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Financial Products (Mis-Selling)

Volume 409: debated on Friday 18 July 2003

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To ask the Chancellor of the Exchequer how many complaints of mis-selling of (a) endowment policies and (b) other financial products by (i) tied agencies and (ii) independent financial advisers have been upheld by the Financial Ombudsman Service in (A) 2001, (B) 2002 and (C) 2003; what the total of fines levied for each category was by year; what average length of time it took to investigate each complaint; and what the longest period was a complaint has remained open. [126076]

The Financial Ombudsman Service has advised the Treasury that the number of complaints upheld either wholly or in part were as follows.

Mortgage Endowment Complaints
Substantially upheldUpheld in part
2002–03
IFAs359110
Tied Agents3,906854
2001–02
IFAs38595
Tied Agents2,758690
2000–011
1 In 2000–01, the Personal Investment Authority Ombudsman Bureau (PIAOB) dealt with mortgage endowment and other investment product complaints. The PIAOB did not record statistics about case outcome that can be analysed in this way. However, across the range of investment related complaints Against both IFAs and tied agents, 46 per cent, of complaints were

resolved by conciliation or mediation where both parties agreed voluntarily and of those cases that were resolved by adjudication or a final decision by an ombudsman, 22 per cent, were upheld in favour of the consumer.

Other Investment Products

1

Substantially upheld

Upheld in part

2002–03

IFAs411201
Tied Agents3,1091,853

2001–02

IFAs17068
Tied Agents1,142804

2000–01

2

1 Personal pension plans, whole-of-life/non mortgage linked endowments and other 'packaged' investment products.

2 In 2000–01, the Personal Investment Authority Ombudsman Bureau (PIAOB) dealt with mortgage endowment and other investment product complaints. The PIAOB did not record statistics about case outcome that can be analysed in this way. However, across the range of investment related complaints against both IFAs and tied agents, 46 per cent. of complaints were resolved by conciliation or mediation where both parties agreed voluntarily and of those cases that were resolved by adjudication or a final decision by an ombudsman, 22 per cent. were upheld in favour of the consumer.

Awards

The Financial Ombudsman Service does not punish or fine firms—the regulator, the Financial Services Authority, takes any such action.

In resolving disputes, the ombudsman service may make a 'money award' against a firm of such amount as it considers fair compensation for financial loss and or pain and suffering or damage to reputation or distress or inconvenience. Additionally or alternatively, the ombudsman service can 'direct' a firm to take such steps in relation to the complainant, as the ombudsman considers just and appropriate.

The Financial Ombudsman Service does not record 'money award' data as any such figure would not include cases which have been settled by way of agreeing that an offer of redress that a firm has made is fair compensation nor would it include the equivalent monetary value of any 'direction' that the ombudsman service may give.

Timeliness

Each year, the ombudsman service sets timeliness targets for resolving complaints. In 2000–01, 73 per cent. of cases at the PIAOB were closed within six months; 19 per cent, took between six and 12 months and 8 percent, took over 12 months.

In 2001–02, the Financial Ombudsman Service closed 73 per cent, of cases within six months and 96 per cent, of cases within 12 months.

In 2001–02, the average time taken to resolve and close a case was just over five months.

In 2002–03, the ombudsman service introduced a new three month target and reported that it resolved 44 per cent, of cases within this time and that it resolved 76 per cent, of cases within six months.

The ombudsman service refined the measure for the average time taken and reported that it took just under four months to resolve a complaint by mediation or conciliation. And, where a detailed investigation was required to settle the dispute—involving a full ombudsman review and decision—the average time taken was eight and a half months.

The oldest ombudsman case still open dates back to November 1997, and has remained open for 2,035 days.

It is the ombudsman service's policy to report any case that remains open to its Board so that the Directors can satisfy themselves that there are valid reasons for a case to be more than a year old.