The number of complaints formally made by consumers against banking institutions has grown year on year since the inception of the Financial Services Ombudsman (FSO) in 1995. The FSO is the statutory office tasked with independently inspecting complaints made by the general public about their dealings with financial service providers that have not been resolved by the providers themselves. Between 2008 and 2009 the office saw an increase in complaints of 28%. There is no doubt that this increasing figure is not only a result of mounting consumer difficulties in making repayments on loans and mortgages, but also a result of the growth in anger at and thus scrutiny of the practices of Irish banks.
The procedure for successfully resolving a complaint through the Financial Service Ombudsman is, unsurprisingly, complicated. The consumer must first lodge a written application. On the basis of this the FSO will decide whether the issue falls within its remit; in 2010 it found that a whole 859 did not. We have no idea as to what happened to these claims as they are not tracked any further by the office. If a complaint is found to fall within its remit the FSO then notifies the financial institution in question and affords the institution twenty five days in which to resolve this complaint internally. If no solution is reached the FSO will offer a mediation service. How this works in practice remains a mystery as the office does not elaborate on what mediation involves. There are no clear guidelines provided as to what type of result will deem mediation a success. A mere token effort by a financial institution to placate an aggrieved consumer might be sufficient to halt the involvement of the FSO.
On to the investigatory stage. Only if the FSO itself declares that mediation has been unsuccessful will it begin an actual investigation into a complaint. There is currently a twenty week waiting time for the commencement of a new investigation following the ruling out of mediation; what happens to the aggrieved parties in the meantime we do not know. Investigations take on average six to eight weeks, involve an evidentiary assessment and potentially an oral hearing. Once a decision is reached it is legally binding on both parties, subject only to an appeal. In 2010, a year that saw a near-record 7230 complaints, only 2443 decisions were ever reached.
At this point we reach the most problematic aspect of the complaints procedure. The only way to appeal a decision of the FSO is to take an appeal to the High Court. The High Court, the second highest court in the state! At this level legal costs are prohibitive for the majority of the populace never mind those parties already in a disadvantaged position with their bank. The cost of taking on a solicitor and barrister to bring an appeal through the High Court would be well into the thousands and we can hardly expect applicants to represent themselves in an upper court where across the room will sit the type of well-paid and experienced counsel that banks can afford. As a direct result very few appeals are ever taken.As of 31st December 2010, there were only 32 High Court appeals pending against the FSO in a year where 2500 decisions were issued. We don’t even know how many of these appeals were brought by the consumer rather than by the financial institution involved.
In theory applicants could apply for legal aid to support their appeal. Unfortunately legal aid is very heavily means tested and the income bracket it accepts is extremely low. Anecdotally I know that even if an applicant meets the financial requirements to qualify for legal aid, the Legal Aid Board will generally turn them down on the merits test. A case must be likely to succeed before it will be taken on for legal aid and since the FSO complaints process is already so long-winded the Board are reluctant to bet on the success of an appeal. It would be interesting to see how many applications for legal aid in order to take such an appeal are dismissed every year but this kind of specific information is not provided by the Legal Aid Board.
I see the point of using non-judicial bodies like the Financial Services Ombudsman to make decisions on certain specific issues, since this reduces the costs to the taxpayer that would be incurred by full blown court cases. The Personal Injuries Assessment Board is a good example of this model working at its best. Yet the integrity of these non-judicial bodies is instantly cast in doubt when applicants are forced to go all the way to the High Court to appeal their decisions. As well as providing more clarity on its complaints procedures the Financial Services Ombudsman must set up a more realistic appeals process as a matter of urgency.
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