Moneysupermarket.com editor Clare Francis meets with Walter Merricks, Chief Ombudsman of the FOS to discuss their involvement with complaints and what they can do to help...
Video Transcript
Clare Francis: What do you do if you've got a problem with a bank, a building society or other financial institution? There is a complaints process in place but a lot of consumers aren't aware of it or don't know how it works. I'm at the Financial Ombudsman Service today to find out.
I'm with Walter Merricks today, who's the Chief Ombudsman at the Financial Ombudsman Service, hopefully he's going to be able to demystify what the FOS does and how it may be able to help you.
Q1: So Walter, please can you just explain exactly what it is that the FOS does?
Walter Merricks: What we do is to investigate consumer complaints, where a consumer has already complained to a financial firm or business, and they are not happy with the outcome of that complaint. We can then take their case on, investigate it, see what the right answer should be and make a decision one way or the other.
Q2: So if somebody goes to their provider first, what sort of time should they give the institution to respond to their complaint and resolve it before they take it on to you?
Walter Merricks: Well there are actually rules about this. All the financial firms regulated by the Financial Services Authority (FSA) - there are rules that say once you have made a complaint the firm has eight weeks, and no more, to provide a final response to your complaint. So that's the deadline, so nobody should be waiting for more than two months for a formal response from the firm, and if at that point the firm says 'no, we're not going to do what you want' the firm actually has to send people one of our leaflets and tell them that they can now refer the matter to us. So people are signposted in our direction at the point where they might need it.
Q3: Which firms exactly are we talking about?
Walter Merricks: Well we cover pretty much everybody in the financial services arena - we cover banks, insurance companies, building societies, financial advisers, stock brokers, fund managers, consumer credit businesses, lenders of all descriptions, anybody that's got a consumer credit licence as well, so there are a whole variety of organisations from whom people might borrow money, credit cards, mortgages - the whole area really.
Q4: And what powers do you have exactly? I think there's a lot of consumer confusion around regarding what the FOS does and what the FSA does. You're not the regulator, so what can you do?
Walter Merricks: Well, we deal with individual complaints, the regulator deals with systemic issues, make the rules, enforces against firms that appear to be breaking the rules in a systemic kind of way. We deal with individuals who have lost money or say they have lost out in some way, and our powers are quite substantial. We can, if we believe that the firm has made a consumer lose out financially, we can require that firm to compensate the consumer up to £100,000 and the firm is then required to do that - they have no alternative and they have no right of appeal.
Q5: In what percentage of cases do you find in favour of the consumer?
Walter Merricks: Well broadly speaking, remember of course these are complains that have already been investigated by the firm and the firm has already had chances to settle it. Broadly speaking we up hold about a third of complaints, something like that, somewhere around 30%. Of course that's a very broad generalisation. There are some areas where we uphold a much higher percentage, with some firms that uphold a much higher percentage, and in other areas where it's much lower than that.
Q6: Can you give any examples?
Well recently of course we have been doing a lot of complaints about bank charges and payment protection insurance, in there we have been upholding a much higher percentage than that. Pension administration cases, pension mis-selling cases is probably a great deal lower then that, I think we said it was about 15-16% last year so there is quite a big variation in the proportion of cases we uphold, but it seems to balance out at around a third of the complaints we uphold overall.
Q7: You mentioned bank charges - can you just explain where we're at with that at the moment, because obviously we've got an ongoing court case between the Office of Fair Trading (OFT) and eight financial institutions, and because of that the FSA said last year that banks, building societies and the FOS didn't have to look into any outstanding complaints until the court case has been resolved - can you just update us on what's happening with that at the moment?
Walter Merricks: Well the courts still in the middle of it, the courts haven't finished the process of deciding that and there are a number of stages left to go. Meanwhile, yes we have got about 14,000 consumer complaints in our cupboard that we've put on hold, because there is not a great deal of point in our trying to decide the same issue that the court is eventually going to decide, and we said at the time when it was decided that the banks were going to be defendants to this action by the Office of Fair Trading that there not a great deal of point in our second guessing what the courts were going to decide, we would put cases on hold, pending the outcome of the court case. When that is decided then I hope that will clear the way for the complaints that we have to be resolved in accordance to what the courts decide.
Q8: One of the other things you mentioned was payment protection insurance (PPI). We've recently had a report out from The Competition Commission, and the FSA has been looking into the mis-selling of PPI. Have you seen a big increase in the number of complaints coming in regarding PPI and mortgage payment protection insurance (MPPI)?
Walter Merricks: Yes is the short answer, a very large increase. We have had, we are now getting something like 500 cases a week coming into us which, about year ago would only be about 50. So, it's an enormous increase in the number of complaints, and it's not surprising as you say the FSA itself has done a number of reports saying that they are extremely disappointed by the market practices that were going on and the Competition Commission report added to that. So it's not entirely surprising that we should be receiving a lot of complaints.
I have to say that I think that this sort of level of complaints is not going to be, its not the right way for the payment protection insurance issues to be sorted out, because if there are a very large number of consumers who have lost out then we are not the right method for sorting that out, it needs to be a wider industry initiative of some kind.
Q9: Until that perhaps materialises, how are you dealing with PPI and MPPI complaints? Is the onus on the individual to prove they were mis-sold, or is the onus on the company to prove that they didn't mis-sell?
Walter Merricks: We do as we do in every case - we look at every individual circumstance. We look at the circumstances in which the sale occurred, whether people were advised to take this out or whether it was part of some other transaction where there wasn't any advice given. We look at the terms and conditions, we look at whether or not if properly advised this person would not have taken out the policy in the circumstances they were in. So we try to reach those sorts of judgements both on a consistent basis but also on the basis that reflects the circumstances of each individual.
Q10: One other issue that we're seeing quite a lot about on our forum, and that I've read a lot about in the press, is problems with opening Isa's and in particular with transferring money that's been invested in previous tax years into a new cash Isa account. Have you seen a big increase in this number of complaints you're receiving about this issue?
Walter Merricks: I have to say we get this every year, there are always points around the Isa year where firms haven't managed to do things quite as consumers would have wished. Sometimes its not always the firms fault, sometimes its 'six of one, half a dozen of the other', but yes, deadlines like that inevitably give rise to circumstances where people find the need to complain and we are fairly used to sorting those out and I have to say that the firms are fairly used to sorting them out as well - they know sometimes administrative errors will have occurred and they are fairly used to sorting them out.
Q11: Are we at a point where the level of this problem is such that it is systemic and needs looking at on a larger scale? We've seen Nationwide recently say that their not going to accept Isa transfers for the time-being until they resolve their backlog of applications - is this a really big problem or is it still at the level where it needs to be sorted out by the institutions themselves and the FOS?
Walter Merrick: Well, not every firm is having problems doing this, and so I don't think it's something which we could say is a systemic, widespread, total industry problem. There are some firms who as you say have admitted that they can't really cope, and others who have apologised for the way they've handled things, and they are putting those things right. But it doesn't look to me as if this is something, and I'd be surprised if it was a completely nation-wide issue across the whole of the financial services Isa savings community, it just doesn't look like that.
Clare Francis: Thank you Walter.
