Financial Services and Pensions Ombudsman Bill 2017: Second Stage

Question proposed: "That the Bill be now read a Second Time."

We have been through a lot of this already and improved the legislation significantly. The add-on is the merging of the two offices. In the light of how far we have come I hope and anticipate that the co-operation there has been will continue.

This Bill aims to improve the position of consumers of financial services and pensions services in a number of respects. It does so by first amalgamating the existing offices of the Financial Services Ombudsman and the Pensions Ombudsman into one single body. Furthermore, it consolidates and updates the existing legislation, including the extension of the time limits for complaints. I believe the Bill is a significant step in the empowerment of consumers of financial and pension services when it comes to addressing their complaints. There has been much cross-party co-operation in the Dáil on this Bill and I am sure this facilitative environment will continue in the Seanad.

I also acknowledge the passing of Sinn Féin’s Central Bank and Financial Services Authority of Ireland (Amendment) Bill in the Dáil last Friday. The Minister for Finance and the Department of Finance have worked closely with Sinn Féin and tabled amendments to try to ensure both Bills are complementary in areas where they overlap. However, the provisions of Sinn Féin’s Bill will be repealed once this Bill is commenced as this Bill moves the legislation from the Central Bank Act into stand-alone legislation.

I will outline the key features of the Bill.

A list of important definitions is contained in section 2. Chief among them are the definitions of a "consumer" and of a "long-term financial service". The definition of a consumer of financial services in this Bill has been expanded to include those who are entitled to benefit from income continuance plans, ICPs. In ICPs, the employer takes out the group scheme for the benefit of employees who may become ill or disabled long term. The contract is between the employer and the insurer. The employee is not a party to the contract. Therefore, up to now, employees could not complain to the ombudsman about a decision to exclude them from a benefit under the scheme. By including beneficiaries of ICPs in the definition of a consumer, such employees are now entitled to seek redress from the ombudsman.

The delineation of what constitutes a "long-term financial service" is of central importance to this Bill. That is because the proposed extension of the time limits within which a consumer can make a complaint will only apply to long-term financial services, as well as pension products. Therefore, it is necessary that a suitably precise and comprehensive definition be adopted in this Bill to ensure the desired types of financial products come within this definition. I believe we have achieved this with our current definition of a long-term financial service. It includes all financial services or products of a fixed term of five years and one month or more such as mortgages, tracker mortgages and long-term loans. It also covers life assurance products. The definition also provides for the avoidance of doubt that annual products like car and house insurance are not included as long-term financial services. The existing six-year time limit should be sufficient time to bring complaints in respect of short-term financial services. The definition is the same as that which was agreed in this House last week in the discussion of the Sinn Féin Private Members' Bill following Report Stage of the Government's Bill.

Parts 2 and 3 of the Bill set out the provisions for the creation of the Office of the Financial Services and Pensions Ombudsman, as well as the dissolution of the existing bureau, the Financial Services Ombudsman and the Pensions Ombudsman. It must be noted that the offices of the Financial Services Ombudsman and the Pensions Ombudsman have already been physically merged in one location at Lincoln Place. Mr. Ger Deering is the Ombudsman in both offices pursuant to section 23 of the Social Welfare and Pensions Act 2015, which allowed the Financial Services Ombudsman to act as the Pensions Ombudsman. Section 12 of the Bill provides that the principal function of the Ombudsman is to investigate complaints by informal means, mediation and formal investigation, including oral hearings, if required or a combination of these means.

Part 4 of the Bill establishes and regulates the Financial Services and Pensions Ombudsman Council. It will supersede the dissolved Financial Services Council, with some important modifications. The Council has now been reduced from a maximum of ten members to a maximum of seven members. This reduction is reflective of the changing workload of the council under the Bill. The regulation-making power of the council has been transferred to the Minister for Finance. Additionally, the responsibility of appointing the ombudsman and deputy ombudsman is now also the task of the Minister rather than the council, after a public competition. It is preferable that these powers should be vested in an entity that is democratically accountable. The Minister may consult the council before making regulations under section 4. The role of the council is set out in section 40 and it includes keeping under review the efficiency and effectiveness of the office. The council retains the powers to make regulations to set the financial services industry levy, which is to be calculated according to the amount of cases concerning financial services in the previous year. This levy is one of the two sources of funding for the Office of the Financial Services and Pensions Ombudsman, the other source being the Exchequer in accordance with the existing funding structure of the Pensions Ombudsman.

Part 5 of the Bill governs the procedures for the making of a complaint by a consumer and the powers of the ombudsman in conducting an investigation. In respect of the conduct of a financial service provider, a person can complain about the provision of financial services, an offer of financial services or failure to provide financial services. In respect of the conduct of a pension provider, a person can complain about financial loss or a dispute with regard to pensions.

The steps for resolving a complaint are contained in more detail in Part 6 of the Bill. Similar to the existing legislation, consumers will first be asked to try to resolve complaints with the internal resolution procedures of a provider. Section 55 now enables the Minister for Finance to prescribe minimum standards for such procedures. This may minimise a consumer's need to lodge a complaint with the ombudsman in the first instance and may lead to faster resolution of the complaint.

Section 58 stresses the importance of mediation in resolving complaints that proceed to the ombudsman. The text of this section was much discussed in the Dáil and in this House during the passage of the Private Member's Bill with the Government's amendments made on Report Stage in the Dáil. The current wording was arrived at with the consensus of all parties. I thank the other parties for engaging so productively on this issue. I believe that the current wording of section 58 should reinforce the encouraging current trend of nearly 60% of complaints being resolved by mediation.

The extension of the time limit is a key feature of this Bill and had been flagged for some time in the public consultation in 2015 and the heads of Bill published in 2015. Under the old regime, a consumer had to make a complaint within six years of the occurrence of the conduct complained of. Section 51 of this Bill proposes to modify that time limit by providing that a consumer of a long-term financial service may also make a complaint within three years from when he or she first became aware, or ought to have become aware of the conduct complained of if that was later than the standard six years from the date of the conduct. Furthermore, the ombudsman retains the discretion to extend the time limit for the making of a complaint in respect of long-term financial services in circumstances where it seems just or equitable for him or her to do so. The rationale for extending the time limits to long-term financial services is because consumers of a long-term financial service may not be aware of a problem until the maturity of the product, which could be long after six years from the date of the conduct in question. On the other hand, a problem with a short-term financial service should manifest within the six-year time limit already provided for.

The new time limits also apply to conduct that occurred in the past. Consumers will now be able to complain about conduct stretching back 15 years to 2002, provided that the long-term financial service in question has not expired or been terminated more than six years before the complaint. This could include complainants who have previously have had their complaints dismissed by the ombudsman in the past due to the conduct complained of falling outside the previous six-year time limit and who make their complaint within the new time limits. The decision to apply this 15-year "long stop" was inspired by the long stop recommended by the Law Reform Commission when it discussed introducing a discoverability test to extend the time limit for making personal injury claims. The use of these proposed time periods was arrived at on foot of extensive research by the Department of Finance. It is the result of a comprehensive process of engagement with numerous stakeholders, public consultation and advice from the Attorney General and I am sure Senators will agree it strikes the appropriate balance necessary to protect the consumer in a practical way.

A notable improvement in the Bill is the provision for increased communication between the ombudsman and the parties of a complaint. The ombudsman can now issue preliminary decisions and explain certain decisions during the investigating process, such as decisions on whether to hold an oral hearing. This will increase transparency for both consumers and providers. Most significantly, in section 62 there is provision for the publication of the ombudsman financial services decisions, with names redacted, which should ensure an optimal balance between promoting transparency and the operations of the ombudsman and protecting the privacy of complainants.

The Bill introduces a number of important changes to the current regime. Chief among them is the consolidation of the Financial Services Ombudsman and the Pensions Ombudsman into a single office. The provisions contained in this Bill will considerably improve the position of consumers, especially the new time limits with regard to long term financial services.

I thank all the political parties for engaging in a constructive debate on these issues during the Stages in the Dáil and thank Senators for their contribution to the debate on the Private Members' Bill last week. These contributions have resulted in a Bill that I believe will be embraced by this House. I am satisfied with the Bill, as it stands, and commend it to the House for further discussion.

I think this was the first piece of legislation I took here. I told the House that I would be as accommodating as I could be to ensure we got the best legislation possible and that still stands. I hope the level of co-operation we have had today will continue. The legislation is better for it. There had been some confusion last Friday on how we had got the legislation back to the Dáil to be concluded there, but all parties co-operated and we got through the process quite painlessly. I commend the Bill to the House.

I will make my points briefly because we have discussed this on Committee Stage and many of the matters relating to the legislation were discussed in the pre-legislative scrutiny on the Sinn Féin Private Members' Bill in the appropriate committee. We teased out most of the remaining items last week. I welcome the opportunity to contribute to the debate on the Financial Services and Pensions Ombudsman Bill 2017 and confirm to the Minister of State that Fianna Fáil will support the passage of this Government Bill. Many of the provisions, such as the definition of the consumer and the timeline within which a consumer is able to make a complaint are directly inspired by the FLAC report of 2014, Redressing the Imbalance. The authors of that report must be commended for their extensive work and on other legal protection for individuals. We all want to see better protection for consumers, where they have genuine complaints about services and products which they bought, and that they are able to address those concerns robustly and in a comprehensive manner with the financial services and pensions ombudsman.

I will not rehash the contents of the Minister of State's speech, which was comprehensive. It makes sense to put financial services and pensions ombudsman positions together. The pension is a financial product and it makes sense that it would be with the Financial Services Ombudsman. Physically, they have already merged and this is merely enabling legislation to allow it to take effect in practice. In effect, this Bill replaces or supersedes the Sinn Féin Bill which we passed last week.

It is important that we take on board all its measures. All of the positive measures to which we agreed in that Bill last week are comprehensively included in this Bill. We do not want a situation where one Bill contradicts another. There could be a concern that the merging of the two offices may lead to a reduction in the quality of service. We must make it clear that by putting two ombudsman offices together we do not see any diminution in the service provided to either sector, whether it is financial services excluding pensions or pensions. That is an important part of this legislation. It might be the case that its smaller council could make it more focused. There will be people with a consumer background and others from the financial services and pensions industries. Expertise is important.

The Minister of State discussed a levy. He said we should look at mediation, where possible. The definitions are important when we are looking at what is or is not a long-term product. We must make sure the time limits are comprehensive. The Minister of State mentioned the 15-year backstop which would give many people a reason and an opportunity to make their complaints and have it enabled in the legislation.

The Minister of State's conclusion was appropriate. It says exactly what the Bill is about which is merging the offices, improving the time limits, and giving the definitions. I support the Bill and do not want to delay its passage through the House. I commend it and hope all parties will work together on it. New politics is criticised sometimes, but it is important that when we work together and get a better result it shows that the dynamic here at the moment can encourage Governments to take on the concerns of other parties to produce better legislation for the benefit of everybody.

I thank the Senator for his usual brevity.

I also hope to be brief.

I warmly welcome the Minister of State, Deputy D'Arcy. This Bill makes absolute sense. It is important when something makes sense and has been teased out and argued, and its merits put forward, we should move on with it. There is much criticism of new politics, but it can only be new politics if those from all parties and none make it work. That is our challenge.

I acknowledge the broad consultation on the Bill. We have had much debate and discussion on this legislation, for which I thank the Minister of State. The financial services and pensions ombudsman is a statutory officer who deals independently with unresolved complaints for consumers about their individual dealings with all regulatory financial service providers. The statutory role of the Pensions Ombudsman is to investigate complaints of a financial loss due to maladministration and disputes on facts of law in relation to occupational pension schemes, trusts, retirement, annuity, contracts and personal retirement savings accounts. The Pensions Ombudsman performs these functions independently and acts as an impartial adjudicator. The funding of all this and the resources that will be necessary for the new merged outfit are important. I will raise this matter later with the Minister of State.

The Bill before us seeks to amalgamate the office of the Financial Services Ombudsman and Pensions Ombudsman which makes absolute sense, as Senator Horkan said. There can be no diminution of the role of the office or its strength and effectiveness. This is about supporting consumers and resolving issues in the financial services market and everything that goes with it. It cannot be seen to water down the impact of what is needed, whether it is righting a wrong, mediation and addressing issues which are pertinent to the role and functions of an ombudsman.

The proposed legislation provides consumers with a one-stop shop for inquiries, which makes sense, and the potential to remedy complaints relating to pensions and financial products. It proposes to consolidate and update the legislation including an extension of time limits for complaints to the ombudsman. This is something that people have called out for and again we have seen the Minister of State respond to the public demand and genuine concern. I welcome all of these things.

In April 2013 the Government agreed to accept the recommendations to an important report, a critical review under the public service reform plan, to amalgamate the office of the Financial Services Ombudsman and the Pensions Ombudsman. It argued that the functions of the two organisations were "sufficiently similar to provide opportunities for improvements in the quality of the service to make such an amalgamation desirable," and it can work. The then Minister for Social Protection, Deputy Joan Burton, had announced the intention to amalgamate the two bodies in April 2013.

I do not see any Labour Party Member in attendance, but it is worth noting that was her recommendation as Minister at the time. In addition to the amalgamation of both offices, the opportunity was taken to review the existing legislation. It is important that that was done in order for the Bill to be meaningful, as the Minister of State has demonstrated it is. I have read the memorandum and other literature in this regard. A root and branch review of both bodies and how the services worked was carried out and it was decided that what is proposed by the Bill is a better option.

I am fully happy to support every aspect of this legislation. It is a good, timely and welcome Bill. The Minister of State is pushing it very early in his time in office and I wish him well with it. He should address how it will be resourced and how the new body will be funded. That is very important. I again thank the Minister of State for coming to the House and for the rapid manner in which he has pushed the Bill forward. He has also listened to, engaged with and responded to various concerns raised.

I welcome the Minister of State. He was in Limerick yesterday and is spending much time in the Seanad, his alma mater-----

Is the Minister of State following the Senator or is it the other way around?

Absolutely. This is probably one of the most important Bills to come to the House in a long time. People in Limerick have told me that issues in respect of dealing with the ombudsman and related time limits in particular are very important. Sinn Féin brought forward a Private Members' Bill on this issue which will now be superseded and is consolidated in this Bill.

Many people come to my constituency office having experienced an issue with a financial provider and then suddenly found that six years had elapsed from the date of the conduct complained of. Most may not even have been aware during that time of what was happening. It was unfair. The biggest short-term issue is that people will now be able to seek to reopen a case with the financial ombudsman over conduct going back as far as 2002 so long as the financial product had not expired or been terminated more than six years before the complaint was made. That gives a window of opportunity. People who feel they were ripped off in respect of a financial service but whose time period to make a complaint to the ombudsman had elapsed will now be able to go back to the ombudsman and have the case reopened.

This legislation has gone through the Dáil and is due to be passed through the Seanad in its entirety this week. It should then go to the President as quickly as possible to be enacted. The ombudsman would be ready for that enactment. An information campaign should be begun by the financial ombudsman to inform people of the changes and should provide a freefone number for people seeking information about whether they can now make a complaint about a product in respect of which they felt they were ripped off in the past. People must be made aware that if the conduct complained of took place since 2002 and the product had not elapsed for more than six years from when an original complaint was put in, they can now re-enter the complaint. I welcome that window of opportunity. The Bill should be enacted as quickly as possible.

Section 26 provides that a strategic plan be completed by the ombudsman as soon as practicable following the establishment of the Bill and updated every three years thereafter. We must ensure those targets are met and that by the end of this year the strategic plan will be known.

Section 58 deals with mediation. The Financial Services Ombudsman should be a measure of last resort. I hope this Bill puts manners on financial service providers and that problems with a person who has been treated badly in respect of a financial services product be sorted out through a financial service provider's internal mediation process, rather than the case going to the ombudsman. That is extremely important.

It is welcome that the ombudsman will be able to provide preliminary decisions. A practical measure should be put in place whereby people with legacy issues who could not previously make a complaint to the ombudsman because the six-year deadline had elapsed will now be made aware that if the conduct complained of happened within the past 15 years and that the product had been in place for less than six years prior to the date they made the original complaint to the ombudsman that, they can seek to have the case reopened. There are many such people. When the Bill is enacted and up and running, banks and financial institutions should take heed of what it is purporting to do and resolve it by mediation. The ombudsman should issue preliminary decisions as a matter of course in order that people will be aware of whether they will have an oral hearing, the reasons for it and how long the process will take.

Section 62 provides for the publication of decisions, which should ensure an optimal balance and promote transparency. Redacted details should be published which would provide a standard and benchmark for financial service providers to adopt. That will help to ensure routine cases be dealt with by financial service providers rather than ending up before the ombudsman.

There should be no requirement for a financial services and pensions ombudsman. Financial service providers should act in the best interests of their client, as well as in their own interests. Members know of too many instances in which elderly people in particular have been ripped off. Many such people have contacted me in regard to this issue. Members must consider whether a commission-based payment scheme for those selling these financial products has contributed to the selling of products that are not fit for purpose.

Sinn Féin welcomes the Bill. As Senator O'Donnell has just said, when passed it will supersede the Sinn Féin Bill which I was delighted to see passed by the House last week. I am very glad to see that what was won on behalf of consumers in the Sinn Féin Bill will form part of this Bill.

This is a Bill of two parts. First, it merges the offices of the Financial Services Ombudsman and the Pensions Ombudsman. Second, it overhauls many consumer protection rules regarding the making of complaints. Of most importance is the removal of the so-called "six-year rule". The issues in respect of consumer protection have been well debated and I am glad that common ground and common wording has been found in order that there be no differences from the point of view of the consumer when making a complaint, regardless of the date, from now on.

It is important that the merger of the offices of the Pensions Ombudsman and Financial Services Ombudsman not pass without comment and scrutiny. Members have become so used to the language of austerity that words such as "merger" set off alarm bells that the real intent is to impose cuts. There seems to be no democratic demand for such a merger. The basis for it seems to be the regulatory impact assessment by Mr. Hinz of the World Bank who concluded that there was no compelling evidence that negative consequences would ensue from the merger. That is a very weak premise on which to proceed with the merging of two very important consumer protection bodies. In view of the recent tracker mortgage and PPI scandals, can one really say this is the right time to tinker with the consumer protection bodies of the State?

That is not to mention the rip-off being carried out by insurers on drivers, small business and home owners day in, day out. Reform of consumer protection law is required and this opportunity could have been taken for a more radical approach. The strict power of the ombudsman to rule only on what is legal as opposed to what is fair frustrates many people and that frustration is understandable. The Central Bank does not want to hear from individuals and the ombudsman can only stick to the narrow legal battles.

That is the situation for consumers in this country. When something stinks, everyone smells it, but no one can do anything about it. I am aware, too, of the issues with endowment policies and so-called whole-of-life policies, where elderly people or their children in some cases are now realising that the small print contains some very nasty wording. The policies they were sold turned out to be different from what they were led to believe. I predict this will be a major issue for the new ombudsman's office in the coming years.

This merger should not and cannot put consumers at a disadvantage relative to where they are today. That means ensuring the new office is properly resourced at all times, which we need to monitor. My party put forward an amendment during the Dáil Stages seeking to weaken the overall control of the Minister in matters such as the ombudsman hiring extra resources or engaging a consultant to carry out a study. The principle of oversight is correct, but it is my hope that, in practice, whatever resources the ombudsman wants, he will get.

I warmly welcome the new provisions allowing the ombudsman to publish findings in full. This is a significant improvement. Only last week we passed some of the other measures of this Bill because of the overlap with my colleague, Deputy Pearse Doherty's Bill. I thank the Minister of State and his staff on behalf of my party for their co-operation in getting Deputy Doherty's Bill through. Thousands of people each year who are prevented from pursuing allegations of wrongdoing against financial institutions will now be allowed to access justice through the Financial Services and Pensions Ombudsman. Figures from the ombudsman's office show that 1,000 people every year are barred from the process because of the six-year rule. We know thousands more have not applied because they have been advised the six-year rule will apply. This rule only operated to benefit the banks and other financial institutions, which it shielded from investigation. We will now redress that imbalance, with consumers empowered to make a complaint within three years of becoming aware of possible wrongdoing. Critically, thousands of people previously refused access to the process will now be allowed to resubmit their complaint because the legislation is retrospective in nature. This will come as very welcome news and a massive relief to the many consumers who have contacted us all, I am sure, looking for an opportunity to have their complaint heard. I wish particularly to commend the work of FLAC, Free Legal Advice Centres, the report of which, Redressing the Imbalance, forms the basis of these victories for consumers. I urge those previously refused access because of the six-year rule to reapply and the countless others who did not apply because of their awareness of the situation to reconsider submitting their cases. We support the Bill.

I thank the Senators. I want to touch on the issue of when the commencement orders will be made in respect of the establishment. When we conclude within the House, I hope this week, the Bill will go to the Attorney General's office in respect of the commencement order. I do not think there is a requirement for an early signature or anything of that nature. It is going to go through the process and become law as quickly as possible.

Senator Boyhan raised the issue of the funding model. As a result of having two offices, there were two streams. There is a dual funding structure in place. It is appropriate that the financial services providers should fund the ombudsman's service in respect of financial services products, since the ombudsman helps them resolve complaints, as well as allowing consumers to raise them. The ombudsman replaced voluntary schemes which the industry had in place.

In respect of pensions, many of the complaints pertain to public sector schemes. It is appropriate that they should be paid for from public funds. In addition, we do not want to discourage people from taking out pensions, which could be the case if the cost of a levy was too great. There was a previous structure within both offices which has been streamlined into one.

Senator Conway-Walsh asked if expenditure could be allowed within delegated sanctions. It would be the intention that the ombudsman would be allowed to operate within delegated sanctions. That is the way every other Government agency operates. There are clear sanctions and amounts within the HSE and other Government agencies. If one goes beyond that, there is a requirement for consent from the Minister for Public Expenditure and Reform. This is putting in place exactly what applies to every other Government agency. There is nothing different here. It is not the intention that the ombudsman would have to seek the approval and consent of the two Ministers each time he needs to engage consultants or advisers, but it is necessary that expenditure of taxpayers' funds is subject to the appropriate oversight. There is a lot of focus on expenditure on consultants, coming from all sides of the House.

The line between pensions and financial services is no longer completely straight. There is a significant crossover and the lines have become blurred because of the products that are being sold at the moment. As a result, this is the opportunity to be able to assess those financial services that may be a pension or have some features of a pension. It is the main reason the bodies are merging.

The issue of whole-of-life policies were raised. My role as the Minister of State with responsibility for financial services is a promotional role. I promote the sector very strongly and vigorously. Many people are employed in this industry in the State. I support that fully. However, I want to be very clear that if there is any sharp practice occurring, I want people to bring it to my attention. If there is sharp practice, I will do the very best I can to deal with it within my period as Minister of State with responsibility for financial services. The matter of whole-of-life policies has been brought to my attention. A number of constituents have come to me. It is very wrong that elderly people are being charged massive annual premiums to continue their policies. Some of these people have paid into a policy for decades. If they live another year or two, and please God they will, the premium becomes so high they effectively lose all they have paid over the period. That is not playing the game fairly. I want to be very clear about this. I take a very dim view of someone taking advantage of the rules and how they are allowed to apply them.

On a point made by Senator Kieran O'Donnell, I agree with him that there should not be a need for an ombudsman. I would love if there was not. There can, however, be very legitimate disputes on both sides. The ombudsman's office is there to be fair and impartial and to try to come to a conclusion on matters without recourse to the courts. That is what it is for. The likes of what I just mentioned is not playing fair. If the financial services I promote and support are not doing it properly, there will be a cost.

On a point of order-----

Is it a point of order, though?

Just to be constructive-----

As the Minister of State is concluding the debate, I am not really supposed to let the Senator in now, but perhaps it is to be helpful.

It is a very important point on whole-of-life policies. I met a man recently who was in his 90s. He had taken out what was called a section 60, a life policy to pay taxes on his death.

He has lived to a much older age. He is now 93 years old and has put a substantial amount of money into a term policy but no endowment element of any description was built into it. I suggest the design of such policies needs to be looked at. The amount of money the man in this case has put into the policy is significantly more than it would be on encashment if he were to pass away. We probably need to look at the design of these products. When the man in question went to the Ombudsman, he was informed that under the terms of the contract he had signed with the financial institution, nothing unlawful had been done. It seems incredible that he has put in significantly more than what the policy is worth. It is wrong that it is being said the policy will die if he does not continue paying the exorbitant premiums.

I thank the Senator for his additional contribution.

I am pleased to see the introduction of a new term in the era of new politics.

I am not going to invent new terms.

Senator Victor Boyhan did.

Question put and agreed to.

When is it proposed to take Committee Stage?

Committee Stage ordered for Wednesday, 19 July 2017.
Sitting suspended at 3.15 p.m. and resumed at 3.35 p.m.