Two recent Acts, signed into law by President Higgins last month, will have a significant impact upon the operation of the Financial Services Ombudsman (FSO) complaints procedure. In particular, the Acts allow for an extension of the period in which consumers can make complaint about certain financial products.
The Acts in question are:
- The Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017; and
- The Financial Services and Pensions Ombudsman Act 2017.
The Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017, originally a Private Member's Bill, provides for the strengthening of the functions of the FSO and improvement of the consumer complaints procedure. The Act came into force on 25 July 2017.
The Financial Services and Pensions Ombudsman Act 2017, originally a Government Bill, was signed into law on 26 July 2017. This more comprehensive Act provides for the establishment of an Office of the Financial Services and Pensions Ombudsman (combining the FSO and the Pensions Authority) but also contains changes to the complaints procedure. This Act has not yet been commenced by the Minister but when it comes into force it will, in effect, repeal the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017 above.
Below are some of the key changes contained in these Acts.
Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017 – in force
Extension of Time Limit The Act provides that the time limit for a consumer to make a complaint to the FSO is 6 years (the current time limit) however, if a consumer complaint relates to a 'long term financial service' the six year rule shall not apply. Long term financial service is defined as including financial services with a duration of 5 years and one month or more and life assurance policies.
The time limits for a consumer to make a complaint about a 'long term financial service' are:-
a) 6 years from the date of the conduct concerned; or
b) 3 years from the earlier of the date on which the person making the complaint became aware, or ought reasonably to have become aware, of the conduct concerned; or
c) such longer period as the FSO may allow where it appears to him or her that there are reasonable grounds for requiring a longer period and that it would be just and equitable, in all the circumstances, to so extend the period.
The only caveat to the above is that the 'long-term financial service' must have not expired or otherwise been terminated more than 6 years before the date of the complaint, and the conduct complained of must have occurred during or after 2002.
The Act provides that the FSO can investigate complaints made before the coming into force of the Act but which had not been assessed due to them being time barred. This means that complaints that were refused as being outside the then applicable time limits can be resubmitted to the FSO as they could now possibly qualify under the new extended time limits. The retrospective nature of the legislation is clearly set out in the Act.
Greater pressure on financial service providers to engage in the mediation process
The FSO must try, as far as possible, to resolve complaints by way of mediation (but may abandon the process where appropriate). Both complainants and financial service providers will be encouraged by the FSO to engage in mediation. The process remains voluntary and anything said during mediation will not be admissible in any subsequent investigation or court proceedings in the State.
Change in terminology in the adjudication of complaints
On completing an investigation of a complaint that has not been settled or withdrawn, the FSO shall make a finding in writing that the complaint—
(a) is upheld, or
(b) is substantially upheld, or
(c) is partially upheld, or
(d) is rejected.
This provision replaces the previous regime that a complaint be substantiated, not substantiated or partly substantiated in one or more specified respects but not in others.
New time limit to appeal to High Court
An appeal to the High Court against a FSO finding must now be made not later than 35 days after the date of notification of the finding of the FSO. Currently the time for an appeal to the High Court is 21 days.
Financial Services and Pensions Ombudsman Act 2017 – not yet in force
Extension of Time Limit
The provisions in this Act in relation to the extension of the limitation period are substantially identical to those set out above.
Powers of Ombudsman
Under the Act the Ombudsman, in investigating a complaint, has the power to obtain information in such manner and make such inquiries as he or she thinks fit.
Under current legislation the FSO may require the regulated entity or any associated entity to provide information or documents relevant to the investigation and to require officers, members, agents or employees of the regulated entity to give evidence. This power has been extended in this Act so that the Ombudsman may now require 'any person' to provide documents, information or give evidence in relation to a complaint.
Information or evidence by an individual in such circumstances shall not be admissible in criminal proceedings against that person and legal privilege in documents is preserved.
Jurisdiction of the Ombudsman
The Act continues the requirement that the Ombudsman will not deal with a complaint where legal proceedings are in being. However, the Ombudsman is now empowered to accept a complaint against a regulated entity who has instituted legal proceedings, where the Ombudsman believes that those proceedings were commenced to prevent the making of the complaint or to frustrate or delay its investigation. The Act also provides that the decision of the Ombudsman as to jurisdiction will be final.
Declining to Investigate
In addition to the current reasons for declining to investigate the Act provides that the Ombudsman may also decline to investigate where the subject matter of the complaint is of such a degree of complexity that the courts are a more appropriate forum for the complaint.
Internal Dispute Resolution Procedures
The Act continues the requirement that the complainant must engage with the regulated entity and provide a reasonable opportunity for it to deal with the complaint through internal dispute resolution procedures. However, the Ombudsman may consider a complaint before the internal dispute resolution process is completed where the regulated entity has failed to complete the review within the time limit or the complaint is of such importance so as to warrant waiving the internal dispute resolution procedure.
The time limit set out in the Act is suspended for the period during which a complaint is being considered under the internal dispute resolution procedure of a regulated entity.
The Act also provides that the Minister may require regulated entities to establish procedures for dealing with complaints.
Change in terminology in the adjudication of complaints
This is similar to that set out in the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017.
With regard to compensation in respect of complaints relating to financial service providers the Act puts in place a cap of €26,000 per annum where the subject of the complaint is an annuity and €250,000 in respect of all other complaints. In relation to pension providers there is no cap on compensation, however the Act provides that any financial redress should be an amount the Ombudsman deems just and equitable, but shall not exceed any actual loss of benefit under the scheme in question.
The appeal period has been extended to 35 days in this Act also.
The Act extends the powers of the High Court on appeal allowing it to make an order amending a decision of the Ombudsman or to make such other order as it considers just in all the circumstances.
Although the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017 is likely to be in force for a relatively short period of time, its key provisions are replicated in the Financial Services and Pensions Ombudsman Act 2017. That Act when commenced will have an even greater impact on how complaints to the Ombudsman will be dealt with.