A deficit of trust

In a prolonged economic downturn many more people experience financial difficulties, and some are left in great financial distress. Against that background, the rise in the number of consumer complaints to the Financial Services Ombudsman (FSO) is scarcely surprising – up 27 per cent in the first six months of this year compared with the same period in 2012. In part, as Ombudsman Bill Prasifka has pointed out, the rise in complaints marks an increased lack of trust by the public in financial institutions, and a sense of great frustration. Bank managers and their peers, who were once treated with "awe and respect", can no longer command the same public confidence.

Of the 4,600 complaints made to the ombudsman in the period, most involved the insurance sector and concerned the alleged misselling of payment protection insurance, while more than one third related to banking, and customer complaints on mortgages.

As Mr Prasifka has again pointed out in his review, too many banks and other financial institutions have failed “to learn from previous complaint experiences and findings issued” by his office. Simply stated, they fail to take their customers seriously at an earlier stage. Consumer complaints that could be easily settled, if dealt with sooner, are all too readily ignored. That, however, is set to change.

Under new legislation, the ombudsman’s office shortly will have a statutory power to “name and shame” offenders. At present an offending financial institution cannot be identified. Only the complainant, but not the wider public know it. But because the failings of the bank or insurance company are not revealed to the public it suffers no reputational damage, and therefore is under less pressure to change its behaviour. The consumer, while made aware of the offending practices is unaware of the offender, and remains inadequately protected. That does little to restore confidence in the financial services sector, when its various institutions have long resisted becoming fully accountable to the public for their performance.

The legislative change, while long overdue and welcome, is nevertheless inadequate. Only some complaints made by the public - those upheld by the ombudsman – will be published. Quite unlike the UK, where both the number and detail of complaints made against all financial institutions are published, and not just those complaints that have been upheld.

The Irish Insurance Federation (IIF) has criticised what is a very modest move in the right direction. It fears that its members could become subject to "periodic trial by media". Doctors and solicitors are subject to a complaints procedure by their professional bodies. And IIF members too should be "named and shamed" where the Financial Services Ombudsman upholds any public complaints made against them.