Policy
Response
Transparency and the Financial Ombudsman Service - Publishing Ombudsman Decisions: Next Steps
Response by the Building Societies Association|
Contact: Chris Lawrenson Date: 12 Dec 2011 |
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Introduction
1. The Building Societies Association represents mutual lenders and deposit takers in the UK including all 47 UK building societies. Mutual lenders and deposit takers have total assets of over £375 billion and, together with their subsidiaries, hold residential mortgages of over £235 billion, 19% of the total outstanding in the UK. They hold more than £250 billion of retail deposits, accounting for 22% of all such deposits in the UK. Mutual deposit takers account for 34% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
2. The BSA liaises closely with the Financial Ombudsman Service (the Service) on a range of matters, including transparency. We were, for example, members of the Service’s data publication working group that examined contextualisation in respect of the publication of complaints statistics. The BSA supported the publication of complaints data. We welcome this opportunity to comment on the possibility of publishing Ombudsman decisions set out in the consultation at -
Summary
3. The BSA welcomes the main proposals in the consultation. In particular, we
support the proposed publication of Ombudsman decisions in full, but agree with the Service that there is no strong case for publication of adjudicators’ decisions or the preparation of summaries of decisions. We have one, very significant, qualification – strong, effective arrangements would be required to ensure that the publication of flawed or genuinely contentious Ombudsman decisions did not have wider, significant and unfair outcomes for firms (see, in particular, our responses to questions 1 and 6 below).
Questions and Answers
Question 1 - Do you agree with our overall approach? Are there other considerations we should bear in mind, in approaching the publication of our ombudsmen’s final decisions?
4. Yes, we believe that it is right to publish Ombudsman decisions. Our main reason for supporting the Service’s proposal is that such publication is in the interests of openness and transparency. However, we also take account of the Service’s Freedom of Information Act responsibilities, effective from 2 November 2011. As the consultation notes, the Ombudsman also has responsibilities under the Data Protection Act, and the two sets of statutory requirements need to be balanced.
5. We broadly agree with the criteria set out on page 12 of the consultation – customer confidentiality, genuine commercial sensitivity, financial crime prevention, and the minimising of additional costs (at any time, but especially in the current economic climate) are all important factors that would have to be considered carefully if the decision to publish is taken. Compliance with legal requirements is also important including both the transparency requirements under the Freedom of Information Act and the confidentiality/commercial sensitivity safeguards in the Data Protection Act. The BSA would be happy to work with the Service with regard to an examination of the practicalities of these, and other, important considerations.
6. We have one significant qualification. Ombudsmen are human and will, like the courts, sometimes make flawed decisions or ones that are of a genuinely contentious nature. If a court delivers a judgement that is flawed, there is the potential for appeal to the higher courts, which sometimes overturn the decisions of lower courts. While complainants have the right to take their case to court if they do not accept an Ombudsman decision, firms do not. Broadly speaking, firms accept that occasional flawed Ombudsman decisions in individual cases, or ones that they have significant reasons to disagree with, are a price worth paying for a relatively speedy, informal Ombudsman service.
7. However, if an Ombudsman decision was flawed and was then published on the Ombudsman’s website, it could have significant implications in circumstances where there could be a large number of other, similar cases at the firm in question and where, for example, CMCs then raised a series of complaints off the back of the flawed decision. The implications could be very serious for an individual firm because the Ombudsman (whilst, of course, seeking to remain impartial and to decide further complaints on an individual basis) will naturally be pre-dispositioned to decide those cases in favour of the complainant if the facts are substantially similar. What is more, where the Ombudsman decision is flawed, the firm would have no logical basis to conduct root cause analysis of the matter in question.
8. Currently, there is no kind of review procedure or appeal mechanism for firms that have reasonable grounds for believing that an Ombudsman decision is flawed or that fundamentally disagree with an Ombudsman’s ruling. Judicial review is set at such a high, process level that it is of almost no use whatsoever in this context. As part of the two-year review of the FSMA in 2004, the BSA proposed that there should be arrangements for review of cases that had wider implications for individual firms or a number of firms -
(We did not advocate appeals on individual cases, which we fully acknowledged would undermine the Ombudsman arrangements.) However, our proposals were not accepted and the FSA and the Service introduced their own ‘wider implications’ processes, which were largely unsuccessful and were scrapped earlier this year.
9. The Government, in the regulatory reform White Paper, signals the possibility of new processes for dealing with wider implications cases and states “The FOS should be able to focus on processing individual complaints on a case-by-case basis rather than having to lead the way on mass issues”. The BSA strongly agrees with this statement – our full response to the White Paper can be found at -
As the draft Bill progresses, the BSA will seek the inclusion of arrangements to permit the review of flawed Ombudsman decisions that have wider implications (but not appeal from individual Ombudsman decisions, which we continue to believe would be retrograde).
10. In the meantime, there will be a heavy responsibility on the Financial Ombudsman Service, if it goes ahead with the publication of Ombudsman decisions, to protect firms against the risk of the publication of flawed Ombudsman decisions leading to serious problems for a firm’s business. The assurance, on page 16 of the consultation, that the Service would, if it publishes decisions, have to exercise yet greater care is helpful but does not sufficiently address the potential problem. We believe that, as a minimum, the Service should presume in favour of confidentiality on the basis of commercial sensitivity where a firm makes a reasonable case that an Ombudsman decision is flawed and that the publication of that decision could have significant wider implications for the firm’s business (as well as in other circumstances recognised in the consultation eg genuine commercial sensitivity). One of the difficulties is that, as mentioned above, the Service is likely to be pre-dispositioned to support the decision of its Ombudsmen and it seems that there would have to be some form of independent, third party review in such cases - possibly the Upper Tribunal or the Information Commissioner.
Question 2 - Do you agree that we should not publish the views of adjudicators – instead limiting the publication of decisions to those made by our ombudsmen?
11. Yes, the BSA agrees. The publication of Ombudsman decisions is enough: adjudicators’ views are less formal and costs of publishing 150,000 a year would be excessive. An important consideration is the fact that the adjudications are much more likely than Ombudsman decisions to be the product of conciliation – generally speaking, they have much less resemblance to judicial decisions that Ombudsman decisions. We agree with the Service that the right balance would be achieved by the publication of Ombudsman decisions, subject to the qualification set out above.
Question 3 - Do you agree that our published reports on cases should not normally be specially commissioned summaries, but the actual determination made by the Ombudsman (subject to the appropriate safeguards)?
12. We agree with the Service’s conclusion. There is no reason to summarise published decisions and cost of summarising all decisions (£700,000 a year or more is excessive). Also, summarising would be likely to give rise to allegations of ‘editorialising’ and probably lead to yet more disputes.
Question 4 - Overall do you think our proposed approach strikes the right balances between transparency, protecting genuinely confidential information and the costs of implementation?
13. We agree that individual consumers’ details should not be made public. There is no public interest in doing so and, as acknowledged by the consultation, many reasons not to do so. We support the three conclusions set out on page 15; ie that the Service should routinely disguise the identities of individual complainants, disguise or delete information likely to identify an individual, and reserve the right not to publish a small number of decisions where the risk of identifying the consumer from the facts is significant. These considerations do not apply to claims management companies when they bring complaints on behalf of consumers, because they are commercial organisations.
14. There are circumstances where commercial sensitivity, the needs of financial crime prevention or certain other factors would justify redactions from published decisions – and see our responses to question 1 above and 6 below concerning flawed or genuinely contentious Ombudsman decisions. It is important that the Ombudsman’s duty of impartiality is not undermined by the publication of businesses’ identities and the non-disclosure of the identities of individual complainants. Blanket non-disclosure of complainants’ identities (which the BSA supports) is only fair if the Ombudsman Service has full and proper regard to the rights of firms. Businesses are entitled to expect nothing less. It might be helpful for the Service to set up a working group to examine such matters in practical detail. However, we agree with the Service’s broad point that, in the large majority of cases, there should be transparency.
Question 5 - Do you think the steps we propose are sufficient to protect consumer identities and personal information – or are there other specific steps we should take?
15. We agree with the proposals and have nothing to add - it is right to conceal information that could reveal the consumer’s identity, provided due regard is given to the rights of firms.
Question 6 - Do you agree that we should not seek to protect the identity of financial businesses? If you disagree, what other steps would you want us to take?
16. We broadly agree that it is not practical or desirable to conceal the firm’s identity but, in a limited number of circumstances, redactions of genuinely commercially sensitive material etc should be made. Again, see the important example referred to in our response to question 1 above - it is imperative, before any decisions are published, that fair and robust arrangements are put in place to guard against the systemic risks arising from the publication of flawed Ombudsman decisions.
Question 7 - Do you agree with our planned approach to the identities of third parties – including other financial businesses, professionals, other representatives and third-party businesses?
17. As noted above, we see no reason why claims management companies bringing complaints on behalf of consumers should not be named. They are not in the same position as individual complainants but are commercial organisations and we do not see any reason for confidentiality, above and beyond that accorded to firms complained about.
18. We agree that special arrangements should apply in respect of third party businesses that are incidentally involved (ie not as the firm complained about), including those outside the Service’s jurisdiction or where, in presumably very limited circumstances, identifying them might breach the confidentiality of a consumer’s identity.
Question 8 - Do you agree that we should reserve the right not to publish certain decisions – or to exempt information in other exceptional circumstances?
19. Yes, in exceptional circumstances, such as those referred to in the consultation, and also see our response to questions 1 and 6 above.
Question 9 - Are there other considerations about safeguarding personal information that are not covered in this paper and that we need to take into account?
Question 10 - What impacts do you believe publication of decisions as we propose will have – on consumers, financial businesses and on our service?
20. Questions 9 & 10 - We support transparency – firms should not be able to hide ‘embarrassing’ information (but see above for flawed decisions, genuinely commercially sensitive material, criminal investigations etc). It is an open question whether or not claims management companies are likely to find new, fertile ground in relation to published decisions. Many of the issues will be historical and of little use to CMCs but, given some of the practices of the more unscrupulous CMCs (including cold-calling, basing claims on sales lists rather than expressions of dissatisfaction, making of frivolous and vexatious complaints even where the firm in question did not sell the product etc), there is little doubt that some will seek to make mischief out of the published material. As noted above, if flawed Ombudsman decisions are published, then there could be very significant problems.
21. However, the key challenge regarding CMCs is to achieve stronger, more effective regulation and we know that the Ministry of Justice has this matter in hand. We look forward to the impending consultation paper from the Ministry and hope that it will lead to much stronger regulation of CMCs.
22. Firms would need to be given clear notice of when specific decisions would be published and a reasonable opportunity to view redacted decisions. It is important to have more information about the process that would apply, in relation to matters such as these, prior to each tranche of publications.
Question 11 - Do you agree with our approach to the timing of publication? If not, when should decisions be published and why?
23. We broadly agree with the proposal to release ‘shortly’ (ie a week or so) after the decision is issued, in the normal course of events. We can see no reason for delay except in respect of the points about flawed decisions or other commercial sensitivities. But – as noted above - arrangements would need to be put in place to ensure that firms had a proper opportunity to raise relevant concerns, and for them to be fully considered, before publication of the relevant individual decisions (see eg the responses to questions 1 and 6 above).
Question 12 - Do you agree with our approach to the form of publication?
24. The BSA agrees with the proposed approach, ie publication on the Service’s website with no commentary.
Question 13 - Do you have any comments on when we should start publication of decisions – and what are your views on past decisions?
25. We agree – for the reasons set out on page 21 of the consultation - that it would be inappropriate to publish past decisions.
Question 14 - Do you agree that we should adopt the same approach across all of our jurisdictions – and specifically do you agree we should cover our voluntary jurisdiction in the same way as our compulsory (FSA/FCA) jurisdiction and our consumer-credit jurisdiction?
26. Yes, we believe that it would be right to publish all decisions on same basis across all of the Service’s jurisdictions.
The Building Societies Association
December 2011
