I thank the Deputy for putting forward this important Bill.
Before I talk about the specifics of the Bill I would like to first emphasise the important role played by the Financial Services Ombudsman.
The Irish Financial Services Ombudsman Bureau came into being in April 2005, and a measure of its great success has been its growing profile among consumers and industry. The role of the Financial Services Ombudsman is central in underpinning consumer confidence in the effectiveness of the consumer protection regime, complimenting the role of the Central Bank in safeguarding consumer interests.
The Ombudsman exercises his independent statutory function, operating in a fair, balanced and transparent fashion and is responsible for ensuring that unresolved complaints from customers of financial service providers are investigated, mediated and adjudicated upon. The importance of having an out of court adjudication complaints system for consumers who are not satisfied with the decisions of financial service providers cannot be over emphasised. Consider how difficult and expensive it would have been for the large number of consumers who have used the services of the Financial Services Ombudsman Bureau, not to have had an effective out of court dispute resolution mechanism to deal with their complaints. The cost of litigation might have served to dissuade many from pursuing their grievances. The costs for, in particular, smaller financial services bodies in defending complaints through the Court system would also add significantly to operational costs.
I would now like to turn to the proposal that is before the House.
I accept that the naming of financial service providers in certain circumstances will support the work of the Financial Services Ombudsman in effectively carrying out his functions and for this reason I believe the Bill is consistent with current Government policy. Indeed much work has taken place in developing proposals for legislation on this issue.
While the Government broadly supports the objectives of this Bill, it believes that further work is required on the detail of how it would apply and on its scope. I will return to this in due course.
I would like to outline some important points regarding the development of this proposal, which will better inform the House regarding the objectives of the Bill and regarding some complexities surrounding this issue.
In July 2009, the then Financial Services Ombudsman wrote to the then Minister for Finance. In his letter he referred to comments made by various media personnel and other commentators about the extent to which published decisions of the Financial Services Ombudsman should name the Financial Services Provider. He went on to request that he be given the option, if he considered it to be in the public interest, to name an institution that had been subject to one of his decisions.
He outlined two reservations he had about naming institutions against which he had made findings. His first reservation was that complainants may be less inclined to bring a complaint if they felt they might be named. His second reservation was that institutions might take a more defensive line and might appeal findings more to the courts if they felt they were to be named anyway.
However despite these reservations, he said that he was requesting the option to publicly name an institution that had acted wrongly. The reason he gave for this was that it could be a preventative measure and that the threat of being named could act to ensure that malfeasance, when discovered, would be easily rectified and be less likely to occur again.
He also suggested three safeguards that should be included in any legislation that would give him this power. The first safeguard was that he be given sole discretion as to whether or not an institution should be named and that he would not be required to provide names in every case. The second safeguard was that complainants would not be named. The third was that he would have statutory privilege covering the naming of institutions. He also said that the criteria would have to be established to ensure that the naming was done in a fair manner.
Following receipt of the letter from the Financial Services Ombudsman, my Department sought legal advice to help inform the deliberations to formulate a clear policy position. As the House can appreciate this is a complex issue which requires detailed examination prior to bringing forward legislation. For example the criteria for publishing would have to be identified in the legislation. Any amendment to the current legislation would need to be validated, justified and applied in an objective and reasonable manner to all financial service providers while meeting public good criteria.
My Department requested the Financial Services Ombudsman to consult with industry to better inform the debate. In 2011 the Financial Services Ombudsman Bureau invited submissions from all interested parties on the issue of publication of information on the complaints record of financial service providers. In inviting submissions, the Financial Services Ombudsman Bureau also set out its preliminary thoughts on the form that such a disclosure could take. The Financial Services Ombudsman Bureau received a total of 9 submissions: one from an individual and 8 from individual financial service providers and industry stakeholder representative groups. All submissions have been published on the Financial Services Ombudsman Bureau’s website.
On 5 January 2012 the Financial Services Ombudsman wrote to my Department. In his letter he referred to a number of the submissions in which concern was expressed as to how information on the complaints record of financial service providers might be presented and to assurances sought by industry that the information would be presented in a manner that was verifiable, robust, properly contextualised and not misleading. In addition, some submissions expressed a reservation about identifying individual financial service providers in case summaries.
In the Financial Services Ombudsman’s Bi-Annual Reviews, information on findings is given in two forms. Firstly, information is aggregated into three general categories: Investment, Banking and Insurance. Secondly, within each general category, the information is broken down by product type. All information is aggregated across all providers so that no individual provider is identified. The information provided under each category is similar: total number of complaints, complaints upheld, complaints upheld in part, complaints not upheld and total amount of compensation awarded. The Annual Report provides case summaries on an anonymous basis – details from the findings are redacted so that neither the complainant nor provider can be identified.
The Financial Services Ombudsman is now proposing that the Bi-Annual Review would provide a further break-down of the information provided – by financial service provider. Accordingly, for each financial service provider, information would be provided as to: total number of complaints, complaints upheld, complaints upheld in part, complaints not upheld, and total amount of compensation awarded.
To give an accurate picture of the complaints record of each financial service provider, it is now proposed that information about the relative market share of the provider would also be provided. Wherever possible, this would be done using information already in the public domain, particularly as referenced in other frequent regulatory reporting. For example, for insurance products, the relevant metric could be the number of policies in force or the number of people covered by those policies. For banking products, the relevant metric might be number of accounts or number of particular products in force.
The Financial Services Ombudsman has advised me that he would further engage with the industry to develop the most appropriate manner of presenting market share information for each relevant product. He advises that case summaries identifying the financial service provider should only be published where there was a compelling public interest to do so, such as the need to inform potential customers of risks they would not be aware of in the absence of disclosure.
While the Government fully supports the policy objective underlying this Bill, the provisions on ‘naming’, if not carefully crafted, could have negative implications for both consumers and financial service providers. For consumers, if their particulars were revealed, this could dissuade some of them from making complaints in the first place. This would run counter to the objectives of the Ombudsman to support consumer protection. Financial service providers could view such provisions as disproportionate and unfair. In this regard, the legislation needs to be sufficiently robust to withstand any legal challenge.
I support the principle of this Bill and will bring legislative proposals to Government reflecting the policy outlined in this speech.
In conclusion, I would like to thank the Deputy for raising this important issue. The issue raised in relation to the need to provide the Financial Services Ombudsman with power to name financial service providers, in certain circumstances, is consistent with Government policy in this area. However, as I have outlined, further work is required on the precise scope and on the detail of how the Bill will apply. The Financial Services Ombudsman has advised that he proposes further consultation with industry. I have asked my officials to engage with the Ombudsman in the coming weeks with a view to formulating more details proposals for legislation in this area and I will return to the House once this process is completed.