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Guaranteeing your honesty

Chief ombudsman Walter Merricks says the financial services industry should be proud to have a service that “guarantees their honesty”.

In an interview with Money Marketing, Merricks, who is leaving the Financial Ombudsman Service later this year, says the service is more effective than the legal system in dealing with cases. He says: “It is incredibly effective. As a lawyer, I know how incredibly ineffective the legal system is. If all these cases that we are dealing with had to go through the courts, I think consumers would be very poorly served and I think the industry would have to pay an enormous amount more.

“I know it is very difficult for IFAs and small businesses to understand the value of the ombudsman service but I think some do. There are not many other sectors where, as a prof- essional, you can say to an unhappy client – I am explaining to you what I think has happened and I am explaining to you that I do not think it is my fault but if you were to think that I am at fault, all you have to do is refer your complaint to a completely independent organisation, it will cost you absolutely nothing, you will not risk anything and if it turns out that I am in the wrong, I will be required to compensate you.”

Merricks says he would be surprised if a Conservative Government made any significant changes to the FOS.

He refuses to be drawn in on the ongoing issue of the long stop, saying it is not his place to comment on whether it should apply or not. “We work within whatever rules there are and we work within whatever time limits there are. We do not take a view of whether these things are good or bad, we just operate under them.

“I can see why the FSA has made the rule it has. I can also see the point of view of people who think it should be different. I think you could run an ombudsman scheme with or with- out a long stop.”

Asked if he would like to see the FOS changed in any way, he says a provision for collective redress actions should be explored. He says it does not seem right to expect very large numbers of people to make individual complaints when there is a widespread issue.

Merricks says: “Have we got a market that is working well for consumers and the industry when things have gone wrong on a widespread scale? No. One of the obvious answers is try and stop these things happening in the first place, we would all want that. But the financial indus- try is not good at learning from the past. In financial services, very little research is done in trying to draw reflections on what has gone well and what has gone badly.”

Merricks says it is right that the relationship between the FOS, FSA and Office of Fair Trading should be reviewed.

He says mortgage endowments, Equitable Life, precipice bonds, bank charges and PPI have all challenged the handling of widespread complaints.

He says: “I think the interaction between ourselves and the regulators, whether that is the OFT or the FSA, on the bigger-ticket issues is something that is right to look at. If you look back at the history of the ombudsman service over the last 10 years, it is marked by these big surges of complaints and I do not think anybody can say there has been an ideal solution.”

Merricks says his biggest achievement during his role, which he started in 1999, was combining the existing ombudsman schemes to form the FOS.

He says: “If the old scheme had still been there now it would never have possibly coped with the volume of work, they would not have had the infrastructure we have been able to build, the IT systems, the back-office systems that have been able to cope and sustain the organisation that we have.”

Merricks says he always planned to leave after a decade in the position. He is leaving later this year to become the first chair of the newly formed Office of the Health Professions Adjudicator.

He says: “The new job is three days a week, so it is not a full-time role. I will certainly be in the market looking for things to do, consultancy or advisory roles – I’m not one for gardening.”

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