THE FINANCIAL Services Ombudsman is not an advocate for consumers but acts as the arbiter of unresolved disputes between consumers and financial service providers, such as banks, building societies and insurance companies. The office was established in 2005 and the public – to judge by the volume of complaints received – greatly value its work.
Bill Prasifka, the current officeholder and a former chairman of the Competition Authority, who took over that post two months ago, has proposed an important legislative change which, if accepted by the Government, would strengthen the ombudsman’s role as a financial regulator and make financial service providers more accountable to the public.
Under current legislation, all complaints investigated by the ombudsman are conducted in private. All findings made by the office are also private. Only the complainant and the financial service provider know the outcome of their dispute. The ombudsman, when later publishing summary details of individual case findings, can only refer to unnamed firms. Because the anonymity of both parties in a dispute is fully protected, those in the industry that have behaved badly cannot be identified. As Mr Prasifka points out, the ombudsman’s role is to promote the integrity of the financial services sector in the eyes of the public. But he questions how this can be done when his office, while free to publicise cases of industry wrongdoing, must also shield the wrongdoers from public accountability. And he asks: “If certain firms are operating unscrupulously, why can’t the public at least know who they are?”
The Financial Services Ombudsman is a statutory office which is funded by some €5 million in levies paid by the financial service providers. Because they finance the cost of the dispute mechanism, the industry seems unlikely to favour a name and shaming sanction, such as Mr Prasifka has proposed. However, unless some change is made, public confidence in the effectiveness of the ombudsman’s office and in the integrity of the financial services industry will be diminished. Five years after the establishment of the ombudsman’s office, which was proposed in the McDowell report a decade ago, it is time for Government to review its overall performance and to take account of what Mr Prasifka has proposed. The interests of the public, in ensuring they are well informed and adequately protected against the mis-selling of investment products, are best served by more accountability on the part of financial service providers.