I welcome the Financial Services Ombudsman, Mr. Joe Meade. I apologise for the delay in proceeding with our discussion but the committee had a number of outstanding matters with which to deal. I also welcome Mr. Diarmuid Byrne, head of administration at the Office of the Financial Services Ombudsman. I invite Mr. Meade to make his presentation.
Role and Functions: Discussion with Financial Services Ombudsman.
Mr. Joe Meade
I welcome the opportunity to address the committee. I will make a brief opening statement as to what my role is and what has been achieved since we commenced operations on 1 April 2005.
As Financial Services Ombudsman, I am a statutory officer and the position I hold came into being on 1 April 2005. I deal independently with complaints from consumers regarding their individual dealings with all regulated financial service providers which have not been resolved when those complaints have been through the internal complaints procedures of the providers concerned. I am, therefore, the independent arbiter of unresolved disputes and impartial. Broader issues of consumer protection are the responsibility of the Financial Regulator.
All personal customers, limited companies with a turnover of €3 million or less, unincorporated bodies, charities, clubs, partnerships, trusts, etc., can complain to me. It is a free service to the complainant; compensation up to €250,000 can be awarded and my decisions are binding on both parties, subject only to appeal to the High Court.
A context for my role may be of value to members. Consumers are entitled to complain. Financial service providers make mistakes. Against that background, matters that have not been resolved are referred to me. I only receive a small percentage of complaints relative to the total number of financial transactions undertaken but how these are handled by financial service providers is what ultimately matters. Needless to say, I do not uphold every complaint. As stated, I am an independent and impartial arbiter. I am not a consumer champion or an advocate, although my decisions lead to improvements for consumers. I publish selected case studies, generally every six months, to enlighten everyone as to the type of cases I deal with and what lessons can be learned by all. My role, therefore, cannot but enhance the financial services environment.
The following is an outline of my office's activities in 2007: we received 4,374 complaints — an increase of 15% over the 2006 figure, which represented a 14% increase over that for 2005; 1,053 cases were carried forward on 1 January 2007 and, accordingly, my office dealt with 5,427 cases last year; 4,534 cases were concluded after review or investigation; 2,690 complaints, or 59%, were resolved in complainants' favour; 10,400 telephone calls were received; 70,000 visits were made to our website; many personal callers came to the office for advice and guidance; office administration was highly effective and efficient overall; and relations and co-operation with complainants, financial service providers, the Financial Regulator, the Pensions Ombudsman, the National Consumer Agency, the Department of Finance and other State agencies were highly satisfactory.
I wish to comment briefly on what has happened since 2005. To the end of December last, the office had received some 11,553 complaints. At the end of 2007 we had no backlog of complaints. Some 893 complaints were not concluded at year end but this has to be considered in the light of the fact that 1,100 were received during the last quarter of the year and that the process must be undergone in respect of these. At 31 December 2007, 13 of my decisions had been appealed to the High Court, while another was subject to judicial review. This represents just 0.17% of cases decided by me. In the nine judgments handed down to date, only one of my decisions has been overturned on appeal — namely, that relating to Quinn Direct — but this was really an interpretation by the courts of the extent of my statutory powers and has not so far impacted adversely on my role.
Following the settlement in my favour in the judicial proceedings relating to Irish Nationwide Building Society, full refunds involving, I understand, a significant seven figure sum have now been made to all other customers following a look-back exercise undertaken as a result of my decision in the particular complaint. This look-back was carried out under the general supervision of the Financial Regulator.
As regards complaints issues, significant decisions and compensation awards have been made from the outset. However, the size of an award is not what matters; rather it is that the person who has complained and the financial service provider concerned obtain a fair and impartial decision from me. I have not shirked my responsibility to deal with some extremely difficult and complex cases in a short period. I have also expressed serious concerns regarding sales of investment products to the elderly, travel insurance, the provision of inappropriate investment advice in the sale of properties and matters relating to the sale of income protection policies and permanent health insurance policies.
My office is funded by statutory levy set by my council, with the consent of the Minister for Finance. The office's running costs in 2007 were €3.7 million. My staff complement is just 27 but that is plenty for my requirements. The workload increased by 14% and 15%, respectively, since 2005; cases are becoming more complex and levies must be collected. However, only four additional staff have been taken on since April 2005. In the first few years of operation it was not easy to set a realistic budget because it was difficult to determine what would be my workload. Nevertheless, there was no need to increase the levy for this year over that which applied in 2007.
It is regrettable that I have to pursue a small number of intermediaries through the courts for the non-payment of a €125 levy. However, I felt that, in the interests of equality, all financial service providers should pay the levy and that nobody should escape paying what was laid down under statute. My accounts are subject to audit by the Comptroller and Auditor General. I have a governing council, appointed by the Minister for Finance, but it has no role as regards how I deal with complaints. I would be pleased to answer any questions or respond to comments from members. I did not mind waiting as I understand parliamentary committees have much work to do.
I thank Mr. Meade for presenting his report. What interests me most is whether the remit we have given the Financial Services Ombudsman has proved robust enough to deal with complaints that ought to be investigated. Mr. Meade drew our attention to areas of concern, one being the sale of properties, particularly properties overseas. We see such properties commonly being advertised and I suspect many of those attracted to purchasing may not fully know what they are buying into. Cases have come to my attention where people were ripped off when they engaged in the purchase of properties overseas. Is there scope for changing the remit of the Financial Services Ombudsman in order that some of these practices could be dealt with?
There is also the matter of travel insurance. I have had experience with constituents where the extraordinarily restrictive small print prevented policies from being of any value to people who thought they had cover. With some insurers, if a person has been to the doctor in the past two years, they must highlight this fact. People do not read that far into the small print but if something subsequently goes wrong, it can be used against them. That is ex cathedra but such terms can be used to exclude the application of the policy. It seems there are some oppressive terms and conditions in use in some of these products. Has the Financial Services Ombudsman had a flow of complaints that had to be turned away because they were beyond his remit? Is he looking to have the legislative framework altered in any way?
I noticed recently a decision which had found in favour of an applicant in a case of overcharging. The financial institution concerned was not obliged to pay out to others in identical positions. Every affected person would, in turn, have to come to the ombudsman to have a decision made. What issues are raised in providing a power to make class decisions, or in making a ruling that applies universally? I presume that would get the ombudsman into more difficulties in the courts in that the figures in respect of decisions made would probably go beyond €250,000 and be very substantial when totted up.
It has come to the notice of the Department of Finance that the legislation should perhaps be changed. Will the ombudsman report on progress made and whether officials are sympathetic to the proposed changes? What issues arise in this regard?
I join others in welcoming Mr. Meade and congratulate both him and his staff on the work they are doing. I have sent a few complainants in their direction. Although the procedure is sometimes complex, the ombudsman is providing a valuable service. I know a number of people who have been assisted with issues.
I have questions on a number of separate issues. The first concerns credit unions and the purchasing of various financial products, including bonds. I distinguish between two classes of credit union: the very large credit unions such as those in employments, including the Garda and Revenue Commissioners, where there are well established boards and sound legal and financial advice structures and the smaller unions which hold large volumes of deposits, partly because of the SSIA scheme. They have part-time directors who may not have an enormous amount of financial expertise. They are, therefore, at risk of predatory selling of various financial derivatives and other complex financial products that have featured recently as part of the credit crunch.
I know the Financial Services Ombudsman has been in court with regard to one credit union. Is there any indication of the extent to which other credit unions hold such bonds, particularly the smaller examples? What is the position on the protection available for savers and depositors with credit unions if there are financial problems within the credit union movement? Are all credit unions covered by saver protection? Is this part of the ombudsman's remit?
Unfortunately, I come across the second issue I want to raise frequently. This is where people have been sold sub-prime-type mortgages by a small number of financial institutions which are not fully regulated but sell products aggressively. They are offered the opportunity to collate all their loans into one, including their house, car, home improvement and holiday loans. Many such loans are peddled door-to-door in areas with affordable housing or in local authority estates where house values have risen. They are also advertised extensively on television. When there is a problem with repaying the mortgage, the mortgage holders may well find that unless they pay all the arrears in full, the lenders will not accept any settlement. In addition, once they are in default — as little as two months in arrears — there are significant penalties that stack up. Three such institutions hand matters to the courts rapidly. There has been a significant increase in the number of such cases before the courts and legal advisers charge hefty fees. I have come across cases where a sum of €6,000 in arrears morphed within four or five months into a €30,000 debt. Those involved are probably considered to be a credit risk to begin with and would simply be unable to cope with this. I do not know if that issue comes within the remit of the ombudsman.
There is much traffic on an additional problem. Up until now, in the Dublin area it has been common to buy houses and apartments off the plans and pay a booking deposit of approximately €20,000 or €25,000. With the fall in the value of houses and apartments, many who signed such agreements are finding that the value of the property has fallen. Nevertheless, those who took the deposits insist on the complete fulfilment of the terms of the contract. This may be more a matter for solicitors, as opposed to the banks, which provide the deposits. I have heard about many sad cases, including that of an elderly pensioner who had hoped to move and now finds himself facing enormous bills. Is there anything the ombudsman can do in such cases?
Mr. Joe Meade
I will respond to the first two Deputies or else I will get lost.
With regard to property advice, we must distinguish between advice given by mortgage brokers on investments, which in part could relate to buying a property overseas, and that given by auctioneers and others selling properties overseas. If a person is dealing with a mortgage broker or intermediary giving investment advice who is regulated, I can deal with the matter. However, I cannot deal with auctioneers or others selling properties overseas. There is to be a new agency to deal with property matters.
I have published decisions in five cases where I found that mortgage brokers had not disclosed a conflict of interest when they sold investment apartments. They also tried to confuse the consumer on whether they were acting as auctioneers or property investment advisers. In respect of the five complaints I have dealt with, I have awarded €116,000 in total in compensation. I am dealing with more such cases. Once they are giving investment advice be they mortgage brokers, intermediaries or whatever, that is fine.
I have also turned down cases in which it was clear that the person was going to an auctioneer for advice. People must use their cop-on. There is an onus on them not to be gullible. There are good controls between what I can deal with, such as investment advice, and the new regulatory agency being set up for auctioneers and management companies, etc. The implementation body is in Navan and the Dáil will deal with the legislation in a few months.
Small print in insurance policies causes problems. I have had concerns about several issues. Travel agents sell many travel insurance policies on behalf of insurance companies. They will or will not honour the contract, depending on what is told to them. The travel agents selling these policies may not alert people to the necessary restrictive conditions. If a customer does not disclose a pre-existing illness he or she may have got cover which he or she should not have got, or would get cover at a higher rate if he or she disclosed the illness. I compliment the Irish Association of Travel Agents. I examine the terms and conditions, and the equity, and even though something may be correct on the contract, the legislation provides that if I feel it is not fair and equitable I can rule accordingly and have done so.
I can award compensation only up to €250,000. If the effect of my decision was that an insurance policy be paid out, be it €300,000, €500,000 or €10 million, that must be paid. We already have two cases in which I gained access to phone records and found that a person had made known a certain condition, and that a mortgage protection policy of €310,000 was paid out to a poor widower in County Tipperary. In other instances the effect of my decision was that the policy should be paid out and I can award compensation as well.
In respect of Quinn Direct, I said there was a €25 charge that was not in the policy condition. The company accepted that it should not have been paid. That would have arisen for many other complainants in the same boat and they should have been compensated accordingly without having to go through me. The company appealed the decision to the High Court, as was its right, and the court ruled that I did not have that power. I accepted the High Court's judgment and wrote to the Minister for Finance saying that this matter should be examined in the overall context of a class action. The Minister has referred it to the review body set up to consolidate financial legislation. This would arise only in particular cases. By contrast, I told Irish Nationwide that is was not fair to charge a penal interest on early payment of commercial mortgages and said that in future it should change that practice. One would have to study each individual case to understand its individual circumstances. The likelihood of this arising is small.
Although Quinn Direct won that case, it reviewed its policies and before Christmas issued a press statement to the effect that it had refunded €300,000, going back six years, to many customers where it had discovered bad sales practices. I do not know whether that included the €25 charge I questioned but significantly, most of the claims refunded were for €25.
I thank Deputy Burton for her comments. I do not mind receiving representations and I answer them personally within five days. Often this involves identifying where the person should be referred, or whether I can deal with the matter. I have no problem with a public representative acting on behalf of a complainant who might not be able to act for him or herself, as long as that person authorises the representative to do so. I do not, however, give public representatives preferential treatment in investigating complaints.
Credit unions are incorporated companies and therefore I can deal only with those that have a turnover of €3 million or less. There are some big and some small but I do not know their make-up. Of the 350 credit unions, approximately 100 are under the €3 million limit. Some are large and have expertise, others do not. If committee members have read the newspapers in recent days or listened to me on the radio they will know of a decision I made concerning a stockbroker on sales of particular bonds to a credit union in which I found, after detailed consideration, that the stockbroker had not acted properly, in not giving the full advice. I awarded that the bonds be bought back at par, which was €500,000. The stockbroker is perfectly entitled to appeal that to the High Court, which it has done, but it has also sought a judicial review questioning the constitutionality of the legislative basis of my act, saying that it is contrary to the Constitution and to the European Convention on Human Rights. The State has been joined in that portion of the action. I am happy with my decision and will defend it vigorously in the High Court. The committee will appreciate that I cannot discuss the nuance of it now because it is before the court.
The regulator for the credit union movement deals with protection for borrowers and savers in credit unions, and whether they have to have certain bonds and so on. Unions or members can refer complaints to me. I have found in favour of complainants against credit unions in some, but not all, cases. Only one credit union so far has complained to me. I do not look for complaints. If there is a systemic problem I will refer it to the Financial Regulator and to the registrar of credit unions but if other credit unions complain I will consider each case on its merits, because there can be nuanced differences between complaints received.
While sub-prime mortgages are regulated only from 1 February I could deal with complaints against sub-prime lenders since April 2005 because they were mortgages.
Excuse me, Mr. Meade, I must inform members that there is a division in the Seanad.
Mr. Joe Meade
The Consumer Credit Act placed them under my remit. I have dealt with complaints against sub-prime mortgagors. I also deal with complaints against moneylenders and pawnbrokers as well as stockbrokers and credit unions. We examine each case on its merits, considering the contract. I will not discuss any individual case here but I take into account factors such as whether the mortgage was appropriate to that person, and whether all factors were taken into account. If the person took it out in full knowledge and has not honoured his or her repayments I may not uphold that complaint. In other instances I will do so. People are entitled to come to me if they have a problem but once a matter goes to the courts I cannot deal with it, unless I consider that the mortgage company brought it to court to frustrate a complaint being made to me. I have dealt with such cases.
The fall in the final value of a house at auctions, etc., does not come under my remit, unless there was a financial adviser, be it a mortgage broker or whoever, giving advice. As a matter of common sense if a house falls in value that does not mean that it will fall in value over life. One has to be careful not to jump the gun because a house only falls in value if one wants to sell it as an investment. I hope I have answered all the questions.
As Senator Quinn has to leave for a vote in the Seanad I will call Deputy Ned O'Keeffe.
I welcome Mr. Meade and am aware of the valuable work he is doing. He gets good publicity from time to time because he is there to protect the innocent consumer. The case between the credit unions and Davy Stockbrokers is fundamental to the national financial situation. Were Davy Stockbrokers to advise me to take a bond at €500,000 that subsequently fell in value to €470,000, what fall-back would I have?
I take a poor view of the management of the credit union that did not read the terms of reference in respect of the money being invested on behalf of its members. That is the issue because one cannot take by the hand everyone who makes an investment. Members are aware of what is happening in the wake of the sub-prime lending and other crises in financial market globally. Many people are hugely out of pocket and are distressed. Credit unions today, regardless of whether they have turnovers of €3 million or €50 million, are big businesses. However, there are local boards with people who are not very knowledgeable in the financial area — I say this tongue in cheek — as well as the Irish League of Credit Unions. Legislation is required to tighten up this situation. Credit unions should have financial experts available to them who could make recommendations on proposed investments. That is the issue in this case.
Many people have invested over the years in mortgage protection policies in respect of endowment mortgages. What fall-back do such people have when they have made a bad decision whereby the mortgage protection policy will not cover the cost the cost of the mortgage as originally intended? This is another minefield in the financial area.
I do not detract from the excellent work Mr. Meade has been doing. I will not do so because Clare will not be in this year's Munster final and Cork will come back yet.
Is that a prediction?
An ombudsman is needed in Cork.
My point is that I am not very sympathetic to those who made investments and subsequently cried because they had made a bad investment or received bad advice. When one invests that kind of money, one should have one's eyes and ears open. Although many Members make investments and suffer the consequences, they do not have a Joe Meade to fall back on. This was bad management on the part of a credit union that did not further investigate and look at the implications, including the pros and cons of its investment.
I thank Mr. Joe Meade and his colleagues for their attendance. I note the limit in turnover of €3 million. Effectively, the Financial Services Ombudsman only can investigate when a business being complained against has a turnover of €3 million or less. Does this limit hinder the role of the ombudsman? Would Mr. Meade like the limit to be increased?
On a practical note, the ombudsman has expressed serious concerns regarding the sale of investment products to the elderly. Can members take it that a significant number of the complaints received are from the elderly? I refer to the practice whereby financial institutions offer to mortgage the homes of the elderly. They will take ownership on the death of the individuals concerned. Has this issue come to the fore?
Mr. Joe Meade
I assure Deputy O'Keeffe the ombudsman is available, if needs be, to help out in the Cork stand-off. However, the Deputy knows they are on strike because the footballers would be beaten by Kerry and because my wife's Kilkenny team would hammer the hurlers. However, we will let them play.
Members now know the reason Mr. Meade wanted to answer Deputy O'Keeffe's question straight away.
Mr. Joe Meade
On the issue of credit unions and investments, of course caveat emptor applies and, of course, people must ensure they are not gullible. As for the particular credit union complaint with which I dealt, I published the full decision on my website on Monday and have dealt with many issues there. However, I consider all aspects when dealing with a complaint. This is the reason people threaten to refer me to Joe Duffy and so on when I do not uphold complaints. I am not there to give out easy money to anyone who has made a foolish decision or who has not carried out the normal advice which they should seek. The particular case can stand on its merits and the courts should rule on it.
We have dealt with complaints in respect of mortgage protection and have dealt with endowment mortgages. When I last appeared before this joint committee, I dealt with endowment mortgages. Although they were allegedly missold, I could not deal with them because they were six years old. However, each case is considered on its merits and sometimes we have awarded compensation where the five-yearly advice was not given as to the potential value of the endowment in future and so on. I am not a soft touch for anyone who comes to me having made the wrong investment. This is the reason I only uphold 59% of cases.
As for Deputy O'Donnell's question on the €3 million limit, he must bear in mind that the statutory office of Financial Services Ombudsman came into being on 1 April 2005. Before then a voluntary scheme operated for the credit institutions and another for the insurance sector. The credit institutions scheme looked after industries of small and medium size and the limit was €1.5 million. The limit applies to limited companies with a turnover of €3 million or less. Unlimited companies can have a turnover of €100 million. My council raised the limit to €3 million on 1 April 2005 and it is considered every year. As late as June 2006, we considered the €3 million limit to be adequate. We have not received many complaints in this regard.
The ombudsman has not received many complaints in respect of the turnover limit.
Mr. Joe Meade
No, we have not. However, we review it constantly and as the limit for auditing under the various accountancy bodies has been increased to €6 million or €7 million, we are due to reconsider this issue in a few months' time.
Okay.
Mr. Joe Meade
The Financial Services Ombudsman was set up for personal consumers and for industries of small and medium size. I do not want it to be dealing with limited companies or companies that are publically quoted on the stock exchange and so on. However, the limit is considered properly.
In respect of sales to the elderly, I have published on this issue and taken a strong line in this regard. Only yesterday, my staff brought to my attention a case. While it must be investigated to ascertain all the facts, it concerns a stockbroker who sold a six-year bond worth €100,000 to a 94 year old woman. The bond is to International Securities Trading Corporation, ISTC, which, as members are aware, is under examinership. While I must investigate this matter, it was brought to us because the stockbroking firm has not responded for seven weeks to the inquiries the people involved naturally are making. The case will be examined and I will not comment further on it. However, I was horrified by what I heard in this regard.
I have already published eight significant decisions about a €1.5 million inappropriate investment by an elderly farmer. I am a farmer's son and am aware that some farmers are not the best investors but this bond was highly unsuitable. I awarded €56,000 in compensation in respect of a high-risk investment to an elderly couple. An 89 year old woman's investment of €500,000 in a building society was made under a mistaken impression. Part of an elderly widow's €1.5 million investment portfolio was mismanaged by a stockbroking firm. I awarded €18,500 in compensation and no further commission is to be charged. I found against a credit union that did not respect an elderly person's instructions. Her son was disinherited of €24,000, which we refunded.
Serious concerns have arisen about elderly people who enter residential homes and whose ATM cards automatically dispense €700 when used with their personal identification numbers, PINs. No check was in place to ascertain whether doing so for 12 to 20 successive days was unusual. As a result, I talked to the banks, which have put in place new control procedures. I am glad to state that those procedures uncovered two instances in which they were able to prevent the rifling of money from elderly people who had been put into homes. A widow considers that under a credit union nominated account, she was disinherited of €12,700 and I have referred that matter to the Financial Regulator to consider. I have awarded €38,500 to the estate of an 82 year old person, who was sold derivative products over ten years which could not be cashed in.
On the other hand, I did not uphold the fall in investment value of an 80 year old person's complex investment because the person's son was actively involved in setting it up. When it did not work out, the son tried to say the elderly person did it. I am ombudsman because I look at both sides and I did not uphold that complaint. I have stated and will continue to state that I take a very strong line about the elderly or the vulnerable. I have dealt with and published details of a case in which a single unemployed mother of two took money from a credit union and was sold an insurance bond that dropped in value from €20,000 to €18,000 in three months. This possibility was not explained to her, which was highly inappropriate.
What practical measures could be introduced? Mr. Meade mentioned a horrifying case in which a 94 year old lady was sold an ISTC bond.
Mr. Joe Meade
I have received complaints about these matters. I do not know the circumstances until I review a case in detail but that case did cause me surprise. I have referred the matters to the Financial Regulator, which has been taking action. With the new consumer protection code, the suitability of products is a high priority. If any institution is in breach of the code, the Financial Regulator can, and will, impose administrative sanctions.
The Deputy asked about homes for the elderly.
I referred to the mortgaging of homes of people who are at the end of their lives.
Mr. Joe Meade
If the transactions are being carried out by a company regulated by the Financial Regulator, I can deal with them. One or two of the financial institutions do as the Deputy outlined and we have had some complaints in that regard. We have upheld some and rejected others.
If companies are not regulated, it is a different matter. Many home equity release companies are not regulated. At the last committee meeting at which I was present, I and the then head of the Financial Regulator said there was a need to have such companies regulated and brought under our control. I understand there is some progress in this regard at Government level. I can deal with the regulated companies but not with those that are not.
Has the ombudsman received complaints about the latter?
Mr. Joe Meade
We have. As I said about auctioneers, we have had to point out that we can only deal with those institutions that fall under our statutory remit. We indicated at this committee a year and half ago that the question of the unregulated companies should be addressed.
From what I can gather, the MiFID legislation introduced in October or November has made provision in this regard.
Yes, but it will not come into effect for three months.
Mr. Joe Meade
That is correct.
Does Mr. Meade have any opportunity to refer cases to the Garda if he considers there is fraud involved? Is that outside his remit?
Mr. Joe Meade
As with any public servant, if I feel there is fraud or criminal activity, I am duty bound to consider referring the matter to the Garda. However, one must consider all the factors involved. If my office felt a practice was highly criminal, it would naturally discuss it with the Financial Regulator. If it were certain there was criminality, it would refer the case to the Garda for action.
Has any case been referred to the Garda to date?
Mr. Joe Meade
No. I do not discuss individual cases, as the Chairman will appreciate.
I thank Mr. Meade for attending. In cases of inappropriate selling by brokers or agents and where it is perceived that there is a breach of standards, does the Financial Services Ombudsman have the power to report them to the relevant governing insurance brokers?
Mr. Meade referred to travel insurance, which can be bought in a supermarket nowadays. An insurance broker is obliged to register, adhere to certain standards, produce accounts, etc. Does Mr. Meade agree that individuals are, of late, selling insurance products that are not regulated? Does the Financial Services Ombudsman automatically report such individuals to the governing bodies?
Deputy Edward O'Keeffe touched upon endowment mortgages. They are now more or less a thing of the past but unfortunately a number of people still have them. These mortgages, which were very popular 20 or 25 years ago, could well be approaching maturity. In the case of with-profit endowments, the holders anticipate a growth rate of perhaps 3% to 6% in addition to reversionary bonuses each year. Traditionally, terminal bonuses were paid on policies but a difficulty arises now in that many insurance companies have scrapped them all of a sudden. This will leave a gap. Moreover, the projections have not been realised.
The scrapping of terminal bonuses without offering any explanation to the policyholders is inappropriate and can leave them in a very difficult position, especially if the company in question was a mutual company when the policy was initially effected. Has the ombudsman received complaints in this regard and, if so, can he take action to highlight the issue? I appreciate that he deals with complaints and is not a watchdog.
I congratulate Mr. Meade on his clear-up rate, with which I am very impressed. However, I am very concerned about the number of complaints he is receiving. I am a great believer in encouraging complaints because a company learns from them. Mr. Meade's office received 4,374 complaints in 2007 and 11,553 since 2005. This is a large number. Are the complaints repeat complaints and are the companies about which complaints are made learning from them? Are the companies undoing the harm they cause?
Are people complaining to the Financial Services Ombudsman rather than to the companies? A company should handle complaints itself and the Financial Services Ombudsman should only serve as a last resort. Is this what is happening? If not, are companies not encouraging complaints? I would have thought the number of complaints received would have decreased on the grounds that companies would have learned from them.
Mr. Joe Meade
I will first respond to Deputy Barrett's questions. The governing body for brokers is the Financial Regulator. On the question of travel insurance, whether it is sold through supermarkets or travel agents, I am on record as having said at this committee and in my annual report that where financial products are being sold, they should be under my remit and that of the Financial Regulator. This matter has been referred to the Financial Regulator and the Department of Finance. That agents should be under my remit does not mean all travel agents or supermarkets should be subject to regulation; it is only when they sell financial products. One will find that supermarkets may be licensed intermediaries.
We have had some complaints of the kind suggested by Deputy Barrett. That is why I went public on the matter and stated that when the products in question are being sold, either over the Internet or by travel agents, one should be clear about what they involve. As the Deputy stated, brokers must register and pay fees and are subject to considerable regulation. There should be a level playing field for all of them.
As the Deputy rightly stated, I am not a watchdog and just deal with complaints. However, where I feel there is a systemic issue under the memorandum of understanding and under the legislation, I consult the Financial Regulator and bring the matter to its attention. This feeds into the intelligence and field work the regulator will do when reviewing various practices and determining whether there is a need for new codes or rules. One must also bear in mind that administrative sanctions are imposed if there are breaches of the consumer protection code. Anybody has the right to complain to me and I can award compensation.
We dealt with the issue of endowment mortgages in detail at our last meeting approximately a year and a half ago. The Financial Regulator carried out a major survey on the issue. The problem is now old and it was not as big as it was in the UK. The terminal bonus may have been scrapped and the amount a person may get with a shortfall with profit policies may not be as much as it was. Anybody who has a complaint about that is free to bring it to me if he or she has not received satisfaction. I will deal with a complaint on its merits. We have received complaints about that and we have upheld some, but not others. It depends on the circumstances. I hope I have covered the questions.
That is very important. I hope it is made public because people should make complaints if they believe there was a shortfall and they were effectively misled.
Mr. Joe Meade
If an event occurred more than six years before the complaint is made, I am statutorily prevented from investigating it. Many of these products were sold before then. Deputy Bruton will recall raising the six-year rule with me at this committee some time ago. On the other hand, people may not have been advised and we have upheld complaints where people were not told after the five, ten or 15 years. Anybody who believes he or she has not received satisfaction has the right to contact me. We will deal with this on a case-by-case basis. The Deputy will appreciate that I cannot give a general outline.
It is like the statute of limitations.
Mr. Joe Meade
I am creature of law. I just carry out what I am given by legislation, otherwise I would be in the High Court every day. I hope I have covered the Deputy's questions.
Yes. I thank Mr. Meade.
Mr. Joe Meade
Senator Quinn always encouraged people to complain and I am glad to say I never had to complain about his organisation. The number of complaints as a percentage of the total transactions is quite small. Since the late 1990s and early 2000s, financial institutions have invested much in ensuring that if they receive complaints, they settle them.
We are a new body and our remit was extended not only to banks and insurance companies but to credit unions, stockbrokers, brokers, pawnbrokers, moneylenders, bureaux de change and to every financially regulated service. The numbers have increased which is due to three factors. First, people now know there is an office where they will get a fair and impartial hearing. Second, people are more educated and know their rights. Third, the population has grown and the products for sale are quite sophisticated and complex and difficulties will arise.
Institutions try to settle in so far as possible but there will be instances, as in the Senator's organisation, where despite the best will in the world, one cannot reach agreement and where there may be a point of principle. On the insurance side, we have been able to settle 30% of cases because people had not gone through the internal complaints process or when we referred them to the institution concerned, it settled. On the banking and credit institution side, we settled 48% of cases because very often if a person calls into his or her local branch and is not be happy with the service he or she gets, he or she immediately refers the matter to me rather than going through the internal complaints process. Those are factors. The institutions, particularly the major ones, have invested much in this process.
I refer to the Financial Regulator, the amount of consumer information it has provided, the consumer protection code and all the other responsibilities it has placed on institutions, its inspections of institutions and the administrative sanctions it can impose. All of that helps.
I am on record as saying that over time, I hope the number of complaints decreases because if they do not, all the efforts being made will come to nought. The reason they have increased is, I suppose, due to publicity on my part and the fact that everybody knows we are there and that we provide a fair and impartial service. There is also an educated and growing workforce.
Mr. Meade answered my question about whether the Financial Services Ombudsman is the court of last appeal or the first option.
Mr. Joe Meade
It varies.
I thank the Financial Services Ombudsman for his presentation and Mr. Byrne for his presence. I refer to long-term complaints. Are there any complaints with the office which are still unresolved? Have there been any instances of churning of insurance products? That issue was in the headlines a number of years ago. Is that still taking place?
Is the ombudsman happy that his office is advertised enough and that financial institutions are mentioning it in their literature when selling products? Will he give an indication of the typical compensation paid to citizens who contact the office?
I thank the ombudsman for his presentation and I apologise for being late. I refer to small businesses. Many people starting out look for secure money and supports from banks. Does that come under the ombudsman's remit? If it does, has he received complaints? The banks tend to dress up their presentations very well and suck people in. We often hear the phrase that something "Does not do what it says on the tin". Does the ombudsman deal with small business start ups which have had problems with banks and the way they were treated?
Mr. Joe Meade
Is Deputy Flanagan referring to long-term complaints with my office?
Mr. Joe Meade
We turn over complaints within four months. The average cost of a complaint with my office is €500 and it is free to the complainant who does not have to engage solicitors, accountants, etc. I do not object to a complainant having them but he or she will not get any compensation from me for employing them.
Churning is an issue. In a case study I published in January, I indicated that a product had been missold where the management of an insurance company misled its sales team. I felt there was churning involved. That company was involved in selling a product which was inappropriate to an unemployed single mother of two. The Financial Regulator is now looking at its overall sales practices. Naturally, I will not name the company.
Deputy Flanagan asked whether the office is advertised enough. Senator Quinn is Deputy Flanagan's constituency neighbour, and the Senator indicated that I have not had to advertise my services as of yet because all the institutions mention it in their literature. We carry out field work when we go into various branches to see if it is mentioned in pamphlets. All the institutions have done this very well and it is mentioned in their literature.
In regard to typical levels of compensation, I do not make a league table of compensation but I publish decisions. Some €100 in compensation is as valuable to an old lady as €100,000 is to somebody else. It would be grossly unfair for me to say I awarded €3 million to €5 million in compensation. Having a league table would be completely contrary to my role. As I said, €100 to a little old lady, a farmer or somebody else is important.
Small businesses can complain to me. We can deal not only with the provision of service but with the lack of provision of a service, or the way someone has been treated. Naturally, commercial discretion must be taken into account by any institution but we will look at whether it was fair. We will not second-guess afterwards whether the proper decision was made but we will look at it in the round and at whether the person was fully informed of everything, whether the provisions of the consumer protection code were adhered to and whether a reasonable decision was taken.
There have been instances where we have found that a particular amount of start-up money should have been given. If we found that the loan should not have been given and that the business went bust after three to six months, we could find accordingly. However, that is subject to the caveat that each case must be looked at on its individual merits.
Has the ombudsman had complaints from businesses?
Mr. Joe Meade
Yes.
From small start-up businesses?
Mr. Joe Meade
Yes, and we have dealt with them. Naturally, I will not discuss particular cases.
I thank Mr. Meade and Mr. Byrne for their attendance. Some other public bodies could take a leaf from their book in responding within five days to representations.
Hear, hear.
It is great to hear such a statement here. We apologise for the late start for your part of this meeting.
Mr. Joe Meade
There is no need to apologise for the late start. I understand the pressure committees are under and we are here to serve.
Thank you.