A new system for handling complaints is failing consumers, say campaigners
Reports by Helen Dewdney and Marcus Williamson. Helen is a consumer champion. The Complaining Cow blogger and author of consumer interest publications. Marcus Williamson is a consumer champion and editor of ceoemail.com
The idea of going to an Ombudsman has been part of the British consumer system for many years. If an electricity or gas supplier gives problems, initially you would try to sort the matter with the provider. Going to court or taking the matter to Ombudsman is then seen as a last resort to try to resolve things.
Since October last year consumers have had the chance to take complaints to an Ombudsman for other services, such as retail, furniture and airlines. This new world of private Ombudsmen is run by companies who make money by charging retailers a fee for each complaint handled.
But one year on, campaigners say the new system of privatised Ombudsmen is already causing problems. This is due to confusion and a lack of oversight.
The new privatised Ombudsmen are appointed by the Chartered Trading Standards Institute (CTSI). Ombudsmen must be members of the Ombudsman Association (OA). However, neither of these organisations seems willing to tackle the slew of problems that has arisen over the last year.
What’s wrong with the ADR sector and how can it be fixed?
Issue: There’s no single place for consumers to find which Ombudsman deals with which company. This wastes consumers’ time and causes confusion.
Solution: CTSI should provide a single website listing all the ombudsmen and the sectors that they deal with.
Issue: Ombudsmen do not have to list the companies about which they can accept complaints.
Solution: CTSI should dictate that companies must list the companies they deal with. The should ensure that retailers clearly “signpost” their customers to an Ombudsman scheme, if necessary.
Issue: There should only be one Ombudsman for each sector, if possible. New Ombudsmen for sectors already covered should be avoided.
Solution: CTSI and OA must prevent new entrants into a sector where an Ombudsman already exists.
Issue: There are currently no background checks on Ombudsmen, their staff or contractors. This would ensure that they do not have criminal records or financial problems. One Ombudsman even had, until recently, a convicted criminal working as its Director of Communications. He still works for the company as a consultant. The same Ombudsman, Dean Dunham previously ran a company which went into liquidation owing more than £46,000 to the taxman.
Solution: CTSI must introduce a “fit and proper person” test to ensure that Ombudsmen, their staff and contractors are suitable for this important role.
Issue: One Ombudsman runs a “trusted retailer” logo scheme to make additional income. This is a clear conflict of interest.
Solution: CTSI and OA must ensure that the Ombudsman is independent and impartial.
Issue: There is no “Ombudsman of Ombudsmen”. No-one oversee the daily operation of Ombudsmen after appointment.
Solution: CTSI must take a more proactive role in monitoring the behaviour of Ombudsmen. It needs to provide a means by which consumers can make complaints about them, if necessary.
Issue: Despite the Government consultation where respondents overwhelmingly said they wanted ADR to be mandatory, it is still not. Many traders signpost to an ADR provider as they are legally obliged to do, but do not have to engage.
Solution: Government needs to ensure that ADR is compulsory on traders.
Issue: The cost of becoming an approved ADR provider is very high, preventing new organisations from entering.
Solution: CTSI should reduce costs and allow smaller organisations to become Ombudsmen in sectors which do not already have them. This should be subject, of course, to a due diligence process.
Where fees went wrong in ADR approval
Jo Holland was a certified ADR provider of mediation services but could not continue. This was due to what she saw as the excessive and disproportionate fees being charged by CTSI. CTSI charge £750 a day for an audit plus flat fees starting at £2000. ADR providers are expected to offer low cost services which should be free to consumers. The high fees charged by CTSI versus what can be charged for the service to users made the business commercially unviable.
She points out that the fees for a small one or two person company are the same as for a company with over 500 employees. She says this seems unfair. When we raised all these issues, and others, with the Chartered Trading Standards Institute (CTSI) and the Ombudsman Association (OA), we were told that nothing would be done.
The Minister for Small Business, Consumers & Corporate Responsibility is Margot James MP. Her department is the Department for Business, Strategy and Innovation. Although to late for Jo, last month she wrote to the CTSI. She stated that a review had identified a problem with the way the fee regime was structured. The periodic fee had been used to fund certain functions that, whilst legitimate, should not have been funded by ADR providers. She took the decision that each provider should be refunded the £2,000 plus interest which would be paid for by BEIS, the tax payer.
Continued ignoring of issues in the ADR sector
In June 2016 we undertook an investigation and produced a report Ombudsman Omnishambles Serious: unresolved issues affecting the operation of the ombudsman ADR system in the UK. This was in response to a Government call for evidence. It showed there were many holes in the approvals process for Ombudsmen.
But now, a whole year after the scheme was launched and four months after our report was published, there is still no action from the OA or CTSI.
What the Ombudsman Association said…
“The Association has no role in the internal management or performance of our members or jurisdiction over them with regards to day-to-day operations. Members are re-validated against our membership criteria (at least every 5 years) and can be expelled from the Association if they no longer meet our criteria.”
What the CTSI said…
“On the specific issues raised the CTSI mandate is to check applicant bodies for compliance with the bare requirements of the consumer ADR legislation. Our agreement with BIS does not allow for any widening of these requirements and, as such, there is currently no general ‘fit person’ test.”
The CTSI is funded by the taxpayer through the Department Business, Energy and Industrial Strategy. It is ultimately responsible for implementing the EU law on ADR.
Future of ADR in the UK
In theory, the use of ADR, including an Ombudsman, could offer consumers an effective means of redress and expand successfully into other sectors. It should mean less cost, less stress and should be quicker than going to court.
But until these key issues are resolved, consumers will remain confused. The whole Ombudsman sector is in danger of losing the confidence of the consumers whom it’s supposed to be helping.
There are many issues regarding ADR and Ombudsmen providers. These are to do with the oversight by the approval bodies.
They also link to articles from Which? and The Independent. These describe a number of problems which are not the fault of providers. They provide warnings about one provider, Consumer Dispute Resolution Limited run by Dean Dunham. CDRL also runs RetailADR, UtitlitiesADR and AviationADR.
Updates on ADR
Westminster Business Forum seminar Next steps for consumer protection in the UK – dispute processes, enforcement and the consumer markets green paper. 15/11/18.
Presentation Alternative Dispute Resolution – approval and oversight in the loosest possible sense of the words…
A new Chairman started at the CAA on 1 August 2020. But unfortunately the new chair, Sir Stephen Hillier, has been ineffective in tackling airlines that are continuing to break the law on consumer refunds.
CAA launches consultation and tells no-one… launched a consultation on Alternative Dispute Resolution (ADR) but didn’t tell any stakeholders, as Which? calls for a single Ombudsman in the sector.
Getting help for Coronavirus cancellation claims and shopping help and advice for getting refunds and redress.