The Daily Telegraph - Saturday - Money
PERSONAL ACCOUNT
Our current ombudsman system is a maze. Calls for reform need to be heard
Where do you turn when something goes wrong? For consumers, it can be hard to know the right answer. Faced with a sudden crisis, they find themselves surrounded by dizzying options, unsure which way to turn for help.
A new report this week wants to clear a path through that maze. An influential group of MPs, the All-Party Parliamentary Group on Consumer Protection, has called for the Law Commission to review the entire ombudsman system. The report also suggested a range of interim measures to improve its current confusion.
Consumer protection deserves to be taken seriously, and these alternate paths to redress that avoid the expense of the courts have been in need of reform for some time. The Local Government and Social Care Ombudsman told the report’s authors that the fragmented state of the ombudsman system made it “little more than a consumer maze”.
In July last year, our reporter Harry Brennan investigated the example of householders in dispute with builders. Building work is expensive; sadly, so are the accompanying risks. It costs an average of £10,000 when home improvements go wrong. Worse still, there is no easy recourse short of going to court.
That’s because alternative dispute resolution (ADR), of which the ombudsman system is considered the gold standard, is voluntary in the building sector. Many firms do not sign up to mediators, and even where ADR is attempted, it can drag on without an effective outcome because the intermediaries have no enforcement power.
It doesn’t have to be this way, and many of the UK ombudsman services are held to a much higher standard, making them far more effective.
One example that Telegraph Money knows especially well is the Financial Ombudsman Service (Fos). The Fos is not without its problems – we reported in March 2018 on its decision to hold an independent inquiry following a critical Dispatches documentary. But even that outcome was a demonstration of the high level of accountability that the Fos is held to.
Financial guru Martin Lewis of MoneySavingExpert, which helped fund the latest report, pointed out the strengths of the Fos in his submission to the committee: “[It] has oversight from the Treasury Select Committee, is set up by statute, every firm must comply with it automatically, the Financial Conduct Authority gets to regulate on top. It has a regulatory body you can put systemic problems to and interact with. If you get a Financial Ombudsman ruling, companies pay. Or companies do what they’re told to do in 99pc of cases.”
Mr Lewis and his website have been raising awareness of problems in this area for years. At the end of 2017, MoneySavingExpert produced its own report called on the need for ombudsman reform. Others raised concerns even earlier: