Ombudsman systems needs urgent shake-up, says Parliamentary Group

Press release 30/01/19

Consumer campaigners call for immediate changes

The consumer ombudsman system urgently needs changing. That’s the conclusion of a new report launched today by the All-Party Parliamentary Group on Consumer Protection.

MoneySavingExpert.com (MSE) funded an APPG Inquiry and the report which  builds on much research into the Alternative Dispute Resolution sector. It makes several recommendations previously called for by MSE, Citizens Advice Bureau and consumer campaigners Marcus Williamson of CEOemail.com and Helen Dewdney.

The main recommendations are:

  • A “fit and proper person” test for ombudsmen prior to their appointment. This would cover financial and criminal (DBS) background checks and was first identified by Dewdney and Williamson in 2016.
  • Mandatory membership of an ombudsman scheme for all ADR bodies – This was first called for in the 2016 Ombudsman Omnishambles report by Dewdney and Williamson. Mandatory membership was also recommended by the Citizen’s Advice Bureau report in its April 2017 report Confusion, gaps, and overlaps.

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Donal Galligan the Director of the Ombudsman Association said “The Ombudsman Association welcomes that the APPG’s report supports our long-held position that people should have access to an ombudsman in all areas of consumer goods and services. The APPG’s conclusion that there should be mandatory membership of an ombudsman scheme echoes all the recent research and reports in this area, and reflects government policy in a number of sectors. It is time for the Government to take action.”

The latest APPG report calls for a reform of the whole sector, referring the matter to the Law Commission, aiming to use the best of the existing system across all sectors, in a major overhaul.

Consumer Champions Dewdney and Williamson have been monitoring the ADR sector since the EU ADR Directive came into force on 1 October 2015. Williamson says “The lack of oversight of ombudsmen remains a significant concern. Now, more than ever, the Government must establish an ‘ombudsman of ombudsmen’, to oversee the sector.”

I spoke at the Westminster Business Forum seminar in November 2018, where I called for changes in the oversight of the entire ADR sector.

Alternative Dispute Resolution – approval and oversight in the loosest sense of the words…

The whole system is a consumer disaster in the making. I welcome the APPG raising some of the issues again. Hopefully now all the issues and recommendations regarding approval and oversight of ADR bodies that have been raised previously will be appropriately addressed. These include oversight bodies undertaking due diligence in approving providers and scrutinising their services far more closely.

Further reading on the ADR landscape 

More Ombudsman Omnishambles The UK ADR Landscape 20 months on

Landing in court with Ryanair (what you need to know about airlines and ADR too!) the issues regarding ADR in the airline sector.

5 myths about Ombudsman providers busted commonly held beliefs about what what an ombudsman does.

5 myths about Ombudsman providers busted

Ombudsman separating the truth from the misconceptions

Background to ADR and Ombudsmen

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.

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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 member of the Ombudsman 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.)

5 Commonly held beliefs about ombudsmen

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).

Rip Off Britain Independent reports

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 schemeYearNo.Reason for expulsion
The Motor Ombudsman201632 Non-cooperation with scheme, 1 with outcome
The Motor Ombudsman20158Non-cooperation with scheme
The Furniture Ombudsman20160N/A
The Furniture Ombudsman20171Non 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…

Alternative Dispute Resolution – approval and oversight in the loosest 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.

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