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ombudsman news

issue 84

March/April 2010

redress, regulation and mass claims

This issue features an interview with Natalie Ceeney, our new chief ombudsman and chief executive, to whom I hand over on 22 March. As I revert to my role as corporate director, a key issue continues to be the implications of "mass claims" - where thousands of consumers complain to the ombudsman service about broadly similar topics.

Next month sees the tenth anniversary of when the previously-separate ombudsman schemes for banking, insurance, investment etc came together. In our first year together, we received around 31,000 cases. At that rate it would have taken until 2032 for us to receive a million new cases in total. But we now expect to receive our millionth new case around the middle of 2010. In the past year we received around 160,000 new cases (a five-fold increase over ten years ago). The growth of mass claims has been a significant factor in this increase, with more than half of all the cases we have received relating to just six topics, of which payment protection insurance is the latest.

The Financial Services Bill proposes ways for dealing with mass claims - as well as new powers for the Financial Services Authority to create consumer redress schemes and new powers for the courts to deal with collective claims.

It is for Parliament to decide on the appropriate solutions - and consideration of current proposals may run out of time before the election. But all parties have accepted that the ombudsman service is currently having to carry a burden that it was not designed to bear.

We have joined with the Financial Services Authority (FSA) and the Office of Fair Trading in issuing a discussion paper: consumer complaints (emerging risks and mass claims). Responses should be sent to the FSA by 10 June 2010.

A key element in rebuilding consumer confidence in financial services is that financial businesses treat customers fairly - including handling complaints fairly and promptly, putting right recurring problems, and considering the position of all affected consumers, not just those who complain.

The paper considers the identification of new and emerging risks - to give regulators an opportunity of stepping in and nipping problems in the bud, thereby preventing new mass claims from arising. Examples are given of where that has already happened.

The primary responsibility for resolving mass claims lies with the regulators, who can consider across-the-board action to address the causes, whether or not affected consumers have complained - while the ombudsman service can deal only with individual complaints. But the law requires the ombudsman service to decide what is fair in the circumstances of each individual case - a potential mismatch that can only be resolved by legislation (such as the new section 404B proposed by the Financial Services Bill).

These are important issues, with great significance for financial businesses and their customers, as well as for our workload. The ombudsman service will play a constructive part in any new arrangements that emerge. But, pending some other solution, we will carry on deciding cases.

David Thomas
chief ombudsman (interim)

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ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.