largest businesses (where the flow of files and data in and out of our offices is currently running at record levels) on the logistics of exchanging large amounts of data electronically. But we will be taking account of the position of smaller businesses as well.

You need to show you're making decisions based on industry and regulatory knowledge.

Few of the cases we receive turn simply on whether or not the financial business has complied with a specific rule. Many cases, on the other hand, involve disputes between the consumer and the business over what actually happened. In these cases, after drawing together all the evidence and arguments, we then consider which version of events seems to us - on the balance of probability - to be the more likely. Once we have established what happened, the law requires us to decide complaints on the basis of what we consider to be fair and reasonable in the circumstances of the individual case.

In doing so, we take into account the rules, codes and good practice that applied at the time of the event complained about - as well as relevant law and regulations.

The ombudsman is too willing to believe the consumer when there's no documentary evidence.

And on the other hand, consumers whose complaints we don't uphold sometimes say we're too willing to believe the business, when there's no documentary evidence.

The true position is that we never automatically favour either side. Each case is different - and is decided on the basis of the particular facts and circumstances involved. We form a view based on what we believe is likely to have happened, taking all kinds of information into account. In fact, it's pretty rare for us to have to make a decision based solely on the existence (or the absence) of a single pivotal piece of evidence.

The £500 case fee is too harsh.

We have frozen the case fee at £500 for two years running. And it is paid by only around a quarter of the businesses who have complaints referred to us.

This is because we don't charge a business a case fee for the first three cases each year. And around three-quarters of businesses with complaints have fewer than four cases.

Each year we consult publicly on our funding - including the level of our case fee. Views on our funding arrangements range significantly from business to business and from sector to sector.

Some favour lower case fees and a higher general levy - paid by the financial services industry as a whole. Some argue that the case fee should be higher, to encourage businesses to resolve more complaints properly themselves - instead of (as is sometimes claimed) using the ombudsman service as a kind of 'outsourced' complaints service.

There are also a wide range of views on whether there should be different case fees for complaints resolved at different (or tiered) stages of the process, for different types of products, or on the basis of whether or not we upheld the case.

Our current funding structure broadly represents the consensus of views - over the last ten years - on what are probably the simplest and most practical arrangements to implement effectively. But we will continue to take views and encourage debate on this topic - with the next consultation due on our plans and budget during January and February 2012.

You should consider running sector-specific events for complaints handlers from larger financial businesses.

Over the last year, we have been running a series of conferences around the UK. These have been aimed at complaints handlers across all sectors of the financial services industry who have larger numbers of cases and are in regular contact with the ombudsman service.

The conferences have been very well-received and have covered cross-sector topics of interest. These topics have included matters that are of equal relevance to practitioners from banking, insurance and investment backgrounds, such as complaints-handling tips and our approach to compensation for non-financial loss

In response to feedback, the conferences we are currently planning for next year will include some events aimed at complaints handlers from specific industry sectors. Meanwhile, we will also continue to run our regional 'introducing the ombudsman' events, tailored specially for smaller businesses and those who have little or no direct contact with us.

image of ombudsman news

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.