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‘No justice in watchdog naming and shaming’

Lord Hunt’s recommendation for the Financial Ombudsman Service to name the worst-performing companies would push companies to uphold complaints regardless of fault, says a former FOS adjudicator.

The Hunt review recommends that the FOS should name the worst performers in terms of uphold rates in retail banking, investments, general insurance, intermediation in investments and intermediation in general insurance.

But Jane Sanders, who left her role as an FOS adjudicator earlier this year, says there is no justice in this type of naming and shaming.

She says: “This is assuming that a good performer is the one who has the most upholds. I always thought – and I was taught to work on this premise – that you cannot have an uphold rate unless there is an attachment of some fault.

“The next step for firms would be to say that if you have done 4,000 mortgages in that year, you need to uphold 25 per cent of complaints. That is just ridiculous.”

Sanders says if firms are awarded “wooden spoons” and subjected to close attention from the FSA, it will increase fear of the regulator.

She says: “How are they supposed to operate? A lot of firms, particularly small firms, are really scared of the regulator. It is one thing to have respect for an organisation, it is another to be scared to speak out against it for fear of what it is going to do.”

Sanders claims that the FOS is unconstitutional in its decision to disallow a 15-year long stop.

She says: “The FOS says it is transparent and it says it has got justification for doing so, because it would potentially disenfranchise consumers if it was to apply the 15-year long stop rigidly, but who gave it the power to set aside legislation? It does not have that power, which means it is acting outside the realm of its powers, which makes it unconstitutional.

“Why are we still seeing so many firms argue for a 15-year long stop to no avail? This makes it clear that the FOS’s decision was not transparent, it was not arguably reasonable and, on top of it all, that the FOS does not have the power to do that, it was not given those powers from the outset.”

Sanders believes that the FOS should publish a public register of decisions. She says that firms should have access to information on how the ombudsman makes decisions and where their money is spent.

Sanders says: “Why doesn’t the industry have the right to see where their charges are going? What recommendations are being made? How much of their money is being sent out to compensate clients?

“Open decision-making at least means that society can benchmark its conduct and know what it must not do. But if nothing is open if there is no publication of any of the decisions. Firms are one-footed to start with.”

Sanders believes that firms should not be submitted to compulsory jurisdiction and mediation should instead be agreed by both parties.

She says: “If the FOS is as confident in its ability as it professes to be, why not remove the compulsion to have firms go to it and see whether firms actually do go to it to have their disputes resolved voluntarily, as any other firm is entitled to do in any other industry. Alternative dispute resolution is supposed to be voluntary. Even the courts have said you cannot order mediation. But firms have absolutely no choice, they are subjected to it.”

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