The Financial Services and Pensions Ombudsman Bill
Second Stage Speech
Minister of State Eoghan Murphy TD
25th May 2017
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I welcome the opportunity today to debate the legislation concerning the Financial Services Ombudsman and the Pensions Ombudsman. As you are aware, the Government published the Bill entitled ‘Financial Services and Pensions Ombudsman Bill 2017’ on the 10th of May, and today’s Second Stage debate on the general principles of the Bill is a positive step in the progress of this significant piece of legislation which deals with a number of important issues for consumers of financial services and pensions.
The Bill will amend, update, and consolidate into one Bill all of the legislation underpinning the Financial Services Ombudsman and the Pensions Ombudsman with the aim of forming a unitary structure and amalgamating the Financial Services Ombudsman and the Pensions Ombudsman into the Financial Services and Pensions Ombudsman.
The Government decision to amalgamate both offices follows the recommendation of a Critical Review under the Public Service Reform Plan. In the drafting of this Bill, a full Regulatory Impact Analysis (RIA) was undertaken by my Department, including a public consultation process, along with a series of consultations with relevant stakeholders (both public and industry representatives).
The Financial Services Ombudsman is an independent statutory officer who deals with unresolved complaints from consumers about their dealings with regulated financial service providers.
The statutory role of the Pensions Ombudsman is to investigate complaints of financial loss due to maladministration and disputes of fact or law in relation to occupational pension schemes, trust retirement annuity contracts and personal retirement savings accounts. The Pensions Ombudsman performs these functions independently and acts as an impartial adjudicator.
Given the fact that financial investments and pensions are increasingly becoming inter-mingled, the merging of these two Offices will provide a simpler process for consumers who will have a “one-stop-shop” for complaints in relation to the a wide range of products falling within the two general areas.
Since the Government agreement on the outline Heads of Bill, both Offices have been physically merged in one location on Lincoln Place. In addition to this, recent legislative changes under the Social Welfare Pensions Act 2015 have enabled the appointment of the Financial Services Ombudsman Mr. Ger Deering as Pensions Ombudsman in May of 2016
The detailed Heads of Bill underwent pre-legislative scrutiny on 27th October of 2016, along with a Sinn Fein’s Private Member’s Bill on the Financial Services Ombudsman entitled: Central Bank and Financial Services Authority of Ireland (Amendment) Bill 2014. I welcome the Scrutiny Report of the Joint Committee which has provided a useful service to this House. I am particularly glad that the Report recognises the improvements for consumers that the Government’s legislation will bring to financial investments and pensions.
The Report, in its analysis of the General Scheme of the Bill, recommended changes in the Heads that would bring further clarity to its proposals. I have reviewed the Committee’s recommendations, and I can assure that these most of these recommendations have been addressed in the published Bill, where it was feasible to do so. I look forward to discussing the detailed provisions at Committee stage at a later date.
In drafting this legislation, the Department of Finance reviewed the legislation underpinning the Pensions Ombudsman (Pensions Act 1990, inserted by the Pensions (Amendment) Act 2002) and the Financial Services Ombudsman (Part 7 of the Central Bank Act 1942) as inserted by the Central Bank and Financial Services Authority of Ireland Act 2004).
The published Bill is more comprehensive and provides for a number of improvements to the existing legislation. Firstly, it amalgamates the Offices of the Financial Services Ombudsman and Pensions Ombudsman; secondly, and most importantly, it consolidates and updates the legislation, including the extension of the time limits for complaints.
I will now outline the key features of the Bill for Deputies.
Part 1: Preliminary and General
The first part of the Bill deals with preliminary matters. As is the normal practice, this part contains definitions of terms used throughout the Bill. An important definition is that of a financial services “consumer” which is defined as meaning in general terms individuals, small businesses (sole traders, partnerships and companies), charities, clubs, and so on. Small businesses are those businesses whose annual turnover is €3 million or less.
This part of the Bill also sets out the power of the Minister for Finance to make Regulations, and what type of Regulations he can make including the ability to specify additional classes of persons who may make a complaint to the Ombudsman. Section 3 sets out the new dual funding structure of the merged Body. The existing levy on financial services industry is maintained, but it should be noted that monies will continue to be received from the Oireachtas insofar as they relate to the investigation of complaints regarding pension providers which reflects the current funding of the Pensions Ombudsman.
Finally, Section 5 refers to Schedule 1 which lists all the legislation and statutory instruments to be repealed and revoked on the relevant commencement date. We are repealing the Central Bank Act 1942 Part VIII (seven) and Part XI (eleven) the Pensions Act 1990 which set up the respective Ombudsman offices originally.
Part 2: Establishment of Office of Ombudsman and Deputy Ombudsman
Part 2 of the Bill establishes the Office of the Financial Services and Pensions Ombudsman. Part 2 also gives the Minister for Finance the power, by order, to appoint a day as the Establishment Day for the Office of the Financial Services and Pensions Ombudsman.
This Part provides that the power to appoint the Ombudsman and Deputy Ombudsman will be the responsibility of the Minister for Finance (having consulted with the Minister for Social Protection) from a list of candidates following a Public Appointments Service competition.
This Part also sets out the functions of the Ombudsman and Deputy Ombudsman, the terms of their employment, and the ability to remove the Ombudsman from office on certain grounds. Terms and conditions of the staff of the Office, including consultants and/or advisors working in the Office are also dealt with under this Part – it covers their obligation to deal with information confidentially.
Section 18 outlines the power of the Ombudsman to exchange information with the Central Bank of Ireland or the Pensions Authority as appropriate, which is a very important provision that we have reproduced from the original legislation. Finally,
Part 2 of this Bill sets out the accounting and reporting requirements of the Office, including the accountability of the Ombudsman to the Public Accounts Committees and other Oireachtas Committees.
Part 3: Dissolutions and Transfers of Functions to Financial Services and Pensions Ombudsman
Part 3 of the Bill sets out the functions that are to be dissolved or transferred to the new bodies, including transitional provisions pertaining to staff, accounts, and the Council.
Specifically, Chapter 1 dissolves the former Financial Services Ombudsman’s Bureau, the Financial Services Ombudsman Council and the Office of the Pensions Ombudsman. All of the functions that were vested in the Financial Services Ombudsman or the Pensions Ombudsman are, on and from the Establishment Day, to be transferred to the Ombudsman.
All reference in enactments to the Financial Services Ombudsman Bureau and the Office of the Pensions Ombudsman are to be taken as references to the new Office of the Financial Services and Pensions Ombudsman upon Establishment Day. All land and other property, and rights and liabilities, and records that belonged to any of the dissolved Bodies are to be transferred to the Office under Chapter 1 of this Part.
Chapter 2 transfers staff and superannuation from the dissolved Bodies to the new Office. Finally, Chapter 3 deals with the final accounts and Annual Reports of the dissolved Bodies.
Part 4: Financial Services and Pensions Ombudsman Council
Part 4 establishes the Financial Services and Pensions Ombudsman Council.
To reflect the changing workload of the Council, the Bill reduces the membership of the Council from a maximum of 10 to a maximum of 7 members. One member is required to have pensions experience, while one will need to have financial services knowledge, and now at least two members must have knowledge of consumer protection or consumer issues. The members are appointed by the Minister from a short list of more than three persons following a competition by the Public Appointments Service. One member with pensions experience will be nominated for appointment by the Minister for Social Protection. The Minister for Finance shall appoint a Chairperson from among members of the Council.
In the amalgamation of the two Bodies, the Minister for Finance has maintained the prominent oversight role the Council plays, but he has made some changes.
He proposes to remove the Regulation-making power of the Council with respect to how the Ombudsman operates. Instead, the Minister, rather than the Council will have the Regulation-making power under Section 4 relating to the operation of the Office of the Ombudsman. This can be done either on the Minister’s own initiative or at the request of the Ombudsman, having consulted with the Council and the Ombudsman.
The Council will continue to keep the efficiency and effectiveness of the Office under review, but it will no longer be responsible for the appointment of the Ombudsman or Deputy Ombudsman.
The Council will maintain its role in approving the draft Statement of Accounts prepared by the Ombudsman, before they are to be submitted to the Minister for Finance.
A notable change in the legislation is the new funding structure of the amalgamated Body (part-industry for financial services complaints and part-Exchequer for pension complaints). For this reason, the Council will continue to determine and prescribe by Regulation, the levies or fees to be paid to the Ombudsman by financial services providers. Further provisions in relation to the operation of the Council are set out in Schedule 2.
Part 5: Complaints to the Ombudsman
Part 5 of the Bill outlines the type of complaints that can be made to the Ombudsman and the format in which they should be submitted.
In relation to the conduct of a financial service provider, a person can complain about:
- the provision of financial services;
- an offer of financial services; or
- failure to provide financial services.
In relation to the conduct of a pension provider, a person can complain about financial loss or a dispute in relation to pensions.
Part 5 also sets out some practical arrangements such as, the provision for a complaint to be continued on the death of a complainant (this is a new provision for financial services complaints).
Section 47 outlines the powers of the Ombudsman in relation to an investigation and Section 48 sets out transitional provisions for the investigation of complaints that were made before Establishment Day.
Section 50 sets out rules in relation to the option of staying of Court proceedings where a complaint is being investigated by the Ombudsman.
Part 6: Complaints Procedure
Part 6 outlines the complaints procedure that consumers will be subject to once the Bill is enacted, including the most significant change in the legislation. This change relates to an extension to the time limits applicable for complaints to the Ombudsman which I will outline in a moment. Section 50 outlines the matters within jurisdiction of the Ombudsman.
It is worth noting that there have been some significant changes under this Part of the Bill. For example, it contains provisions for the Ombudsman to adopt rules of procedure regarding the dealing with complaints, and to publish these rules. These changes have been proposed with the intention of providing more clarity and certainty for the consumer about the process for dealing with complaints and it will also help them to understand what to expect when the Ombudsman is dealing with a complaint.
The Bill outlines the steps involved in the resolution of a complaint ranging from internal dispute resolution to investigation of the complaint by the Ombudsman. There are related provisions relating to mediation and adjudication.
The Minister for Finance is retaining the requirement for consumers to first try to resolve the matter with the internal dispute process of the provider of the financial/pension product. However, the Minister is now allowing the Ombudsman to waive the internal dispute process in certain cases such as when the Ombudsman determines a complaint is of such importance as to warrant waiving the process. This also means that in cases where the provider may be seen to frustrate the process, the Ombudsman can intervene.
I would like to emphasise the fact that the Bill continues to provide for mediation as a tool for the Ombudsman in cases where he sees fit, while at the same time strengthening the role of the Ombudsman in promoting engagement in the mediation process.
A key feature of the new legislation is the increased communication between the Ombudsman and complainants. Under the proposed provisions, once the Ombudsman has considered the complaint, he may now issue a Preliminary Decision which will indicate the potential decision to be made and the evidence considered in arriving at this. This ensures that all parties to the complaint are aware of developments in a complaint and they have to opportunity to ensure that the Ombudsman has all evidence necessary for making a final decision.
Part 6 also sets out the redress available to consumers. The Ombudsman can direct a financial service provider to pay compensation of up to €250,000 and he can also direct other measures, for example, rectification. Such rectification can be very significant as it can involve putting a person back to the position in which they previously were before the complaint arose. Part 6 also details the manner in which the Ombudsman can publicise decisions which is a new measure to increase transparency for consumers and providers.
Part 6 (Section 51): Time Limits
Section 51 sets out the new time limits applicable to complaints made to the Ombudsman. The current legislation prohibits the Financial Services Ombudsman from examining any aspect of a complaint where the conduct being complained of occurred more than six years from receipt of the complaint in his Office.
Extensive research was undertaken by my Department into designing the most appropriate time limit achievable within the law that would provide the necessary protection to consumers over the longer term. In this regard, my Department engaged with stakeholders, analysed views received from the public consultation process, and sought advices from the Office of the Attorney General on this issue.
The Bill extends the time limits for complaints in relation to certain long term financial services to the same time limit that currently applies to pension products, namely six years from date of the conduct complained of or three years from the date the complainant knew/ought reasonably to have known about the conduct.
The rationale for this expansion is that those who have long-term financial services, may not become aware of an event to be complained of, until their service or product matures and they should have some access to the Ombudsman at that stage. Long term financial services are, in basic terms, services that exceed five years and one month.
The new time limits for long-term financial services will apply to complaints made to the Ombudsman about conduct that occurred during or after 2002 and the service in which complaint is about must not have expired or otherwise been terminated more than six years before the date of complaint. This 15 year period (i.e. from 2002 to 2017) is inspired by the ‘long stop’ recommended by the Law Reform Commission who were considering a new discoverability time limit for personal injury claims. The introduction of a long stop prevents the opening-up of stale cases and gives some certainty to the parties as to the cut off time for bringing actions
My Bill also provides an extra discretion to the Ombudsman to extend the time limit that would benefit consumers of long-term financial services and pensions in cases where it is just and reasonable, similar to the provision that currently exists for pensions complaints.
Part 7: Appeals and Application to Court
Part 7 sets out the rules relating to appealing decisions of the Ombudsman to the Courts and Court applications. The steps involved in appealing a decision of the Ombudsman to the High Court on a point of law is detailed under this part. Furthermore, Part 7 deals with the ability of the Circuit Court to enforce a direction of the Ombudsman and the ability of the Ombudsman to refer a question of law to the High Court. Finally, Part 7 includes transitional provisions for appeals in the Court system of complaints already in the system before establishment day.
Part 8: Other Transitional Provisions
Part 8 outlines some other transitional provisions for the saving of regulations made by the former Council and the transfer of functions from the Financial Services Ombudsman Bureau to the Office of the Financial Services and Pensions Ombudsman.
Part 9: Consequential Amendments
Part 9 contains consequential drafting amendments to the Central Bank Act 1942 and the Freedom of Information Act 2014.
Part 10: Miscellaneous
Part 10 contains miscellaneous provisions such as the ability for the Ombudsman to cooperate and exchange information with the Central Bank of Ireland, the Registrar of Credit Unions and the Pensions Authority. Part 10 also empowers the Financial Services and Pensions Ombudsman to partake in the “Memorandum of Understanding on a Cross-border out of-court Complaints Network for Financial Services” in the European Economic Area (EEA).
Schedule 1 sets out all the repeals and revocations that must be made to Acts of the Oireachtas and Statutory Instruments on foot of this new legislation.
Schedule 2 sets out the operational matters in relation to the Financial Services and Pensions Ombudsman Council.
To summarise, this Financial Services and Pensions Ombudsman Bill’ will amend, update, and consolidate into one Bill all of the legislation underpinning the Financial Services Ombudsman and the Pensions Ombudsman. It has the aim of forming a unitary structure amalgamating the Financial Services Ombudsman and the Pensions Ombudsman into the Financial Services and Pensions Ombudsman (FSPO).
The measures I have outlined will strengthen the functions of the new Ombudsman, and improve the experience for consumers of both pensions and financial services.
As you are aware, there are many consumers for whom this Bill is a pressing issue, in particular the proposed change to the rules regarding the time period in which the Ombudsman can investigate complaints. With this in mind, I hope that this Bill can be sent forward to Committee Stage, where the Bill can be discussed in more detail.
 ‘The Public Service Reform Plan Critical Review - Integration of the Regulatory Function of the Pensions Board with the Central Bank and Amalgamation of the Pensions Ombudsman with the Financial Services Ombudsman’, April 2013
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