FOS announces plans to publish Ombudsman decisions (in full)
On Friday, the FOS released a consultation paper on its proposal to publish Ombudsman decisions.
Although couched in terms of a consultation, publication now seems inevitable. It will have an impact on complaints handling generally but particularly when it comes to identifying and handling systemic issues.
The consultation proposes that Ombudsman decisions (as distinct from Adjudicator decisions – or 'views') will be published in full on the FOS website shortly after they have been issued. The complainant's identity, commercially sensitive information and the names of third parties (including the individual adviser responsible within the respondent firm) will usually be redacted but the consultation paper does not rule out naming and shaming in exceptional circumstances.
As Robbie Constance observed in June, the draft Financial Service Bill will require the FOS to publish reports on its determinations, including the name of the respondent firm, unless to do so would be 'inappropriate'. The FOS' paper says it would very rarely consider publication inappropriate. For convenience and to avoid 'editorialising', the FOS now proposes to publish the determinations in full, subject only to limited protections.
FOS decisions are currently only available to the public in the form of anonymous case studies published in the bi-monthly Ombudsman News. Only 95 updates have been published since January 2001, including just over 1,000 case studies. In contrast, the Ombudsmen made 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 (if at all) the FOS will index the published decisions or how user-friendly any search functions will be but, with an obligation on firms to consider previous decisions, this proposal means financial advisers will have to consider a much wider body of material than ever before when responding to complaints.
The ink has barely dried on the new guidance (introduced with effect from 1 September) on taking into account Ombudsman determinations (DISP 1.3.2A) and it already looks out of date. The guidance refers to determinations involving the respondent and other 'guidance' issued by the FSA or FOS. I am sure it will not be long before DISP 1.3.2A is amended to refer to other FOS determinations too. If not, it would be only the bravest firms that interpreted the rules to mean they are not obliged to consider published determinations generally.
Predicting the FOS' likely assessment of complaints on the basis of what, in the opinion of the individual Ombudsman, is 'fair and reasonable' is notoriously difficult. From 1 January 2012, the Ombudsman's monetary award limit increases to £150,000. With increasingly large sums of money at stake, publishing decisions would provide firms with greater predictability and certainty. But publication of Ombudsman decisions will also increase the expectation on firms to identify and investigate potential systemic issues. The FSA has also strengthened the rules relating to root cause analysis (see DISP 1.3.3R and 1.3.6G). With such heightened risks, if a firm decides to reject an individual complaint, it becomes all the more important to advance the most compelling arguments in support of the firm's position as the case is all the more likely to become a precedent or (publicly) raise the possibility of a systemic problem. A one-off case for one firm could be a systemic problem for others.
The consultation contains no answer to the perceived injustice that a successful respondent firm would still be named whilst a complainant (taking an extreme example) found to have lied would not. The decision to name the firm (and not the complainant) will attract mixed reactions – some will believe naming and shaming firms (or even individuals within them) is the only way to improve standards and indirectly reduce the associated regulatory and insurance costs for all. 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 and, although played down in the FOS' paper, also carries the threat of CMCs using the information to target certain firms.
I suspect the plans also have much to do with trying to deter firms from appealing Adjudicator decisions to reduce FOS costs. The FOS has made no secret of its intention to reverse the recent trend of more appeals being referred to the Ombudsmen and the threat of being named and shamed in a published final decision will likely prove an effective tool in dissuading firms. However, as firms account for only 32% of such referrals, they might have grounds to argue that complainants ought to be deterred too.
The probability that the FOS will soon no longer provide a forum for quick, informal and confidential alternative dispute resolution represents a major change, and one that favours complainants who have nothing to lose in referring complaints to the Ombudsman.
The timeframe for implementing the Financial Services Bill will drive the timing of this proposal. The consultation period closes on 9 December 2011 and so the issue will not be revisited this calendar year.