5 myths about Ombudsman providers busted

Ombudsman separating the truth from the myth

Alternative Dispute Resolution providers which include ombudsmen, provide services for business and consumers. When you can’t get your complaint resolved and the trader is a member of a scheme you can take your complaint to an ADR provider. Alternative Dispute Resolution: What it all means

In April 2018 the Government produced some research, Resolving Consumer Disputes. The findings included “…in cases where the ADR provider decided in favour of the consumer 83% of consumers perceived the process to be fair. This dropped to 17% in cases where the decision was in favour of the trader or a compromise. A similar, but less extreme, variation was seen for consumers who had used the courts (90% v. 53%).” Not exactly surprising.

lots of images of people shaking hands

The myths about ADR

Being in the world of consumer rights and stuff I talk about this area a lot. However, so often I hear the same inaccurate assumptions and beliefs from members of the public, including journalists. Sometimes these come from personal experience, sometimes guesses, sometimes from inaccuracies reported in the media and sometimes from I don’t know what! There are a lot of issues with the sector but these are mainly to do with oversight of the approval.

But here I am going to bust a few of those popular myths and hope it helps make things clearer! I’m using the term Ombudsman for ease but ADR provider is still the same in terms of these myths. (However, an Ombudsman has to be members of the Ombudsamn Association which has higher standards than for non members as shown by their minutes of a meeting revoking the Retail Ombudsman’s membership. See The Retail Ombudsman is no more and the minutes in appendix  J of More Ombudsman Omnishambles.

1) Ombudsman are consumer champions

Nope. A consumer champion will fight for the consumer. An ombudsman is an unbiased service. Each case is looked at individually and decisions are made on the evidence provided.

2) Ombudsmen are paid by the traders so will always see in their favour

Nope. The traders pay yes. The alternative would be for consumers to pay at least a proportion! The traders pay a yearly fee plus a case fee. If the case goes to arbitration then in some cases, such as with the Furniture Ombudsman and an independent inspection is required, the trader pays for this too. Therefore it is actually in the traders’ interest to try and resolve the matter and for it not to go to the Ombudsman. If you look at providers’ annual reviews you will see the breakdown of percentages of cases won by trader etc. If the consumer were made to pay as well you might as well go to court and these schemes are there to provide an ALTERNATIVE! An Ombudsman service gets paid the same win or lose so there is no incentive to find in favour of either party.

As an example:

In the period November 2016 to October 2017, Ombudsman Services closed 49,117 energy complaints. Of those, it helped resolve 8% without investigating because the energy company was willing to provide the consumer with their desired resolution.

Of the complaints that Ombudsman Services investigated, it:

  • upheld 66% (finding that the energy supplier had done something wrong and had not done enough to put it right).
  • maintained 26% (finding that although the energy supplier had done something wrong, it had already offered a fair resolution to the customer).
  • did not uphold 8% of complaints, (concluding that there was no substance to the original complaint and the energy supplier had treated the customer fairly).

3) All ombudsmen are funded by Government

Nope. All providers in the non-regulated sector, such as furniture and airlines are funded by the industry. Providers in the regulated sector such as the Financial Ombudsman, energy and telecoms are also funded by the industry so that services are free to consumers. Others, such as  the Local Government Ombudsman are funded with public funds.

4) If the trader doesn’t want to pay up it won’t

In the regulated areas of finance, energy and telecoms if a trader doesn’t abide by an ombudsman’s decision then it will be reported to the regulator. Financial Conduct Authority, Ofgem and Ofcom. They will investigate and if found to be in breach of the rules can be shut down. In the non-regulated areas if the trader doesn’t abide by a decision they will be expelled from the scheme. The rate for non compliance is very low.

ADR scheme Year No. Reason for expulsion
The Motor Ombudsman 2016 3 2 Non-cooperation with scheme, 1 with outcome
The Motor Ombudsman 2015 8 Non-cooperation with scheme
The Furniture Ombudsman 2016 0 N/A
The Furniture Ombudsman 2017 1 Non compliance

There are however issues with compliance in the aviation sector, particularly with AviationADR members. See more details in More Ombudsman Omnishambles and Landing in Court with Ryanair.

5) There are lots of people who have gone to court when not happy with Ombudsman decision

If the Ombudsman doesn’t see in your favour it doesn’t necessarily mean it is wrong. It could be that you didn’t provide enough evidence and the same could happen in court. See Energy ombudsman shows how to keep heat on your supplier for an article from the Energy Ombudsman on how best to present your case.

The court option always remains open to you. But actually very few people do this. An ombudsman will usually be open to looking again at any case if you have more evidence. A judge can only look at evidence. There are cases where people go to the Small Claims Court, but often these don’t get reported accurately in the media which is misleading. For example, one recent case was reported in the media as the judge seeing in favour of the consumer where the ombudsman hadn’t. Actually it was because the trader didn’t attend and so a default judgement was made.

There are issues with ADR

Yup. Not a myth!

Westminster Business Forum seminar Next steps for consumer protection in the UK – dispute processes, enforcement and the consumer markets green paper. 15/11/18 Alternative Dispute Resolution – approval and oversight in the loosest possible sense of the words…

There are many issues regarding ADR and Ombudsmen providers. These are to do with the oversight by the approval bodies. See Government and regulators continue to fail on resolving consumer disputes and Landing in Court with Ryanair. These articles include links to reports (Ombudsman Omnishambles and More Ombudsman Omnishambles in particular). They also link to articles from Which? and The Independent that describe a number of problems which are not the fault of providers and provide  warnings about one provider, Consumer Dispute Resolution Limited run by Dean Dunham which runs RetailADR, UtitlitiesADR and AviationADR.

man talking to couple

 

Bright ideas for complaining about Brighthouse (& avoiding them in the first place!)

Sara Williams Debt camel guest post on The Complaining CowThis is a guest post by Sara Williams, an adviser at Citizens Advice who has her own website Debt Camel where she blogs about everything to do with debt and credit ratings. She also guest posted Everything you need to know about Payday loans The only person so far who has written two guest posts on my blog ‘cos she’s sooo good at her stuff!

BrightHouse is a “pay weekly” chain of shops which is loathed by almost all debt advisers.

What’s so wrong with BrightHouse?
Their interest rates are high, but that isn’t the only reason. BrightHouse goods are often much more expensive than a similar TV or washing machine would be from another retailer. In addition they make most people add on expensive insurance.

The result is that you could spend more than £750 paid over three years on a Hoover washing machine, when you could get a very similar model from AO.com at £230.

So far so bad… but these rip off prices are made worse by the fact that BrightHouse has often failed to check properly that its customers can afford the items they are buying. The quoted weekly amounts may sound manageable but most BrightHouse customers are on low income or just benefits.

And BrightHouse goods are sold on Hire Purchase agreements. So customers in the last year of their contract who have financial problems will often be desperate to make the last few BrightHouse payments, rather than lose the item they have already paid so much for. They may get behind with rent, council tax and utility bills or take out expensive credit such as payday loans as a result.electrical items can you get a refund - more than likelyBrightHouse refunds
In October the Financial Conduct Authority (FCA), BrightHouse’s regulator, told them to refund a bit under £15 million to two groups of customers:

  1. People who had cancelled a purchase within the 14 day cooling off period but still made 1 payment. These refunds will be small as it’s only 1 week’s payment to be refunded.
  2. 81,000 people who bought something between 1 April 2014 and 30 September 2016 where BrightHouse think they should have done more affordability checks – average refund £125.

If you want to know if you will be getting a refund, call their free helpline: 0800 30 40 80. £15 million sounds good, but in practice not many people are getting them considering the amount of stress and misery BrightHouse has caused.

The FCA took over as BrightHouse’s regulator in 2014, but before then the regulator was the Office of Fair Trading (OFT) and the OFT had the same rules about checking affordability as the FCA has. So I think people with older purchases should also get refunds. And if you had a purchase after 2014 which they aren’t refunding, you can make a complaint that it was unaffordable.

See How to make an affordability complaint to BrightHouse for a template letter and more information about complaining to Brighthouse.

If your purchase was “unaffordable” then you should get a refund of all the interest you paid, plus 8% simple interest and have any negative marks on your credit record deleted.

Other BrightHouse complaints
BrightHouse also have a poor reputation for customer service when something goes wrong – an item doesn’t match its description, or it is faulty.

If you have one of these “consumer complaints”, you have the same legal rights under the Consumer Rights Act 2015 as if you bought the goods from a normal shop. See the article on this website that looks at these rights and how to complain – it’s got some useful videos.

Alternatives to BrightHouse
Many people with little money go to BrightHouse because they are desperate. But here are some better alternatives, so check if one might work for you:

  1. Local Welfare Assistance Scheme (used to be called Crisis Loans). These are harder to get now than they used to be, but it’s worth asking your council if they help families to replace things like white goods and essential furniture.
  2. Budgeting loans If you have been on JSA, ESA, Income Support or Universal Credit for more than 6 months, you may be able to get an interest-free budgeting loan.
  3. Credit Union You may be able to join a local one or one linked with your job, eg NHS staff.
  4. Fair For You – this is an online alternative to BrightHouse, offering weekly payments but without the markup on the original prices and their interest rates are lower. Check them out!