On Friday 9 September, the Financial Ombudsman Service (FOS) published a consultation paper on its proposal to publish Ombudsman decisions. This will have an impact on complaints handling generally but particularly when it comes to identifying and handling potential systemic issues.

What does the consultation propose?

The consultation proposes that Ombudsman decisions (as distinct from Adjudicator decisions) will be published in full on the FOS website shortly after they have been issued. Commercially sensitive information will be removed and, after consideration, there is no proposal at this stage to reveal the identity of the firm’s professional indemnity insurers.

FOS decisions are currently only available in the form of anonymous case studies published in their bi-monthly Ombudsman News updates. Only 95 updates have been published since January 2001, including over 1,000 case studies. In contrast, the Ombudsman handed down more than 17,500 final decisions in the last financial year alone – 55% of those decisions related to pensions and investments advice. It is not yet clear how user friendly any search functions will be but, with a positive obligation on firms to consider previous decisions, this proposal means financial advisers in particular will have to consider a much wider body of material than ever before when responding to complaints.

Why now?

Because Parliament has included the requirement in the draft Financial Services Bill. The timeframe for implementing the Bill will also drive the timeframe for this proposal. The consultation period closes on 9 December 2011 and so it will not be this calendar year.  

Commentary

Predicting the FOS’s reaction to certain complaints on the basis of what is “fair and reasonable” can be a source of much frustration for firms and their insurers alike. From 1st January, the Ombudsman limit increases to £150,000 – six times the multi track limit in the High Court. With such large sums of money at stake, the decision to publish decisions and provide firms with some guidance in this regard is welcome – particularly also given the FCA’s (Financial Conduct Authority) well documented intentions to hold firms and individuals to account for poor complaint handling practices.

We will have to wait to see whether publishing Ombudsman decisions carries with it a greater expectation on firms to identify and investigate potential systemic issues at a time when the FSA has been strengthening the rules relating to root cause analysis. What is more obvious is that if a firm decides to reject a complaint, it becomes all the more important to advance the most compelling arguments in support of the firm’s position or risk the heightened possibility of an adverse (published) precedent being set.  

The decision to name the firm (and not the complainant) in the decision is likely to attract mixed reactions – some will believe naming and shaming firms is the only way to improve standards and indirectly reduce the associated regulatory and insurance costs. Others will point to the fact the FOS already publishes general information on firms’ complaints records. The question is whether this is deterrent enough. Publishing the firm’s name carries reputational risks as well as the potential for extracts of the decision to be lifted out of context onto social media sites. There is also the risk of claims management companies using the information to target certain firms.  

The decision to name the firm might well have other motivations – such as to try and defer firms from appealing Adjudicator decisions. The FOS has made no secret of its intention to try and reverse the recent trend of more appeals to the Ombudsman and the threat of being named and shamed in any final decision might be considered an effective tool in this regard.

The possibility that the FOS might no longer provide a forum for quick, informal and confidential dispute resolution will represent a major change, and one that favours complainants who have nothing to lose in referring to it to the Ombudsman.