Wednesday, 27 February 2013

Questions (238)

Clare Daly


238. Deputy Clare Daly asked the Minister for Justice and Equality his plans to reform the statute of limitations so that claims can be made against financial institutions that misssold financial products. [10722/13]

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Written answers (Question to Justice)

The mis-selling of financial products is a matter of ongoing public concern. It has been raised by consumer groups and by the media, as well as in successive reports of the Office of the Financial Services Ombudsman, which has previously noted:

The current economic climate has affected many consumers across the range of complaints received, however it is most pointedly seen in the complaints regarding investments products. The main area of complaint with regards to investments is the alleged mis-selling of these policies. This complaint type accounted for over 37% of investment complaints for the period 2007-2010. The majority of complaints relate to the consumers’ contention that they were sold unsuitable products.

Its biannual review for July to December 2012, the Office of the Financial Services Ombudsman again highlighted the mis-selling of financial products, noting that "Payment Protection Insurance (PPI) complaints, representing 32% of all insurance complaints in 2012, have increased by 216% on 2011 figures", from 405 in 2011 to 1,280 in 2012, and that, "in general, the main feature of the complaints concern the suitability of PPI for the consumer and the consumer's knowledge or lack thereof that they agreed to and paid for the product in the first instance". I am also aware that the Central Bank has sought a review by banks of the sale of PPI and the refund of customers who could never claim under that insurance as purchased.

While it is not under the aegis of my Department, the Financial Services Ombudsman was established under the Central Bank and Financial Services Authority of Ireland Act 2004 and became operational on 1 April 2005. It is a statutory body funded by levies from the financial service providers. The Financial Services Ombudsman can investigate, in an impartial and independent manner, complaints from individual customers and small businesses who have unresolved disputes with Financial Service Providers who are either regulated by the Financial Regulator or are subject to the terms of the Consumer Credit Act 1995. Under current law, the Financial Services Ombudsman may not investigate a matter which occurred more than six years before the complaint is made. This is in line with the limitation period for most civil claims in the courts, including contract. This limitation period is provided for under section 57BX of the Central Bank Act of 1942, as amended by section 16 of the Central Bank and Financial Services Authority of Ireland Act 2004. The relevant provision states:

"(3) A consumer is not entitled to make a complaint if the conduct complained of—

(a ) is or has been the subject of legal proceedings before a court or tribunal, or

(b ) occurred more than 6 years before the complaint is made, or

(c ) relates to a matter that is within the jurisdiction of the Pensions Ombudsman, or

(d ) is of a class prescribed by Council."

I would also point out that the statutory functions of the Financial Services Ombudsman Council include the keeping under review of the efficiency and effectiveness of the Office of the Ombudsman and advising "the Minister for Finance, either at the Minister's request or at its own initiative, on any matter relevant to the Ombudsman's operation". It would seem, therefore, open to the Council to make any relevant recommendations concerning the current limitation period that it considers appropriate to the Minister for Finance, who will be best placed to inform the Deputy whether or not such matters have so come to his attention. I am aware that a different approach has been taken to this issue in the United Kingdom. While consumers in that jurisdiction must bring complaints to the Financial Ombudsman Service within six months of the final response letter from the business concerned, no limitation period applies to the matters on which the complaints are based. The Law Reform Commission has made recommendations in relation to enhancing the coherence of the broader limitation of actions regime in its Report on the Limitation of Actions of December 2011 and in relation to the limitation period applicable to contract law which could have a bearing on the matters of concern to the Deputy. I will be happy to take account of these recommendations and of the Deputy's concerns in any proposals for legislation that I may develop on periods of limitation in the future, while also taking account of any relevant developments in policy that may take place between the Office of the Financial Services Ombudsman, its Council, and the Minister for Finance.