Financial Ombudsman Service - Triennenial Reviews

Triennenial Reviews

The non-executive board of the Financial Ombudsman Service commissions three-yearly external reviews of the service.

The first review - in 2004 - involved a six months' assessment of the operations of the ombudsman carried out by Bristol University's Personal Finance Research Centre. The review - "Fair and reasonable: an assessment of the Financial Ombudsman Service" - included a detailed overview of the ombudsman service's case-handling procedures and systems. It examined the organisation's performance in terms of quality, consistency, process and value. The review concluded with the "overall view that the Financial Ombudsman Service is a thoughtful, well-managed organisation that is doing a good job under difficult circumstances."

In 2007/08 the Financial Ombudsman Service was the subject of a second triennial review - by Lord Hunt, the terms of reference of which were set by the non-executive board of the Financial Ombudsman Service.

Lord Hunt - a leading financial-services lawyer, president of the Chartered Insurance Institute and former government minister - was commissioned in late 2007 to conduct an "independent" review, focusing on the openness and accessibility of the Financial Ombudsman Service.

The review allowed for a three-month submission period between 16/10/2007 and 16/1/2008. Corporate submissions were published on Lord Hunt's review-website.

Complaints have been made that consumer submissions were either not published or were edited before publication. However, Lord Hunt had already explained that he would generally not publish individual consumers' submissions - because of the details they frequently contained relating to individual personal and financial circumstances.

Lord Hunt's report was published on 9 April 2008. Lord Hunt concludes that: the ombudsman's approach to settling disputes on the basis of "what is fair and reasonable" is essential – to underpin the ombudsman's credibility as an informal non-legalistic alternative to the courts; charging consumers to access the ombudsman – as some have proposed – would comprehensively damage accessibility; there is no convincing case for an external appeals mechanism – on top of the ombudsman service's current internal appeals procedure; there should be no change to the ombudsman's current approach to formal hearings (holding them only where absolutely necessary – as most disputes can be decided on the basis of paper evidence); there is no requirement for a small firms' division – as long as the ombudsman's Smaller Businesses Taskforce continues to focus on the particular needs of small firms; there should be closer monitoring and regulation of the activities of claims management companies; there should be greater openness – in relation to the ombudsman's approach, the relationship between the ombudsman and the regulatory system, and the performance of individual financial services businesses in handling customer complaints.

Lord Hunt's review also includes 73 specific recommendations for the ombudsman service, including: significantly increasing investment in pro-active communications – including TV advertising, consumer campaigns and strategic partnerships with government and others; commissioning a new consumer-friendly brand-name instead of ombudsman; offering a freephone service (instead of the current 0845 number) and extended opening hours; appointing "case advisers" – working alongside adjudicators and ombudsmen – to guide the most vulnerable consumers through the complaints-handling process; launching an awards scheme to identify and reward businesses who handle complaints well – matched by a "wooden spoon" for the worst performers; publishing comprehensive information on all aspects of ombudsman policy and methodology (but not decisions on all cases) – as well as benchmarked data on how individual financial services businesses handle complaints; and placing all the ombudsman service's formal communication with the regulators on the public record.

The Financial Ombudsman Service has published updates on its accessibility and openness projects - following Lord Hunt's recommendations. The ombudsman service has also set up a discussion group - made up of financial services practitioners and representatives from consumer organisations - to help with ongoing plans to develop and implement accessibility and transparency initiatives.

In January 2012 the National Audit Office (NAO) published its report into the efficiency of the ombudsman service, having been invited to do so by the board of the ombudsman. This was the third three-yearly external review.

The NAO concluded that: - Having to cope with volatile demand is a key test for the ombudsman service. - With more than half of the ombudsman service’s workload over the last decade relating to just three issues – mortgage endowments, bank and credit-card charges, and PPI – the large surges of so-called “mass claims”, and the way in which financial businesses deal with them, give rise to major operational challenges. - The cost of settling disputes at the ombudsman service had risen by 214% in real terms since 2001 – but the complaints workload it has handled over this period had increased by 376%. - The programme of changes introduced in 2010 to modernise operational processes and IT (including the e-enablement project) had already begun to realise benefits – and while some aspects of project management should be strengthened, the programme was being managed well with good progress made to date.