I am pleased to have the opportunity, together with my colleagues Ms Mary Rose McGovern, Ms Tara McDermott and Mr. Diarmuid Byrne. to address the committee. I note that the committee is particularly interested in complaints relating to tracker mortgage interest rates but I also note its interest in the practice of dual pricing.
The Office of the Financial Services and Pensions Ombudsman, FSPO, was established on 1 January 2018. The establishment of the office involved the merger of the former offices of the Financial Services Ombudsman and the Pensions Ombudsman. We provide a free service for consumers to resolve complaints about the actions of their pension provider or financial service provider. Our goal is to redress the balance of power between the individual consumer and provider and we do this by making our service as informal and accessible as possible. We mediate between the parties and, where necessary, we investigate and issue legally binding decisions.
Mediation through telephone, email and meetings is the first and preferred option for resolving complaints. By engaging with the parties directly, we try to achieve a timely and satisfactory resolution. Where these early interventions do not resolve the dispute, we use our extensive powers to investigate and adjudicate complaints in a fair and impartial manner. Full details of how we managed complaints in 2018 are set out in the overview of complaints 2018 that is available on our website.
We are dealing with a large volume of complaints which has led us to a situation where we are not dealing with complaints as quickly as we would like to. In order to deliver the objectives in our strategic plan, we submitted a workforce plan to the Minister for Finance and I am pleased to have received approval to recruit an additional 35 staff. We have been proactively recruiting to fill these posts. However, similar to many public sector bodies, the current buoyant job market is making it difficult for us to retain staff. Our staff resources are still not at the level we would like but we will have more people joining us before the end of the year.
I am conscious that there has been considerable interest in the time limits for making complaints to my office and, in particular, that this has had and impact on our ability to deal with certain tracker mortgage related complaints. Therefore, I would like to address this issue. In July 2017, the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017 was enacted. This legislation changed the period within which complaints could be made to the then Financial Services Ombudsman. These changes were carried forward into the Financial Services and Pensions Ombudsman Act 2017.
The legislation setting out the jurisdiction of this office in respect of time limits for bringing complaints against financial service providers is complex as a result of the various changes that have been made. Before the formal investigation of each individual complaint can commence, my office must assess whether the complaint has been made within the time limits set out in section 51 the 2017 Act. A complaint that relates to a long-term financial service must be made within one of the time limits set out in section 51. I have set those time limits out in a document I have submitted to the committee and will not go through them now. This can be a lengthy process because, in many instances, an objective consideration must be given to the complainant's date of knowledge and this may require scrutiny of all relevant historical communications. Both parties are given the opportunity to make all evidence available to that end and all such evidence is shared between the parties so that any jurisdictional determination is conducted in a way that is transparent and fair to both parties.
We also take into account section 54, which suspends those time limits for the period during which a complaint is being dealt with under the provider’s internal dispute resolution procedure.
In the exercise of my discretion, I must point out that not only must reasonable grounds exist, that is, there must be a particular reason to extend the time limit but, in addition, it must be just and equitable, in all of the circumstances, to both parties to do so. This provision cannot be exercised simply because, for example, the complaint relates to the application of a tracker mortgage.
The wording in the legislation means it is not possible for a party to the complaint or, indeed, the Ombudsman to simply "waive" the time limits. The use of the word "shall" in this provision mandates me to make a determination that a complaint is inadmissible where it was made after the expiry of the legislative time limits. Some providers had taken an approach in to tracker mortgage-related complaints that the complaint was made within the time limits. In such circumstances, a full formal assessment of whether the complaint was made within the time limits may not be necessary and the complaint can proceed to investigation.
In advance of or during a full assessment of the time limits, it is open to a provider to express a view that the complaint was made within the time limits. This is then taken into account in making a determination on the application of the time limits. However, where a provider puts forward a view that the complaint was made to this office outside the time limits, and the assessment and evidence supports this view, I must, in accordance with the legislation, determine that the complaint is inadmissible for investigation by this office.
Since the change in time limits, my office has been required to spend considerable time carrying out jurisdictional assessments on a large number of files, including on tracker mortgage-related complaints. In recent months, however, this is no longer the case for these complaints. This is because all of main lenders are now taking the approach in the vast majority of tracker mortgage-related complaints, that the complaint was made within the time limits, thus eliminating the need, in those instances, for a full assessment as to whether the complaint was made within the time limits to be conducted.
It has always been my view that the most effective and efficient way to provide redress and compensation to borrowers who were wrongly denied tracker mortgages was for the banks to co-operate fully with the Central Bank tracker examination project. It is for this reason that we have co-operated significantly with the Central Bank in that process. After that, when the individual banks completed the tracker mortgage examination, we were then able to proceed with the complaints we had on hold during that process.
Where complainants inform us that they have agreed a settlement with their financial service provider, we close the file. Where complainants have not been offered redress or compensation by their lender or where complainants are not satisfied with an offer of redress or compensation from their financial service provider, or do not receive an offer from their financial service provider, the mediation, investigation and adjudication processes of this office are, in most cases, available to them.
We registered 347 new tracker mortgage-related complaints between January and October 2019 and closed 455. Of the 455 complaints closed, we resolved 234 complaints through our informal mediation process, 146 were closed during the investigation, adjudication and legal services process, we closed 43 complaints at registration and assessment stage, while 24 were deemed withdrawn and eight were noted to be outside the jurisdiction of the office because of the time limits. I will be happy to provide further details on each of these processes and categories should the members wish me to do so.
I recently issued 15 legally binding decisions on tracker mortgage complaints. Two of these were upheld, two were substantially upheld, three were partially upheld and eight were not upheld. I have also issued six preliminary decisions. Now that the time limit issue has largely been resolved for tracker mortgage complaints, I expect we will progress the vast majority of complaints. We hope to continue to resolve the majority of complaints through mediation. However, I also expect to issue a considerable number of legally binding decisions in the coming months. I will publish all the decisions issued in 2019, including the tracker mortgage-related decisions, no later than January 2020. I will also publish a digest of these decisions similar to the digest of 2018 decisions that I published which includes a short summary of selected decisions.
I very much welcome the power to publish my decisions provided by the Oireachtas in our governing legislation. Publishing these decisions not only enhances the transparency and understanding of the powers of the office and of the service we provide, but it also plays an important role in providing enhanced protection for consumers. These decisions will be of assistance to consumers and their advocates and to financial service providers, in both avoiding and resolving disputes. I am confident that the publication of these decisions in our online database of decisions will help to improve the quality of services and protections available to consumers.
The committee has indicated that it wishes to discuss the issue known as dual pricing in the insurance industry with us. My understanding of dual pricing is that it involves a practice whereby some insurers profile their customers to identify price sensitive customers who may shop around for the best price and move. Such customers may then be quoted a lower renewal fee, or a discount, compared to loyal customers who are profiled as being less price sensitive as they do not shop around and are, therefore, quoted a higher rate or not offered a discount. Insurers, like all financial service providers, have a responsibility to treat their customers fairly. Fairness is at the heart of what we do as FSPO. Being fair means not improperly discriminating against a person or a body. The Oireachtas has specifically provided that I can uphold a complaint against a financial service provider where I believe the provider’s conduct in respect of a complainant was improperly discriminatory. In that regard, the Act provides that I can uphold, substantially uphold or partially uphold a complaint where the conduct complained of was unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant. I can also uphold a complaint, although the conduct complained of is in accordance with a law or an established practice or regulatory standard, if the law, practice or standard is, or may be, unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant.
My office will not interfere with the commercial discretion of a financial service provider when it is exercised in a fair and reasonable manner. This means that we will not interfere with how a provider charges for its services if the conduct involved is not unreasonable, unjust, oppressive or improperly discriminatory. For charges not to be improperly discriminatory, however, I expect that the same criteria would be applied consistently and fairly to customers in establishing whether the conduct of a provider in charging consumers for its services is fair and reasonable. This is particularly so, given the range of data used by providers together with the complex and opaque pricing techniques sometimes applied. This makes it difficult to establish whether the charge was fair. Understanding the factors that inform decisions of financial service providers is becoming even more difficult with the increasing use of artificial intelligence and machine learning and the manner in which personal data and data from external sources are used to profile consumers. Indeed, even identifying or recognising a dual pricing issue can present a challenge, as the complainants themselves would not necessarily recognise it or present it as such, and because a renewal quote will not necessarily be based on the exact same set of circumstances as the previous year.
I believe two of the main methods of combatting dual pricing are for insurers to provide consumers with clear and accurate information when they renew or incept insurance policies and for consumers to shop around regularly before taking out or renewing an insurance policy. Where consumers believe that the conduct of a provider has been unreasonable, unjust, oppressive or improperly discriminatory they can make a complaint to my office.
The Oireachtas has provided me with significant powers. I can direct compensation of up to €500,000 and I can also direct rectification, which could, for example, involve directing a financial service provider to reinstate a tracker mortgage rate or directing it to change the margin or the date from which a particular rate was applied. As FSPO, I look beyond the contractual terms and consider the fairness and reasonableness of the conduct complained of.
I assure the Chairman and members that, together with my management team here today, and my staff generally, I will continue to use the powers the Oireachtas has given me in an impartial manner to ensure a fair outcome in respect of complaints made to my office and we will continue to cooperate with the Central Bank in achieving better outcomes for consumers generally.
I thank the committee for the opportunity to engage with it today. My colleagues and I are happy to deal with any questions the committee may have.