Ombudsman would like to name and shame rogue financial service providers

Shooting the breeze - William Prasifka, Financial Services Ombudsman

In the different Ireland in which we all grew up, several pillars of the community were held in the greatest of esteem. We scampered when the garda approached, doffed our caps when we dared to address the parish priest, and adopted the grateful approach when meeting the local bank manager or insurance salesman.

In every community the bank manager was above question, as were the banks and other financial institutions. The insurance salesman was invariably a local county councillor, canvassing and collecting with one go. Their word was their honour and the honour of the institutions they represented. The name of the institutions boomed out with the resonance of the brass nameplates upon their doors and strong granite walls.

Move on a generation and all that is eroded. The reputations of the banks are in tatters, investment companies are treated with the greatest of suspicions. Insurance companies hike up rates to unprecedented level, with this year’s VHI hikes being just an e example of the helplessness of the little people against the big organisations. In terms of financial service, there is a lot of distress out there and the cries of those left hurt are increasingly being heard by the office of the Financial Ombudsman.

The FSO is currently staffed by about 30 people, and deals with complaints from customers who claim to have been treated unfairly by banks, insurance companies, credit unions, brokers, moneylenders, bureaux de change and hire purchase providers.

The current officeholder is William ( Bill ) Prasifka and, faced with the onslaught of new complaints, an average of 20 complaints every day, he is now calling for greater powers that will allow him to name and shame the rogue providers who are dishonouring the industry.

Mr Prasifka was appointed by The Minister for Enterprise, Trade and Employment to the position of Chairperson of the Competition Authority in March 2006. He is a graduate of Columbia University School of Law and previously worked as the Irish Commissioner for Aviation Regulation, and was also a former Member of the Irish Competition Authority. Prior to these appointments Mr Prasifka was in private practice, first in New York and then in Dublin, advising in the areas of Irish, European and American competition law.

Tomorrow night, (Friday ) Mr Prasifka travels to Galway to address the Galway charter of the Insurance Institute of Ireland which is holding its President’s Dinner in the Clayton Hotel, but Mr Prasifka is no stranger to the west.

“For the last 40 years, my wife’s family have been holidaying in Carraroe and as I’ve been there for the past 20 years, I know that part of the world quite well,” so the road west won’t hold any surprise for him.

Neither does the workload his office is facing.

“During the time we live in, with the financial crisis and with so many people in financial distress, it certainly does put a microscope on the industry. We see that in our complaints, which reflects the increase in the number and type of insurance claims that are being made because of the exceptional circumstances we face, in terms of our finances and even the inclement weather of the last two years.

‘We are often left to pick

up the pieces’

Has his workload increased in accordance with people’s decreasing faith in financial institutions?

“Last year, we had in excess of 7,000 complaints and I think that is going to continue into the future. Certainly if you look at the number of complaints we have received over the past few years we have seen dramatic increases in these, mostly on the investment side.This is understandable because of the unprecedented collapse in value in terms of shares and property and in terms of investments generally, so people begin to look at their policies quite carefully; they look at the circumstances under which they were sold, and in many cases we are left to pick up the pieces after there has been a financial calamity in some cases.

Do complainants address the issue with their service providers or do they use Mr Prasifka as a first port of call with their woes?

“One of the most important messages that we give out is that people in the first instance need to work with their financial services providers to resolve the issues. It is a prerequisite before someone makes a complaint to us that they deal with their service provider first.

“Our own experience is that even after a complaint is made, most of those complaints are resolved, over 50 per cent in fact, without us having to make a full finding and that is by having the matter resolved between the two parties.

“We have called upon financial service providers to make a bigger effort to try and resolve things before they ever come to us because the providers in particular will know how we view problems.They should know our methodology, should have a very good indication of how we are going to decide things. It shouldn’t have to always go to a final finding, but we’re looking for more things to be resolved at an earlier stage,” he said.

Within the financial services industry, is the Ombudsman viewed as being inside or outside the tent?

“The important thing is that the Ombudsman in interest of every complaint, must be absolutely fair, we are not pro-industry or pro-complainant, we must be absolutely fair in how we judge these things. And that is why we are easy to access for both sides.

“Complainants don’t need to retain lawyers or accountants, they don’t pay us. We try to give an instant expeditious service that is very much accessible. People can come in and talk to our staff about their complaint. When it comes to us making a decision, our ethos and our statutory requirements is that we are absolutely fair.

Mr Prasifka does retain significant powers of enforcement

“In any case in any one complaint, the office can direct compensation to a complainant of up to €250,000. We also have power which is called rectification which can be used in the investment sector whereby if, say, someone invested more than €250,000 in some bond and if we find the product has been sold in a misleading manner, we can direct that the bond be returned to the financial service provider and the complainant can get their money back in total,” he said.

Because of the failure of regulation in Ireland in recent years, does he feel under greater pressure to ensure that his office performs to its optimum?

“It is important to keep in mind what the mission of this office is. Yes, we are there to adjudicate complaints, but our mission is that we are there to enhance the financial services environment for all sectors. We are there to promote the integrity of the financial services sector. There have been some very serious challenges to the integrity of that sector so I would agree that the services of my organisation are needed more now than they have ever been.

Naming and shaming would focus the minds of companies who do not behave

Tomorrow night he addresses many representatives of one the industries he polices, so what advice would he have for the insurance sector?

“My advice would be always the same. They should get to know what our methodologies are and internalise them. They should deal with complaints effectively before they ever get to us and even more importantly, they should adjust their practices so that complaints don’t arise in the first place.”

In the main, do financial service companies operate in a professional and honest manner?

“I find that the responsiveness of the companies is uneven.There are some financial service providers who, in our experience, I can say never give us any difficulties whatsoever. Their processes are more or less aligned with our own thinking, when complaints are made, extremely small numbers would ever be upheld and the ones that are, they may only be a slight adjustment.

“On the other hand, some other financial service providers have a significant way to go. The way to address that imbalance is for us to have the power which we don’t have, that is to name these companies whose record is below par. We don’t have that power at the moment and I am looking for that. If we had that power, this adjustment could take place more quickly.

“It is an important instrument which can be used in the public interest. It is important we remember that we are not the regulator, we are not here to punish people or to penalise them. There is an important public interest here that with certain companies which are not performing as well as they should, it is only appropriate that the public is aware of that,” he concluded.

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