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annual review 1 April 2004 to 31 March 2005 - other work we have done

In addition to resolving individual disputes between consumers and firms, we are also involved in a range of other activities. This includes work internally - including management of operational, policy and legal issues - as well as work with our external stakeholders, who include all those with an interest in our service.

In this section we highlight some of the projects and activities we have been involved in during the year.

extended jurisdiction

The number of firms covered by the ombudsman service increased from just under 10,000 to around 14,000 when mortgage intermediaries came under our jurisdiction on 31 October 2004. The number of firms we cover then went up again - to just under 25,000 - when statutory regulation began for insurance intermediaries, who came into our jurisdiction on 14 January 2005.

The widening of our jurisdiction to cover these firms has gone smoothly - following considerable advance preparation, both strategic and operational, as described in last year’s annual review. While this extension has resulted in a near tripling of the total number of firms we cover, we expect the volume of complaints arising in relation to these firms to be disproportionately small.

In our plan & budget published in January 2005 we suggested that we might receive around 5,000 complaints about mortgage and insurance intermediaries during the financial year 2005/06 - less than 5% of the total number of expected complaints. Feedback we received was that these plan & budget estimates were realistic.

We continued to plan for the possible further extension of our jurisdiction - to cover consumer credit firms. Consumer credit - where it is provided by firms not already in our jurisdiction (for example, banks and building societies) - remains the only significant area of personal finance not already covered by the Financial Ombudsman Service. During the year, draft legislation began its passage through Parliament which would have involved overhauling existing consumer credit legislation and extending our jurisdiction to cover disputes relating to consumer credit. This proposed legislation had not, however, become law before Parliament dissolved in April 2005 for the General Election.

Since May 2002 one of our ombudsmen has been formally carrying out a separate statutory function - that of the Independent Adjudicator for National Savings and Investments. Following public consultation, our rules were amended with effect from October 2004 - to enable National Savings and Investments (NS&I) to join our voluntary jurisdiction, rather than continuing to come under the Independent Adjudicator. NS&I aim to join on 1 September 2005, from which point we will deal with complaints about NS&I products using the same rules and approach that we apply to complaints about other financial products.

In November 2004 the Treasury launched a consultation document on the regulation of investment trust companies - in response to a recommendation by the Treasury Committee of the House of Commons in its report, published in February 2003, on split capital investment trusts. The Treasury Committee recommended that investment trust companies should be brought within the scope of investment product regulation by the Financial Services Authority (FSA). As part of its consultation on these matters, the Treasury sought views on whether investment trust companies should also be brought fully under the jurisdiction of the Financial Ombudsman Service. Currently we can normally consider complaints about advice on buying shares in investment trust companies; and we can deal with complaints about ISAs or unit trusts that invest in investment trust companies. But we do not cover complaints about investment trust companies themselves.

quality

In January 2004 - as reported in last year’s annual review - the board of the Financial Ombudsman Service commissioned Professor Elaine Kempson of the Personal Finance Research Centre at Bristol University to carry out an independent assessment of the operations of the ombudsman service. The board saw this as an important exercise in scrutinising and testing our process and output in terms of quality, consistency and value - building on the internal review procedures and quality-checking systems already in place.

Professor Kempson and her team of researchers carried out the assessment over the first six months of 2004. The board published Professor Kempson’s report in full in July 2004. The report - Fair and reasonable: an assessment of the Financial Ombudsman Service - is available on this website. It concludes with the “overall view that the Financial Ombudsman Service is a thoughtful, well-managed organisation that is doing a good job under difficult circumstances”.

Our then chairman, Sue Slipman, sent a copy of the report to the chief executives of the twenty firms that together account for well over two thirds of our total workload (in terms of the number of complaints referred to us by consumers). The chairman invited comments and feedback from the firms - in particular, in response to Professor Kempson’s findings that the quality of our case-handling was “generally high” and that there was “no evidence to suggest that lack of consistency was a significant problem within the organisation”. The chairman asked firms to send the chief ombudsman - over the following six months - any decisions they identified which they believed were inconsistent. Only one firm of the twenty eventually responded, giving three examples of outcomes in individual cases with which it had disagreed.

The recommendations put forward in Professor Kempson’s report were considered in detail by the board and executive team and have all been - or are in the process of being - implemented. This included the recommendation that specific responsibility for the management of quality should be assigned to a single member of the executive. The new post of quality director was advertised in October 2004 and Estelle Clark was subsequently appointed in January 2005. The quality director’s role is to act as a champion for quality across the ombudsman service, working across all levels of the organisation to develop new approaches to quality. This includes ensuring that our staff are properly trained and supported, and that a culture of continuous improvement exists throughout the ombudsman service.

investment in management

Following Professor Kempson’s assessment of our operations - and in response to the continuing increase in our workload - we re-structured and strengthened our organisational framework during the year. We have invested, in particular, in our senior management structure, in order to take account of the changing requirements of an organisation that has tripled in size, in terms of its workforce, over the last five years - while handling a fourfold increase in cases over the same period.

In addition to creating the new role of quality director, described above, and appointing a new human resources director, we have realigned the roles of our two principal ombudsmen. As principal ombudsman and corporate director, David Thomas now leads our work on corporate policy, including relations with government and regulators, and our work on "wider implications" cases. As principal ombudsman and decisions director, Tony Boorman leads our team of ombudsmen, assisted by five senior ombudsmen who have been given lead responsibility for particular sectors. Our senior management structure is shown on our organisation chart.

working with the Financial Services Authority (FSA)

The FSA and the ombudsman service are operationally independent, with separate and distinct roles. However, our two organisations have a strong and constructive relationship. In operational terms, a memorandum of understanding (MoU) provides the formal framework for our relationship with the FSA. This MoU - which can be downloaded from this website - reflects the importance of close co-operation and communication between the FSA and the ombudsman service, because our functions are so closely related.

We and the FSA have worked together closely during the year in areas ranging from mortgage endowment complaints to the extension of the regulatory framework (and of the ombudsman service’s remit) to cover mortgage and general insurance intermediaries. And we liaise closely where changes to the FSA rules will affect our consideration of cases. For example, we will have to take into account the difference between the “basic advice” regime for the new “stakeholder” investment products and the “full advice” regime for other investments.

"N2+2" review and "wider implications"

During the year we and the FSA continued our joint consultation with stakeholders on certain aspects of the Financial Services and Markets Act 2000 - relating specifically to how the Financial Ombudsman Service operates in practice. The aspects under consultation were identified as part of the Treasury’s wider review of this new Act, two years after it came into force. This wider review became known in shorthand as the “N2+2” review - because “N2” was how the financial services industry referred to the date on which the Act became law.

The aspects of the review involving the ombudsman service covered our interaction with the FSA on complaints with “wider implications”; and whether there should be an external appeals system on top of our existing procedures (which already involve at least two stages, enabling an appeal by either party from an adjudicator to an ombudsman, as well as the availability of judicial review of ombudsman decisions).

In March 2005 we and the FSA announced jointly the outcome of our extensive consultation on these matters. This included publishing details of new arrangements aimed at clarifying the different roles and responsibilities of the FSA and the ombudsman service when “wider implications” issues arise; improving the identification and handling process for such cases at both the FSA and the ombudsman service; enhancing co-operation on cases between us and the FSA; and improving the overall transparency of the process.

We also confirmed that the majority of those who had responded to the consultation - including larger firms and consumer bodies - were opposed to introducing a formal appeals mechanism; and that we and the FSA did not, therefore, propose to recommend to the government that legislation should be introduced for an external appeals mechanism.

our work with stakeholders and customers

year ended 31 March 2005

roadshows and conferences

We held 19 roadshows across the UK - from Plymouth to Edinburgh, Maidstone to Belfast - and 2 workingtogether conferences.

tradeshows and consumer events

We took our exhibition stand to 49 tradeshows and consumer events: from BBC Good Homes at the NEC to Mortgage Business Expo at Olympia; from NewStartScotland in Glasgow to the United Counties Agricultural Show in Camarthen.

speeches and presentations

We spoke at 124 seminars, conferences etc.

visits and workshops for consumer advisers

We met 136 consumer advice organisations nationwide, such as trading standards departments and citizens advice bureaux.

visits and training for firms

We met 269 financial services providers - from sole-trader financial advisers to international investment banks.

industry meetings and seminars

We took part in 208 meetings for groups of financial services practitioners - including our industry liaison forums (attended by trade bodies and industry representatives).

media enquiries

We handled over 3,000 enquiries from newspapers, magazines and TV/radio stations.

MPs

We responded to 474 letters from MPs and 138 ministerial enquiries - and provided replies to 18 Parliamentary Questions.

website hits

95,000 people a month logged onto this website.

publications

  • We printed and distributed over a million copies of our publications (including our leaflet, your complaint and the ombudsman, and 10 editions of our newsletter, ombudsman news).
  • We sent 30,000 copies of our introduction to the Financial Ombudsman Service to smaller firms that came under the ombudsman’s remit during the year.

our technical advice desk

(general guidance and advice on ombudsman practice and procedures - for complaints-handlers and consumer advisers)

Our technical advice desk handled 18,486 enquiries, comprising:

  • 15,898 calls from financial services practitioners
  • 2,129 enquiries from consumer advisers
  • 459 calls from trade associations, researchers, official bodies etc.

useful links