Money talks: how watchdog gets consumers what they paid for
Sarah McCabe met Financial Services Ombudsman Ger Deering, the man taking a hard line on how insurers sell their products
Ger Deering has been Ireland's Financial Services Ombudsman for just under a year, having taken over from predecessor Bill Prasifka last April. His office handles complaints from consumers around the country about financial service products, from credit cards to house insurance.
Deering joined an organisation that had come under fire after being perceived by some to be too pro-bank. An Oireachtas Finance Committee criticised it for finding against consumers in seven out of 10 complaints.
His first move as Ombudsman was to initiate a review of how the office worked, performed by consultancy BearingPoint. This resulted in sweeping changes that took effect at the beginning of February.
The review surveyed people who had complained to the Ombudsman over the past two years and consulted with consumer groups, the Central Bank, the Department of Finance and financial service providers.
"Everybody said the same thing to us," Deering said in conversation with the Sunday Independent. "Everybody said they wanted a simpler, faster, less legalistic and informal way of resolving disputes, that we had become very formal, very legalistic…
"It was taking a long time to get complaints through the system because of that formality. The same process applied whether it was a small value complaint or a life-changing one.
"We were set up as an alternative to the courts. So it's very important, when the Oireachtas sets you up in that way, that you don't turn yourself into a court of law."
The reforms put in place prioritise mediation over adjudication. Before, the Ombudsman's team mainly consisted of investigators and adjudicators; in future it will mainly consist of dispute-resolution officers.
They will talk to complainants and financial service providers over the phone and in person and seek mutually agreeable settlements, rather than handing down hard-and-fast rulings about who was in the wrong.
Companies that settle can avoid being named and shamed; a rule allowing the Ombudsman to publish the names of companies who it regularly found against was introduced in 2013.
"This model works," said Deering. "I was involved in the establishment of the Workplace Relations Commission and part of what was introduced there was an early dispute resolution service.
"That was picked up from the labour relations agency in Northern Ireland and also the Private Residents Tenancy Board, which does it with disputes between tenants and landlords. They would all cite an 80pc success rate for mediation. Whereas in 2014 we had only eight cases resolved by mediation. We are way ahead of that already this year."
His office retains the right to adjudicate on matters that can't be resolved through mediation - the people who make the decisions are Deering, Deputy Financial Services Ombudsman Elaine Cassidy and its head of legal and investigations. They can award compensation of up to €250,000 and, crucially, order a policy to be reinstated.
There will be an increase in the number of complaints upheld when the office next reports results, Deering indicated. The number of complaints received overall is falling, which he attributes to economic growth as well as the introduction of the "name and shame" rule.
Another review project was also recently completed by the his office, on the decisions it made on tracker mortgage complaints between 2009 and 2015.
This was provided confidentially to the Central Bank to inform the regulator's own ongoing review of tracker mortgages across all lenders. Recognition last year by Permanent TSB that more than 1,000 of its customers had been incorrectly denied trackers was followed by an industry-wide probe of the matter.
"Really what we looked at was what kind of information were people given when they moved from a tracker to a fixed rate, what was their entitlement when they came back off that fixed rate," said Deering.
"I have to say, the terms and conditions across all the banks were quite different. And indeed they changed over time in banks. We would be aware of clauses in certain banks that changed as they went along."
Its analysis also looked at timing.
"The Central Bank sent out an industrial letter in 2010, I think it was, when they had concerns about how trackers were being dealt with, so they were very interested to know did any of these events happen after that."
The Ombudsman found that problems with tracker mortgages were not limited to before 2010, they "were spread all over the period of time".
Mortgage issues reported in the last six years "really all had to do with fixed rates and trackers", Deering added. "Varying different terms and conditions, varying different methods, varying different everything… but at the nub, it was about when people moved from a tracker, or never went on to a tracker, which was in their letter of offer."
Outstanding complaints to his office on tracker mortgages have now been put on hold, pending the Central Bank review and banks' own internal reviews. He and the Central Bank are also of the view that previous dismissals of complaints by the Ombudsman should not now stand in the way of people getting redress, though no previous decisions will be reversed.
"There is no mechanism to reverse them. They will stand. But that does not stop, in my view, a bank from implementing their redress scheme. There is nothing to stop a bank putting someone back on a tracker, irrespective of what decision they got from here.
"Both myself and the Central Bank have the same view on this. We are both of the view that whether somebody got a finding from here or not should not preclude them, and does not preclude the Central Bank, from putting them back on a tracker.
"I have written to all of the CEOs of the banks telling them that I believe everybody who has had a complaint before this office should not be treated any differently by virtue of having a complaint here.
"I think it's very important that nobody should be disadvantaged."
Because the Central Bank's review criteria are wider, he said: "There are people undoubtedly who will be included in the Central Bank scheme who, if they had taken the same complaint here, would not have gotten the same outcome."
Hopefully it will have "a good ending for a lot of people", Deering added. "That is my main objective in this, to ensure that anybody who is entitled to a tracker should get one."
He isn't seeing any major changes in the types of products that consumers complain about - though the newbie on the block is pet insurance.
One that consumers regularly bring up is reviewable whole-of-life insurance policies, which allow providers to ratchet up the cost of premiums as people get older. Most of these problems stem from a lack of understanding about the product and a lack of information given at the time they were sold, he said.
"The trouble with life cover is that as you get older, unfortunately the risk gets higher and costlier. That may not have been fully explained at the time. But because of the six- year rule [statute of limitations], we can't look back."
The statute of limitations, which prevents his office examining problems with products that originated more than six years ago, inhibits the Ombudsman rarely, he added - only a small percentage of cases.
"It's not for me to defend any particular product but I think sometimes people lose sight of the fact that they have had life cover for 10, 15, 20 years…
"You'll never hear anybody saying: 'I paid my house insurance for 10 years and I got nothing.' Life insurance should be the same way. But I accept that there was some confusion around these policies, that some people thought they were buying some sort of an investment policy when in fact they were buying into a life policy. They were a complex product, I have no doubt they could have been sold better and explained better.
"We are constantly saying this to providers, that it is critically important that information is properly conveyed, whether it is a life insurance or a house insurance policy. I also feel strongly that if insurance companies need to know something, then they need to ask the question.
"People are sometimes given a general question and asked to disclose any material fact that might influence the insurer when writing out a premium.
"Well, I don't believe it's for the consumer to figure out what will influence an insurer, I think it's up to the insurer to ask the consumer what they need to know. For example - have you any previous claims? Because the consequences of not declaring a previous claim can be catastrophic.
"Most do ask," he concedes. "But not always.
"It depends who is selling the policy. The policy isn't always sold by the insurance company themselves. This is something I think, as we get more into turning insurance into a consumer product and an easy buy, that's something I am very worried about.
"Look at somebody buying online, buying in the supermarket. It is a serious product they are buying and serious questions need to be asked and answered at that point. So I would put a huge emphasis on that.
"Insurers need to work with, whether it's a broker or whoever is selling their insurance product, they need to make sure that the intermediary is providing them with sufficient information. It isn't sufficient to say that the question wasn't asked."
On whether he has detected any improvement in the behaviour of financial service providers, Deering said it is too early to say given his short time in office.
"But I will say that there is a bit to go. I think they are trying, they are trying to deal with some of their complainants in a better way. I know some of the legacy cases I have here I wouldn't be happy with how they were handled. I am asking service providers to engage with complainants earlier."
Four-fifths of the complainants surveyed by BearingPoint said they had not been given an opportunity to talk to their provider before they went to the Ombudsman.
"Our legislation is quite strong and quite good. I intend, quite frankly - and I have said this very clearly to providers - I intend to use the full ambit of the legislation available to me."
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