New Institution - New Ombudsman: Commentary on DTI Consultation on consumer representation
- New Institution - New Ombudsman
- Regulator First - A No Brainer Relationship Choice
- The New Ombudsmodel - Inventing Your Own Complaints
The New Ombudsmodel - Inventing Your Own Complaints
The new model Ombudsmen protect themselves from redundancy and stay in business by adopting a regulator-led approach that redefines acceptability in terms of past market practice by reference to current market standards in a regulated market.
In short, they invent their own complaints. Things that were alright then are wrong now and contracts must be re-written and redress provided. This is a good wheeze that keeps Ombudsman busy, keeps industry paying and will no doubt work to the benefit of consumers who bought in the past if not for those buying now or in future.
We can see how this might work in the energy markets where Ombudsmen might arrange retrospective compensation for anyone who ever signed a contract to switch energy supplier on their doorstep.
The assumption would be that all these contracts were mis-sold - just like endowments. The energy equivalent would be the dismantling of all the switch contracts sold on the doorstep. The fact they were sold this way will be taken as proof they were mis-sold. The Ombudsman will find in favour of all those users who can claim that they were door-stepped and the regulator will let it be known that challenging the Ombudsman's decisions would incur his wrath.
The basic Ombudsman function - the resolution of individual cases on their individual merits - becomes fused with the regulatory function - the identification and aggregation of consumer detriment leading to market intervention. The individual grievance gets hoovered into the new industrial model of mass complaint creation and management. The beauty of it is that the industry - shareholders, consumers - will pay for it all.
These events do strain relationships as Walter Merricks the Financial Services Ombudsman says in his latest newsletter. "We recognise that our role in handling mortgage endowment complaints ... has been an uncomfortable one for many firms. They have felt a much larger impact from our decision-making than they have ever been used to..." (FSO newsletter 301 http://www.financial-ombudsman.org.uk)
Interesting stuff and all to be paid for by suppliers in the other markets working on much smaller margins than the financial services sector. You can make your mind up whether this will come from current margins or be funded by raising prices.
Colin Adamson, March 2006
