Financial Services Ombudsman Credit Unions

Complaint Experience

William Prasifka Financial Services Ombudsman

3 November 2012

National Supervisor ForumRochestown Park Hotel Cork

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Introduction & Background

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FSO Role

Independent adjudication on unresolved

disputes between Complainants and Financial Service Providers thereby enhancing the financial services environment for all sectors

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Power of the FSO

• Investigate /Adjudicate complaints • Award compensation up to €250k• Direct Rectification• Findings - legally binding, appealable only

to the High Court • Accessible & Free Service to the

Complainant

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Who can complain to FSO?

• All personal customers

• Limited companies with a turnover of €3,000,000 or less

• Unincorporated bodies, charities, clubs, partnerships, trusts, etc.

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Credit Unions

• Consumers can complain against Credit Unions (Financial Service Providers)

• Credit Unions can complain as

‘consumers’ subject to assessment of jurisdiction and discretion ‘not to investigate’ by FSO

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Credit Unions as Complainants

• Jurisdiction: turnover of €3m equates with CU income

• Discretion of FSO not to investigate: availability of ‘alternative and satisfactory means of redress’

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Role of the FSO

• Fair adjudicator of complaints against regulated FSPs

• Not a consumer advocate

• Not an industry advocate

• Free Service – can engage professional advocates at your own expense

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Standard of Adjudication2004 Act

“The FSO ... is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form.”

FSO guided, not bound by regulatory codes & law

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Complaint Trends Context

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Complaint Trends – Context

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2007 2008 2009 2010 2011 2012 ?

?

Total Complaints Received

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Overall Complaints, Up H1 2012

3000

3100

3200

3300

3400

3500

3600

3700

3800

1st & 2nd Qtr 2010

3rd & 4th Qtr 2010

1st & 2nd Qtr 2011

3rd & 4th Qtr 2011

1st & 2nd Qtr 2012

New Complaints

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Complaints Recd– By Sector

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Outcome of Findings (All Products)

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Complaints Against Credit Unions

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Credit Union Complaints

• Small number of complaints made

• Usually less than 1% of Complaints

• Relative Consistency in Complaint Numbers

• As of yet, no ‘spike’ in a particular complaint type

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Complaints against Credit Unions 2009-Sept 2012

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Findings Issued in ContextSince 2005

• Approx 400 Complaints Made against Credit Unions

• 94 Complaints reached Finding stage Remainder are usually ‘closed’ because: • No further Contact 120• Outside Jurisdiction 60• Settled 40 • Referred elsewhere 21

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Finding Outcomes since 2005Points to Note

• Not many complaints received

• BUT Finding outcomes not in line with industry norms

• More complaints upheld against C.U.s

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Outcome of Credit Union Findings Since 2005

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Finding Outcomes Across All Sectors

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Complaint Types 2012

• Customer Care 5 • Maladministration 10• Repayment Terms 7

PPI = Emerging Issue? • Approx 15 PPI mis-selling complaints

against Credit Unions so far in 2012

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Complaint Process

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Complaints ProcedureOverview

1. Lodging a Complaint

2. Initial Assessment

3. Final Response Letter

4. Mediation

5. Investigation

6. Oral Hearing

7. Adjudication & Finding

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Can Uphold Complaint if...... the conduct complained of was unreasonable,

unjust, oppressive or improperly discriminatory in its application to the complainant;

... although the conduct ... was in accordance with a law or an established practice or regulatory standard, the law, practice or standard is, or may be, unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant;

...if conduct was otherwise improper;

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What is expected of CU when handling complaint

Engage with the customer

Understand what the Complaint is

Detailed ‘Final Response’ letter

Ask yourself: Has the CU been reasonable?

Are there grounds for settling or resolving

matters before referral to FSO?

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FSO Experience with Judicial

System

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High Court Appeals

• FSO Findings – Appealable to High Court

• Both FSP and Consumer entitled to appeal

• Currently – Approx 40 HC Appeals (1%)

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Courts hold FSO to High Procedural Standard

• Substantial experience before the Courts

• Full exchange of submissions & opportunity of parties to respond

• Procedures / investigation must reflect the remedy directed

• Request for discovery and jurisdiction must be fully considered

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High Court Appeals – Standard of Review

Not a ‘de novo’ review

“To succeed ... must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors...“

Ulster Bank Investment Funds Limited v Financial Services Ombudsman, 2006

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Judicial Support for FSO

“What has been established: • [FSO] is an informal, expeditious and independent

mechanism for the resolution of complaints ... • not engaged in resolving a contract law dispute in the

manner in which a court would engage with the issues ... • can also make orders of a type that a court would not

normally be able to make ... • possesses a type of supervisory jurisdiction not normally

vested in a court.”

Hayes v Financial Services Ombudsman & Ors – 2008

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Judicial Support for FSO

• Unique Jurisdiction • ‘Plain Language’• Confirmation that the purpose of the FSO is to

keep the process of dealing with quantum of complaints, so far as possible, out of the court

• The Ombudsman is not the correct forum for a party who wants court style remedies

• Courts do not ‘second guess’ awards

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Conclusions

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Complaint Trends & Outcomes

• ‘Paradigm’ Shift

• Consumers’ awareness and willingness to complain

• Product types / complaints may change... ...BUT Complaints remain at record levels

• Increase in challenges to Findings

• Indications are for an increase in Complaints

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Points to Note

• FSO Consistency of approach in Findings

• Cases decided on individual merits

• ‘Fair and Reasonable’ attitude by the Institution?

• Has Institution engaged with Consumer?

• Effort to resolve matters before referring consumer to the FSO?

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Thank you

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