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| Implementation of a Telecommunications Ombudsman Scheme - 26 July 2001 | |
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| Statement
issued by the Director General of Telecommunications
26 July 2001 Chapter 1 Introduction Chapter 2 Implementation of an Ombudsman scheme Chapter 3 Summary of responses to the consultation Chapter 4 Overview of Scheme Chapter 5 Framework of the Scheme: Articles of Association Chapter 6 Terms of reference Chapter 7 Funding of the Scheme Chapter 8 Application of procedure: decision making powers Annex 1 BIOA Criteria Annex 2 Respondents to consultation document Executive summary S.1 This Statement sets out actions that industry will need to take to have an Ombudsman scheme in place, ideally by April 2002 but at the very latest by summer 2002. It follows careful consideration of the responses received to the consultation document Developing a Telecommunications Ombudsman, issued in March 2001, and in-depth research of other Ombudsman schemes. S.2 The primary purpose of issuing that consultation was to consider options for resolving disputes between consumers and fixed operators/service providers, in accordance with the requirements of the Telecommunications (Open Network) (Voice Telephony) Regulations 1998) (SI 1998 No.1580) (the ‘RVTD Regulations). Whilst the Director General has the powers to implement such a scheme, he prefers industry to accept responsibility for an independent, industry-funded voluntary scheme, covering all communications-related disputes. S.3 There are major benefits of Ombudsman schemes, in preference to reliance on the courts and/or arbitration. For consumers they offer a fair, impartial, speedy and effective service for resolving disputes. There are also significant benefits to industry. Other voluntary Ombudsman schemes have shown that they can increase consumer confidence in the industry; protect and increase a member firm’s reputation and brand image; allow long-running intractable disputes to be resolved at a relatively low cost; provide general advice to members, thereby assisting improvements to internal complaints handling procedures; and, provide consistent, expert resolution on an impartial basis. S.4 Such a scheme will also demonstrate a forward-looking approach by industry in anticipation of the Communications Bill and the implementation of the proposed EU Directive on Universal Service and Users’ Rights. Oftel will continue to discuss with Government, in the course of preparing the Communications Bill, the appropriate powers for OFCOM to be able to recognise Ombudsman schemes, monitor their effectiveness, and compel participation in them and, if necessary, create schemes de novo. S.5 Oftel warmly welcomes the general support shown in the consultation for the objective of creating an Ombudsman scheme. It attaches great importance to the scheme, both in its own right and as an exemplar of the scope for self- and co-regulation generally. In order to ensure its speedy implementation, Oftel has proposed a critical path to be followed. A high level meeting with the industry and consumer groups will be held in September 2001 to reach agreement on how implementation should be taken forward. S.6 The Ombudsman scheme will be required to meet the Criteria for the Recognition of Ombudsman Offices (Schedule 1 to the Rules of the British and Irish Ombudsman Association) (the ‘BIOA Criteria’) (see Annex), and to seek membership of the Association. The four key criteria, which the Scheme will be required to meet, are:
S.7 The Ombudsman scheme will be established by the industry as a company. Membership will be through its Articles of Association. Members will agree to be bound by any award and to take account of any other recommendation or representation made by the Ombudsman within the time period specified. Members will be encouraged to deal with complaints in a timely fashion and inform complainants of the existence of the Ombudsman scheme should the dispute reach deadlock and/or by displaying the Ombudsman logo on company literature. S.8 The Scheme will be overseen by a Governing Board, comprising a balanced mix of "public interest" members, taken from industry, consumer groups and elsewhere. Industry members of the Scheme would elect a separate Finance Board. The Governing Board will ensure that the Ombudsman’s independence is not jeopardised. S.9 Access to the Scheme should be limited to private individuals and small businesses only, defined either by turnover or by number of employees. The Scheme is clearly not intended to be a mechanism for resolving inter-industry disputes. S.10 The Scheme will not deal with disputes that are already the subject of court proceedings or a decision of any court of law (or arbitration). There will be strict limits for bringing disputes to the Ombudsman’s attention. The Ombudsman will not consider whether a term in a contract is generally unfair to consumers, but will bear in mind the Unfair Terms in Consumer Contract Regulations 1999 in handling individual cases. The Ombudsman will not be obliged to consider a complaint unless and until the complainant has demonstrated that all internal complaints procedures have been exhausted. The Ombudsman will not be obliged to consider vexatious or frivolous complaints or those which may be dealt with more appropriately elsewhere. S.11 It will be the duty of the Ombudsman to ensure that there are no barriers to the Scheme that could adversely affect consumers’ ability to use it. All consumers, (including elderly and disabled people, socially and economically disadvantaged groups, users of other languages and members of different communities, ethnic or otherwise), should, as far as possible, have equal access to the Scheme. S.12 Based on analysis of the number and type of complaints and enquiries received by Oftel’s Customer Representation Section (CRS), and experience of other Ombudsman schemes, the Ombudsman may have to deal with around 8,000 cases a year. Industry will need to ensure that staffing levels are sufficient, based on the experience of similar Ombudsman schemes, to ensure that cases are processed speedily and effectively. S.13 Whilst wishing to be cautious of incurring excessive costs of a Scheme, it is important that initial capital expenditure is sufficient to ensure its smooth operation. The incentive for industry will be to improve internal complaints handling procedures thereby minimising the number of disputes requiring investigation by the Ombudsman. Whilst the final decision on funding both the start up costs and ongoing revenues must rest with the industry, Oftel believes that a hybrid funding regime, combining case fees and a levy, is likely to be the most appropriate means of securing ongoing revenue for the Scheme.
Introduction 1.1 In March 2001 Oftel issued a consultation document entitled Developing a Telecommunications Ombudsman. The objective was to explore the practicalities and feasibility of setting up an Ombudsman scheme, to be operational by April 2002. The consultation period ended on 15 June and the closing date for comments on comments was 29 June. 1.2 This Statement takes into account the responses to this consultation as well as previous documents concerning ways to resolve disputes between operators or service providers, on the one hand, and between consumers and their operator/service provider on the other. In accordance with the requirements of the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998) (SI 1998 No. 1580) (‘the RVTD Regulations’) the Director General is required to ensure that procedures exist, to resolve disputes brought to him under the RVTD, that are fair, transparent, easily accessible and inexpensive and which do not involve any unnecessary delay. 1.3 In September 1999 Oftel published a consultation document, Proposed new Dispute Resolution Procedures for Fixed Telecommunications. This considered various options for resolving disputes. It was followed by a Statement issued in September 2000, Resolving Disputes between Fixed Telecommunications Service Operators. This covered the resolution of disputes between fixed public operators or fixed systemless service providers. It concluded that it would be appropriate for Oftel to investigate and determine these types of dispute. 1.4 The primary purpose of the March 2001 consultation was to consider options for resolving disputes between consumers and operators/service providers, which were compliant with requirements under the RVTD. However, the publication of the White Paper, A New Future for Communications, in December 2000, announcing the creation of the single regulatory body, OFCOM, presented the industry with a fresh challenge. This was to come forward "with effective means of redress where services standards are not being met" (para. 7.4.3). OFCOM will be required to ensure "that there is an effective and accessible machinery for consumer redress, in the form of an Ombudsman or something similar, if action by the industry does not meet this need." 1.5 In response to the publication of the consultation Patricia Hewitt, Minister for Small Business and e-commerce, said: "I am delighted that Oftel and the telecoms industry have responded to the challenge to create a new consumer Ombudsman. As customers become more demanding, services become more sophisticated and the telecoms industry becomes more competitive, it is vital that consumers who are unhappy with their telecoms service should be able to have a fast, effective, independent complaints body." 1.6 Oftel believes that implementation of an appropriate Ombudsman scheme, extending beyond the more limited scope of the RVTD, could meet the requirements of the proposed EU Directive on Universal Service and Users’ Rights. The Directive requires Member States to ensure that transparent, simple and inexpensive out-of-court procedures are available for dealing with unresolved disputes, involving at least consumers. Such procedures will have to ensure that disputes can be settled fairly and promptly, with reimbursement and/or compensation, where warranted.
1.7 Oftel therefore warmly welcomes the general support shown in the consultation for the objective of creating an Ombudsman scheme and the commitment shown to implementation at the earliest possible date. The Director General believes that the industry, working closely with consumer bodies, should now rise to this challenge and ensure an effective scheme is quickly put in place. 1.8 Oftel believes that a voluntary scheme is the way forward. Whilst the Director General has the powers to implement a scheme for operators and service providers covered by the RVTD Regulations, he would prefer industry to accept responsibility for the scheme. This would demonstrate a forward-looking approach in anticipation of the Communications Bill and the implementation of the proposed EU Directive on Universal Service and Users’ Rights. 1.9 Against this background, this Statement sets out the actions that industry now needs to take to have an Ombudsman scheme in place, ideally by April 2002, as proposed in the consultation document. At the very latest the Scheme should be operational by the summer of 2002. The Statement sets out:
1.10 Oftel attaches great importance to this scheme, both in its own right and as an exemplar of the scope for self- and co-regulation generally. It will therefore work closely with the industry and consumer groups to secure timely and comprehensive implementation. In particular, Oftel will continue to actively facilitate implementation, at least until the stage when an Ombudsman with suitable support staff is in post, and will carefully monitor progress against the indicative critical path for implementation set out in chapter 2. In the event of significant slippage from that timetable or failure of a critical mass of industry players to subscribe to the scheme, Oftel will be prepared to use the statutory powers set in para 1.8 above to compel participation in a scheme of the Director-General’s own devising. 1.11 Moreover, Oftel firmly believes that support for an Ombudsman scheme will be a crucial part of the role of the new integrated Communications regulator OFCOM, as described in para. 1.4 above. Oftel will therefore continue to discuss with Government, in the course of preparing the Communications Bill, the appropriate powers for OFCOM to be able to recognise Ombudsmen schemes, monitor their effectiveness, and compel participation in them and, if necessary, create schemes de novo.
Implementation of an Ombudsman scheme 2.1 This chapter explains how Oftel expects industry to approach the further development and implementation of the scheme and over what timescale. 2.2 Oftel believes that the key challenge for the industry is to develop and maintain momentum behind implementation. To that end, Oftel will convene a high-level meeting with the industry and consumer groups in September to reach agreement on how implementation should be taken forward. 2.3 Oftel can see three broad models for successful and timely implementation. These are:
2.4 Oftel believes that it is essential that the meeting in September reaches agreement on the approach to be adopted. If industry or consumer bodies believe that other options should be considered, Oftel would welcome early notice of them. 2.5 Whichever option is chosen, Oftel believes that it will be essential to establish an Implementation Working Group (IWG) to act as a steering board for the scheme. Oftel believes that such a Group, which would, initially, be serviced by Oftel, should have an independent Chair (ideally, with relevant experience of an Ombudsman scheme or analogous consumer experience). Oftel will present its further ideas on the operation of the IWG at the meeting in September. Critical path 2.6 Excellent project management will be essential to getting a scheme in place rapidly. In the following paragraphs, Oftel sets out a very high level critical path, which will need early refinement and development in the initial stages of the implementation project. This is a minimal, rather than an exhaustive list. 2.7 To ensure an Ombudsman scheme is operational in the first half of 2002, the Oftel suggests that the following actions will need to be taken:
2.8 As a first deliverable from the IWG, Oftel would expect to see detailed plans in relation to securing each of these strands of work by the end of October 2001. This document can then form an industry-owned implementation plan against which progress will be tracked. 2.9 The aim must be to ensure that the scheme is fully operational from the day of its launch, the Ombudsman and his/her staff are of a calibre to command respect and authority and that their procedures and facilities are robust enough to carry immediate credibility. Oftel therefore believes that setting an arbitrary deadline of 1 April for the scheme to be operational may not be helpful if it leads to the scheme being launched before it is fit for purpose. However, the Director-General would also be concerned if there was evidence that implementation was moving so slowly as to materially delay consumers from receiving the benefits of the scheme. He expects the industry to give priority to the setting up of the Scheme as outlined above. While the scheme must clearly be fit for purpose at the point of launch therefore, the aim should be to allow for further development in its opening months of operation, rather than looking for a ‘gold-plated’ solution instantly. 2.10 It is against that background that Oftel suggests that the industry continues to use 1 April 2002 as a target date for the initial implementation plan and seeks to ensure that any unavoidable slippage from it is held to the first half of 2002.
Summary of responses to the consultation Key proposals made in the consultation document 3.1 The main proposals made in the March 2000 consultation document were as follows:
Overview of responses 3.2 Overall, both industry and consumer organisations were broadly supportive of the proposals. Operators duly recognised that it is critical for consumers to have confidence in the way in which complaints are handled and disputes resolved. There was wide recognition of the success of Ombudsman schemes elsewhere, particular the very successful Telecommunications Ombudsman scheme that has been operating in Australia for the last four years. Moreover the initiative was considered an excellent example of the process of self and co-regulation. Consumer bodies, whilst welcoming the establishment of a Scheme, were anxious to ensure that it would be comprehensive. This will avoid consumer confusion, and address the fact that areas outside fixed line are a major focus for consumer concern. One mobile operator warmly welcomed the proposal. However, there was a less positive response from the other three mobile operators. Oftel considers that there would be substantial benefits to consumers from the participation of all the mobile operators from the outset of the Scheme, particularly in view of the number of complaints received by Oftel in relation to mobile phones. Oftel will be holding further discussions with the mobile operators to facilitate their full participation. 3.3 There were mixed views as to whether to start with a core scheme and then expand to include others, or to have a comprehensive voluntary scheme right from the start. Consumer groups, quite understandably, would like the Scheme to have as broad a remit as possible and some argued that this should be on a statutory basis. Oftel agrees that it is highly desirable for the scheme to be established on a comprehensive basis in order to provide ease of access and understanding for consumers. Nevertheless Oftel believes that a voluntary scheme will command more support in the industry and be capable of more rapid intervention. It further believes that a workable voluntary comprehensive scheme put in place in the course of 2002 will negate the need for statutory action on a comprehensive basis once the new EU framework is in place. 3.4 Industry respondents favoured the establishment of a separate Finance Board, whereas consumer groups were not generally supportive of the proposal. Oftel believes that such a Board is necessary to secure industry confidence in the efficiency of the Ombudsman. Experience of other Ombudsman schemes demonstrates that such arrangements do not compromise the operational independence of the Ombudsman. 3.5 Concern was expressed about the proposal that the company being complained about would not have the right to appeal against the Ombudsman’s decision. This is normal practice in Ombudsman schemes, facilitating the speedy and effective resolution of disputes in a non-adversarial manner and Oftel does not see a need to depart from this practice here. This is discussed in more detail in chapter 8. 3.6 There was broad support for setting limits on the value of a dispute that could be handled by the Scheme, and a maximum value of award, provided that both would be subject to regular review. The British and Irish Ombudsman Association (BIOA) advised it would be preferable to have a single limit on awards, thereby deterring opportunistic claims to the Ombudsman scheme. 3.7 There were mixed views on the best way to fund the scheme, but there was almost no support for option 1 (financing the Scheme by general levy only). There was some confusion about raising start-up costs. It was felt there may be problems in encouraging membership should start up costs appear to be prohibitive. Concerns were also raised about members who joined at a later stage avoiding paying for the start up costs (the ‘free rider’ problem). Consumer groups wanted the Regulator to influence the way in which costs were apportioned between members, as this would influence companies’ internal complaints handling procedures. Chapter 7 sets out Oftel’s conclusions on funding. 3.8 Respondents were keen to ensure that consumers would be able to lodge complaints by telephone. Also, that the Ombudsman staff would be adequately trained to assist more vulnerable complainants. Oftel supports these principles. 3.9 The importance of ensuring a high level of consumer awareness of the scheme was raised by all respondents (ie there was no support for keeping the scheme ‘low key’). Publicity would need to be sensibly phased in the early days of the scheme to ensure that the Ombudsman would not be swamped by an early surge of cases. 3.10 The need to highlight the benefits of membership as a ‘hallmark’ of good customer service were stressed, as were the benefits of linking the Ombudsman logo to codes of practice. Industry needs to develop a logo it can then trademark. 3.11 It was noted that a key challenge for the scheme in its early stages would be to establish a good working relationship with Oftel to avoid duplication of effort. Some industry respondents sought assurance that they would not be ‘paying twice’ for the same service – indeed the small minority who were opposed to the Ombudsman scheme felt there was no need for it and that the extra costs they perceived would be involved, were not justifiable. Oftel does not believe that these claims are justified, as the Ombudsman would be supplying a dispute resolution service to the public, which is different from the service currently provided by Oftel’s Consumer Representation Section (CRS).
Overview of scheme Benefits of a single scheme established by the industry 4.1 Following careful consideration of the responses received to the consultation, and in-depth research of Ombudsman schemes, Oftel is of the view that a scheme established by the industry that extends beyond the core requirements of the RVTD would be more effective and of most benefit to consumers. Industry should move towards such a scheme following the critical path outlined in chapter 2 above. As a prudent Regulator, Oftel will be alert to any attempts by operators and service providers to stall the successful implementation of the scheme. 4.2 An independent, industry funded scheme covering all communications-related disputes would be welcomed by consumers, providing a one-stop shop and avoiding confusion. Whilst recognising that public awareness of Ombudsman schemes generally could be improved considerably, consumer organisations are very supportive of that proposal. 4.3 In its consultation response, the Consumers Association stated that "an Ombudsman is a proportionate solution to resolving small scale and relatively simple issues which formal regulation often misses." From a consumer perspective, research has shown that Ombudsman are considered to be thorough in their investigations, fair and impartial, speedy, friendly, and approachable. 4.4 The National Consumer Council (NCC) has highlighted the importance of providing a redress mechanism to ensure the effectiveness of markets for consumers. The NCC would support Ombudsman schemes in preference to reliance on the courts or arbitration schemes because:
4.5 Operators and service providers should have due regard to Article 30 of the proposed EU Directive on Universal Service and Users’ Rights (see para.1.6 above). It is intended that the scheme to be implemented should meet those requirements. 4.6 Oftel acknowledges that some operators have individual dispute resolution mechanisms in place. However, the objective of the RVTD Regulations is to ensure that all telecoms consumers have access to "fair, transparent, accessible, timely and inexpensive procedures … to address disputes between users and operators providing either a fixed public telephone service and/or a fixed public telephone network", not just the customers of companies who have arbitration schemes or similar. The obligation is therefore on Member States to ensure that the industry as a whole is compliant, rather than on individual firms to put their own arrangements in place . This does not mean a company should not create its own arbitration scheme as part of its customer care strategy if it so wishes. To the extent that such a scheme is effective, it may help reduce the number of complaints against the company that need to be investigated by the Ombudsman. Benefits of the scheme to industry 4.7 The benefits of Ombudsman schemes are not confined to consumers. Industry can also gain substantial benefits:
Framework of the scheme: Articles of Association 5.1 The Telecommunications Ombudsman will need to meet the British and Irish Ombudsman Association (BIOA) criteria (see Annex 1). As it will be a voluntary scheme, membership will be through Articles of Association of a company set up to run the scheme. 5.2 The Ombudsman scheme will be established by the industry as a company. The industry will be responsible for finding a location for the company’s offices. There are several possibilities, which the industry may wish to explore further. One suggestion would be to lease office space and equipment from an existing Ombudsman scheme or other independent organisation. This would save both time and money during the initial start up phase. 5.3 The Ombudsman company would be responsible for the borrowing or raising of any money that may be required for the initial financing of the Scheme. Also for the purchasing, leasing, exchange, hire or otherwise of any land, buildings, offices and equipment etc; as well as for raising the revenue necessary for its ongoing operations. 5.4 Membership of the Scheme will be at the discretion of the Governing Board (see para. 5.7). 5.5 Each Member of the Scheme would agree to be bound by any award and to take account of any other recommendation or representation made by the Ombudsman within the time period specified. 5.6 Members of the Scheme will be encouraged to deal with complaints in a timely fashion; and inform complainants of the existence of the Ombudsman either at the point of deadlock and/or by displaying the Ombudsman logo on company literature. Oftel believes that the existence of the scheme will strengthen the existing commercial incentives on companies to put in place swift and effective internal dispute resolution procedures. The Governing Board 5.7 As proposed in the Consultation Document, the Governing Board should comprise a maximum of seven "public interest" members. Ideally the Board should have a balanced mix of experience, taken from industry, consumer groups and elsewhere, but no member would serve in a representative capacity. The duration of office should be on a rolling basis (renewable) to ensure that members of the Board do not retire at the same time. 5.8 In order to ensure that the critical path for implementation is followed, the Governing Board should be appointed by December 2001 at the latest. If the industry were to decide that a third party should administer the scheme (see chapter 2), there may be no need to go through a formal appointment process. This would be subject to general agreement that the governance of the organisation concerned already met the public interest requirements, as set out in the previous paragraph. Were that not to be the case, the alternative would be a process of open advertisement. A selection panel, comprising industry and consumer representatives, and chaired by the Director General, would make the initial appointments. It is envisaged that the Chair would be appointed first and would then participate in the selection process. Thereafter, the industry may wish the Governing Board to appoint its own Chair and members. 5.9 Remuneration of members of the Governing Board will be in line with similar Ombudsman schemes. Governing Board members will be entitled to claim for all reasonable travel, hotel and other expenses incurred in connection with their responsibilities for the scheme. 5.10 The Governing Board would be responsible for: -
The Finance Board 5.11 In the March 2001 Consultation Document, Oftel proposed putting in place a separate mechanism to oversee the finances of the Ombudsman service. The options were for either a separate Finance Board or for either the Governing Board or the Chief Executive of the Ombudsman scheme to undertake this role. 5.12 Respondents were in the main very supportive of the proposal for a Finance Board, although one consumer body believed that the Regulator should be responsible for approval of the budget rather than an industry body. The main consideration is to ensure that the Finance Board cannot interfere with the independence of the Ombudsman in any way. Therefore, it is essential that the Ombudsman be responsible for the preparation of the budget, and be able to satisfy the Governing Board that it is realistic and fully adequate to ensure the effectiveness and efficiency of the Scheme. The Governing Board would then be responsible for seeking the agreement of the Finance Board. 5.13 It is essential that the Governing Board acts as a buffer between the Ombudsman and the Finance Board to ensure there is no undue pressure or influence brought to bear upon the Scheme. It would also be desirable for there to be some cross membership between the Governing Board and the Finance Board, to allow for greater understanding of the respective roles and responsibilities. 5.13 From an industry perspective, the establishment of a Finance Board should alleviate any concerns expressed that the Scheme may be unreasonably expensive and help encourage wider membership. 5.14 It is proposed that industry members of the Scheme would elect the members of the Finance Board by the most equitable process. 5.15 The Finance Board would fulfil the following functions:
Withdrawal from the Scheme 5.16 Members would be entitled to withdraw from it, subject to a reasonable period of notice. This would be determined in the Articles of Association. The Governing Board may also recommend the removal of a member, provided there are reasonable grounds, (eg a persistent failure to enforce the Ombudsman’s decisions), subject to approval by members of the Scheme. In either case, the Governing Board would need to ensure that the Director General and members of the general public were made fully aware of the changed status of the organisation concerned. Oftel would need to consider the impact of withdrawal, in particular in the context of the implementation of the RVTD.
Terms of reference 6.1 The final form of the Terms of Reference for the Scheme will be agreed between the Ombudsman and the Governing Board. This chapter sets out the minimum requirements that will need to be met and describes some features of the Scheme, taking into consideration the responses to the Consultation Document. Jurisdiction 6.2 Given the desirability to provide a one-stop shop for consumers, the scope of the Scheme should cover at least disputes between members and their customers concerning: fixed and mobile voice, fax, dial-up Internet access, IDSN, ADSL and cable modem services. When joining the scheme, members should be prepared to include all such services, where provided, within the Ombudsman’s jurisdiction. This is by no means an exhaustive list. Oftel sees attractions, for example, in suppliers of Pay TV services joining the scheme at an early stage. 6.3 As it is an alternative to the small claims court, access to the Ombudsman scheme should be limited to private individuals and small businesses only. Sources of data (including the DTI SME Statistics) define SMEs as employing between 1-249 staff, although the definition of small and medium businesses is arbitrary, defined sometimes by number of employees, sometimes by turnover. When setting up the scheme, the industry should decide whether a turnover measure would be more appropriate and, if so, how its value should be fixed. The Scheme is clearly not intended as a mechanism for resolving inter-operator disputes. These are covered in Oftel’s Statement, Resolving Disputes between Fixed Telecommunications Service Operators, issued in September 2000. Territorial scope 6.4 Industry will need to consider whether the Ombudsman will be prepared to consider disputes in respect of services provided from a place of business in the UK from EEA (and non-European) complainants, on the same basis as UK complainants. Time limits 6.5 The Scheme will need to have strict time limits for bringing disputes to the Ombudsman’s attention. The normal practice for Ombudsman schemes is for there to be a six-month time limit after the point of deadlock between the member being complained about and the complainant. This is to prevent complaints being raised about events that occurred many years previously, for which there would be little or no prospect of the Ombudsman being able to conduct an effective investigation. The Ombudsman would retain discretion to waive the time limit if appropriate (ie to ensure that companies do not use the limit to stall complainants), but such discretion is likely to be used only rarely. Court proceedings 6.6 The Ombudsman scheme is an alternative to seeking redress through the courts. The Ombudsman will not deal with disputes, which are already the subject of court proceedings or a decision of any court of law (or arbitration). The Ombudsman may also decline to pursue a case if he considers that the complainant ultimately plans to pursue legal action against a company and is using the complaint to the Ombudsman primarily to gather evidence, rather than as a means of dispute resolution. Unfair contract terms 6.7 Both Oftel and the OFT are enforcement bodies under the Unfair Terms in Consumer Contracts Regulations 1999. Oftel’s role is to consider whether a term in a contract is unfair. This clearly is not the Ombudsman’s role. However the Ombudsman will need to bear in mind the Unfair Terms Regulations in handling individual cases. The Ombudsman should resolve the individual case on its merits and not be bound by any previous or potential regulatory decisions. Functions 6.8 The Ombudsman will not consider complaints unless the complainant has demonstrated that the member company’s internal complaint procedures have been fully complied with prior to referral. Once the Ombudsman is satisfied that this is the case the service will provide: (i) initial, informal facilitation in order to resolve disputes as expeditiously as possible; which will include offering guidance to both consumers and firms of the various options available. For the most part, however, Oftel’s Consumer Representation Service (CRS) will continue to play its ‘good offices’ role. Complainants will be advised of the existence of the Ombudsman service at the appropriate time. (ii) A speedy and efficient alternative dispute resolution service, free of charge to consumers, with the powers of investigation/awarding compensation. Awards and recommendations 6.9 Where the complaint is upheld, wholly or partially, the Ombudsman will be able to make a monetary award against the Member binding, up to a proposed maximum of £5,000 (equivalent to the small claims court). This is subject to agreement by members of the Scheme and should be reviewed on a regular basis. 6.10 When deciding on the award, the Ombudsman will take account of the actual financial loss incurred and what was fair and reasonable in the circumstances, having regard to: principles of law; good practice; and, to any inequitable conduct or maladministration. 6.11 The Ombudsman may also take account of distress and inconvenience caused to the complainant as a direct result of the dispute. It will be for the Governing Board to decide, in conjunction with the Ombudsman, whether to determine an upper limit on the value of such an award and, if so, how high this should be. 6.12 The Ombudsman will also have the discretion to recommend an award to cover reasonable costs for out of pocket expenses. Whilst the Ombudsman would not normally recompense for legal costs and other professional expenses (eg professional reports), the Ombudsman should have the discretion to include them in an award if in the particular circumstances they have been reasonably incurred. 6.13 The Ombudsman will have the power to set time limits within which awards and costs should be paid, in accordance with the Articles of Association. Duties 6.14 The Ombudsman will be required to: (i) Have regard to and, where appropriate, act in conformity with:
(ii) To have regard to (without being bound by) any previous decision of any Ombudsman. (iii) To have regard to (without being bound by) any guidance of a general nature given by the Governing Board. (iv) In the light of (i) (ii) and (iii) above, to assess what solution would be fair and reasonable in all the circumstances. (v) To attend any meeting (or part) of the Governing Board and Finance Board as required and to provide reports, information, and assistance as requested. (vi) To provide an Annual Report to the Governing Board for publication to the Members, the Director General of Telecommunications and the general public. (vii) To provide and regularly maintain a dedicated website to update members and consumers and explain how the Scheme works. (viii) To publish regularly data on the volume of complaints. (ix) To agree a Memorandum of Understanding between the Regulator and the Ombudsman regarding the exchange of information between the two organisations, for example on the nature and volume of complaints and views on general regulatory policy concerns. The Memorandum would deal, inter alia, with meeting the provisions of the Data Protection Act in relation to complainants’ consent. (x) Not to disclose any confidential information (except to persons properly entitled to that disclosure). (xi) In the event that a Member of the Scheme is in dispute with the Ombudsman on a procedural matter/issues of natural justice, (but not in relation to decisions made) the Ombudsman will refer the matter to the independent Arbitrator (see para. 5.10 above). The Arbitrator’s decision will be final and conclusive.
(xii) The decision whether or not a complaint falls within the jurisdiction of the Ombudsman lies solely with the Ombudsman, as determined by the Terms of Reference. The Ombudsman is not obliged to consider a complaint that is, in the Ombudsman’s opinion, either vexatious or frivolous or which would be more appropriately dealt with by a court of law, by arbitration or by another independent complaints procedure. (xiii) As outlined in chapter 7 of the Consultation Document, the Ombudsman will be obliged to ensure equality of access to the Scheme for all, based upon the treatment of consumers as individuals. As stated in that document, it is unlikely that the costs of accessibility would be prohibitive. (xiv) It will be the duty of the Ombudsman to ensure that there are no barriers to the Scheme that could adversely affect consumers’ ability to use it. All consumers, (including elderly and disabled people, socially and economically disadvantaged groups, users of other languages and members of different communities, ethnic or otherwise), should, as far as possible, have equal access to the Scheme.
Powers 6.15 The Ombudsman’s powers, subject to the supervision of the Governing Board, will be:
6.16 The Ombudsman will not consider disputes that have previously been referred to the scheme, unless material new evidence has become available.
Funding of the scheme 7.1 The consultation document set out three options for the funding of the scheme: Option 1: All of the costs of the scheme would be financed by a general levy on all members. Option 2: All of the costs of the scheme would be financed through case fees. Option 3: The costs of the scheme would be split 50/50 between a general levy on members and case fees, (or by any other split considered appropriate). 7.2 In the main, the larger operators favoured a case fee approach. Oftel understands why this may be seen as the most equitable approach in theory. However, it is important to remember that the Scheme will not be operating in a vacuum. The Scheme will have fixed overheads to maintain and the start up costs will need to be funded, thus some form of levy will need to be applied, at least at first. 7.3 Several respondents wanted an estimate of the likely costs involved before being able to comment. The actual costs of the scheme will depend on the number of members, the number of initial enquiries and complaints, the number of cases requiring investigation and the number of cases prevented. The size of accommodation required, staffing requirements etc are subject to these estimates. 7.4 An informed estimate of the likely number of complaints that may require investigation by the Ombudsman can be inferred by analysis of the volume and nature of complaints received by Oftel’s Consumer Representation Section’s (CRS). Given that Oftel hopes that all operators (including all mobile operators) and service providers will join the Scheme from the outset, this seems a reasonable starting point. CRS will continue to play its ‘good offices’ role following the implementation of the Ombudsman scheme. Thus it is reasonable to assume that the proportion of complaints received by CRS which have the potential to escalate into disputes requiring Ombudsman involvement would be in a similar order as the conversion from enquiry to case rates experienced by other private sector Ombudsman schemes (which are typically in the order of around 10-11%). 7.5 Analysis of complaints and enquiries received by Oftel’s consumer representation section (112,000 last year), showed that around 90% were from residential customers and around 75% could be broadly categorised as a complaint. This would suggest that something in the order of around 75,600 complaints could fall within the Scheme’s jurisdiction. Using the 11% benchmark this would suggest that the Ombudsman Scheme may well be dealing with something in the region of 8,000 cases per year 7.6 The Financial Ombudsman Service (FOS) handles over 1,000 telephone calls per day from consumers and investigates upwards of 30,000 cases per year. The service employs 450 people. From November 2001, the Scheme will become a single, statutory scheme and will initially be funded by a mixture of case fee and levy (50/50). The FOS budget for the year 2000/01 is £22.57 million, which includes the costs of servicing the establishment cost recovery fund. The Scheme is currently financed through a revolving loan of £25 million (underwritten by the Financial Services Authority), of which £6 million had been drawn down at 31 March 2000. The start-up costs include the development of a sophisticated unified casework system, with invoicing and proactive screening facilities. The system is designed to prevent complaints escalating to investigations and thereby reduce unit costs to members in the longer run. 7.7 The Ombudsman for Estate Agents (OEA), which has around 4,300 members covering 36% of the market, received almost 4,500 complaints last year, almost 2,000 of which were within its terms of reference. 501 of these were formally reviewed (ie 25%). The scheme is funded by an annual general levy of £90 collected from each member office. Its annual budget is around £380,000. The Scheme employs 13 staff – 6 full time and 7 part time. 7.8 The Funeral Ombudsman received 172 complaints last year, 20% of which were outside of the Ombudsman’s jurisdiction, with 30% being pursued through to adjudication. The average value of award was £653 and the highest award made was £2,000. The annual budget for the scheme is approximately £200,000. It employs three members of staff, two full-time, and the Ombudsman part-time. 7.9 Both the OEA and the Funeral Ombudsman Scheme are paper-based schemes. Nevertheless, telephone contacts with complainants are important eg for determining whether or not the complaint falls within the scope of the Scheme. In recognition of the importance of the initial customer point of contact, the new Financial Ombudsman Service has invested considerable resources in call-management technology. Its customer contact division provides general information and guidance, and actively looks for opportunities to resolve complaints so that they do not turn into full-scale disputes requiring investigation. 7.10 Given that CRS plays a similar role to that of the Financial Ombudsman Service’s customer contact division (and hence should prevent there being a high rate of complaint escalation to cases requiring investigation by the Ombudsman) it would seem reasonable to base assumptions about staffing levels on the FOS model, ie to assume that around 11% of the complaints received by CRS may require the services of the Ombudsman scheme. 7.11 In order to be able to process this volume of complaints speedily (ie in less than 6 months as a maximum) and effectively, a total like with like comparison with the FOS would imply that the Scheme would need to employ something like 100 case work officers. This figure will need to be reviewed regularly in the light of experience of the volume and complexity of cases. Generalising very broadly, it is likely that disputes in the Communications sector would be less legally and evidentially complex than complaints about financial services and that the number of consumers pursuing them to independent investigation may also be rather less. It needs also to be recognised that Oftel’s Customer Representation Service, with a staff of 30, is achieving good turnaround times on both written and telephone casework, which in some cases approximates to that of the Ombudsman scheme.
7.12 Whilst industry is right to be cautious of incurring excessive costs of a scheme, it is important that initial capital expenditure is sufficient to ensure the smooth operation of the scheme, allowing unit costs to fall over time. Moreover, an Ombudsman scheme will be an important incentive for improving internal complaint procedures. Many of the complaints received by Oftel involve consumer dissatisfaction with the way in which their complaint has been handled, rather than an actual dispute with the company. Whilst the above figures demonstrate that the Scheme will not be on the same scale as the FOS, the sheer volume of complaints related to telecoms suggests that the numbers envisaged are based on reasonable assumptions. The challenge for the industry is to be alert to issues that are likely to generate a large volume of complaints and adapt their business practices accordingly. 7.13 The overriding principle is that the Telecoms Ombudsman scheme must be adequately staffed and resourced, with the technology needed to ensure that the handling of disputes is both speedy and efficient, thereby saving costs over the longer run. 7.14 Whilst Oftel actively encourages the setting up of an Ombudsman scheme, the final decision on funding both the start-up costs and ongoing revenue must rest with industry. On the former, the model of an underwritten loan (ie similar support to that advanced by the Financial Services Authority to the FOS) may provide a good model for meeting start up costs. The Scheme would subsequently take responsibility for the servicing of the loan over its lifetime. This would ensure that no operator had any incentive to delay joining the scheme initially, purely as a means of avoiding start-up costs. Oftel will discuss the practicalities of this approach further with the industry and with government. 7.15 On ongoing revenue, Oftel believes that the balance of argument points broadly to a hybrid funding regime, combining case fees and a levy. It is right that firms should be given an incentive to reduce the number of cases coming to the Ombudsman and that they should reimburse at least an element of the costs incurred as a result of the investigation. However, in the light of:
there is also a case for some form of levy to provide an element of financial security over and above the revenue raised by case fees. 7.16 Oftel believes that the 50/50 split may provide a reasonable basis for operating the scheme in its initial years. The precise balance should be determined by the Governing Board. There may well be merit in increasing the case fee element over time. The Governing Board may also wish to consider whether, in the long run interests of the scheme, it would be preferable to have a reduced membership levy for very small firms.
Application of procedure: decision making powers 8.1 In the March 2001 consultation, Oftel proposed that the Ombudsman would be responsible for making the final decision in a dispute, taking account of what is fair and reasonable in the circumstances. It was proposed that the Ombudsman’s decision would be binding on the operator/service provider but not on the consumer, who maintains the right to go to court. This approach is usual for nearly all Ombudsman schemes (although the Pensions Ombudsman is a notable exception), irrespective of whether a scheme is statutory or not. 8.2 It is a matter for each UK Ombudsman to consider whether or not the provisions of the Human Rights Act apply to the Scheme. Some industry respondents believe it is essential for there to be a right of appeal against decisions made by the Ombudsman where membership of the scheme is compulsory in order for the scheme to comply with Article 6 (right to a fair trial). 8.3 It is important to bear in mind that Ombudsman schemes are designed to be consumer friendly and useable by unassisted complainants. From Oftel’s perspective, it is vital to ensure that consumers are adequately protected. The existence of an independent alternative dispute resolution scheme, which is free of charge to consumers but which enables the consumer to go to court if not satisfied, has a vital role to play in providing consumer protection. It will ‘level the playing field’ between the complainant who is unlikely to have the necessary resources to take a case to court, and the operator/service provider who are in the main, far better resourced. 8.4 Before reaching a final decision, an Ombudsman would take account of what is fair and reasonable in the circumstances and not be bound by any strict interpretation of the law or precedent. The Ombudsman would also, normally, issue a preliminary determination, after which either party would be given the opportunity to comment or bring any other relevant information to the Ombudsman’s attention. This, of itself, allows extra safeguards to both parties in ensuring that all relevant evidence can be fully considered. It is important to remember that Ombudsman schemes are effective because of their extensive use of informal settlements and conciliation. The objective is to ensure that the resolution of disputes is both speedy and efficient, thus it is in everyone’s best interests to avoid adopting a quasi-judicial, adversarial approach. Moreover the right of appeal would add significantly to the overall costs of the Scheme. 8.5 It is Oftel’s intention that the scheme should be established by the industry and open to all operators/service providers. The Ombudsman’s decision will be enforceable by reference to the member agreeing to abide by the Articles of Association of the Company. Nevertheless, it is expected that all operators/service providers covered by the scope of the RVTD should become members of the scheme. If they fail to do so, then the Director General could take appropriate action against the company to ensure compliance with the RVTD. As made clear in para 1.10, the Director-General is prepared to take such a step if there were general slippage in the creation of a scheme or if membership does not reach a critical mass in an acceptable period. Oral hearings 8.6 Article 6 of the Human Rights Act refers to the right for a "fair and public hearing within a reasonable time by an independent and impartial tribunal established by law". Again, industry will need to consider the implications of the Act. Where Article 6 applies, there is no automatic obligation for an Ombudsman to hold a public hearing if the parties concerned do not require it, or if the complaint is considered to be frivolous or vexatious, or there is no arguable point. Further guidance may be obtained from the British and Irish Ombudsman Association. Interaction with Oftel’s Consumer Representation Section (CRS) 8.7 The Director General is required by the Telecommunications Act 1984 to consider any complaint or enquiry relating to telecommunications services supplied in the UK (unless they appear to be ‘frivolous’). This service is provided by CRS. 8.8 The action CRS can take is set out in the Telecommunications Act (and hence the terms of operators’ licences), the Competition Act 1988, and relevant EU Directives. Where there is a potential licence breach, CRS will pass the case to Oftel’s Compliance Directorate for investigation and possible enforcement action. 8.9 In most cases CRS uses its ‘good offices’ role to try and resolve consumer complaints. CRS registers every consumer complaint received. Analysis of this data alerts CRS to the need to contact companies to make them aware of areas that are of concern to consumers. It also ensures that any substantive issues are identified and considered from a policy perspective. Exchange of information 8.10 In order to ensure that the Ombudsman service has access to all information needed to fully investigate the complaint, there will need to be Memorandum of Understanding between it and other organisations. Likewise, it is intended that the Ombudsman would wish to inform Oftel, should evidence emerge during the course of an investigation, which appeared to indicate the existence of a licence breach or anti-competitive behaviour, which merited investigation. Equally the efficiency of the scheme will be greatly enhanced if Oftel alerts the Ombudsman to relevant broader policy issues and market developments. The information obtained by either party would be subject to non-disclosure rules. 8.11 Whilst it is essential that the Ombudsman scheme is independent of the Regulator there will need to be some mechanism to allow for the transfer of case files from CRS to the Ombudsman to avoid unnecessary duplication. Procedures will therefore need to be in place to guarantee that confidentiality is assured. The Regulator will also need to intervene should it find that firms are not alerting consumers to the existence of the Ombudsman scheme as required. 8.12 As this will be an industry led scheme it will be for the industry to decide (subject to the provisions of the Data Protection Act) the type of information required. The Regulator would not expect the Ombudsman to provide any detailed information about individual cases unless there are serious extenuating circumstances, such as a criminal offence or a serious regulatory breach. 8.13 In order that the effectiveness of the scheme can be monitored, the Ombudsman will compile and publish both statistical and qualitative information (the latter probably in the form of anonymised case summaries) about its complaints-handling activities. It is envisaged that these will be in the public domain and therefore fully accessible to the Regulator.
British and Irish Ombudsman Association SCHEDULE 1 TO THE RULES CRITERIA FOR THE RECOGNITION OF OMBUDSMAN OFFICES A. Introduction The core role of an Ombudsman is to investigate and resolve, determine or make recommendations with regard to complaints against those whom the Ombudsman is empowered to investigate by the exercise of powers and in accordance with procedures described in these criteria. The term ‘Ombudsman’ should only be used if four key criteria are met. Those criteria are independence of the Ombudsman from those whom the Ombudsman has the power to investigate; effectiveness; fairness and public accountability. Detailed criteria which should in the longer term be achieved by all recognised Ombudsman schemes are set out in part B. Given the considerable range of ombudsmen schemes in the public and private sectors and the variations in their constitution, jurisdiction, powers and accountability, the detailed criteria need to be interpreted with sufficient flexibility to encompass those variations. Independence, for example, may be achieved in several ways. Hence, in the private sector the body which appoints the Ombudsman and to whom the Ombudsman reports, can be regarded as independent, provided that those of its members who are representatives of organisations subject to the Ombudsman’s jurisdiction, constitute a minority of the membership. Initially, recognition of existing schemes will be dependent on whether, broadly speaking, they meet the key criteria; it will not be withheld if, in some respects, the detailed criteria are not met. However, over time it is expected that the constitution of all schemes would be developed to the extent necessary to meet the detailed criteria. For example, in the longer term the power by those subject to investigation to veto the proposed appointment or reappointment of an Ombudsman should, where it exists, be removed.
In due course, it is expected that in the private sector all, or virtually all, firms in an industry with an Ombudsman scheme or schemes should participate in the scheme or schemes, even though in the short term, especially when a scheme is first established, a lesser number of firms may participate. The decision on which schemes are recognised as meeting the key criteria will be made by the Executive Committee or a General Meeting on the recommendation of the Validation Committee. The Validation Committee will also consider according to the rules which schemes meet the detailed criteria in full and which do not. In respect of the latter, the Validation Committee will in due course review its initial recognition, when requested to do so, having regard to the extent to which progress has been achieved towards meeting the detailed criteria in full. B. Detailed Criteria 1. Independence (a) The jurisdiction, the powers and the method of appointment of the Ombudsman should be matters of public knowledge. (b) The persons who appoint the Ombudsman should be independent of those subject to investigation by the Ombudsman. This does not exclude minority representation of those subject to investigation on the appointing body, provided that the body is entitled to appoint by majority decision. (c) The appointment should be either for a minimum of three years or until a specified retirement age. If the former, it may be renewable. The initial term of office and any renewal should normally commence before the age of 65 years and be of sufficient duration not to undermine independence. (d) The appointment must not be subject to premature termination other than for incapacity or misconduct or other good cause. The grounds on which dismissal can be made should always be stated, although the nature of the grounds may vary from scheme to scheme. Those subject to investigation by the Ombudsman should not be entitled to exercise the power to terminate the Ombudsman’s appointment, but this does not exclude their minority representation on the body which is authorised to terminate. (e) The remuneration of the Ombudsman should not be subject to suspension or reduction by those subject to investigation, but this does not exclude their minority representation on the body authorised to determine it. (f) The Ombudsman alone (or an appointed deputy) must have the power to decide whether or not a complaint is within the Ombudsman’s jurisdiction. If it is, the Ombudsman (or an appointed deputy) must have the power to determine it. (g) Unless otherwise determined by statute the Ombudsman should be required to report to a body independent of those subject to investigation, but this does not exclude their minority representation on that body. That body should also be responsible for safeguarding the independence of the Ombudsman. (h) The office of the Ombudsman must be adequately staffed and funded, either by those subject to investigation or from public funds, so that complaints can be effectively and expeditiously investigated and resolved. 2. Accessibility (a) The right to complain to the Ombudsman should be adequately publicised by those subject to complaint. (b) Those subject to complaint should be required to have proper internal complaints procedures. (c) The office of the Ombudsman should be directly accessible to complainants unless otherwise specified by or under statute. (d) The Ombudsman’s procedures should be straightforward for complainants to understand and use. (e) Those complaining to the Ombudsman should be entitled to do so free of charge. 3. Powers and Procedures The Ombudsman should: (a) Be entitled to investigate any complaint made to the Ombudsman which is within the Ombudsman’s jurisdiction without the need for any prior consent of the person or body against whom the complaint is made. This does not preclude a requirement that before the Ombudsman commences an investigation, the complainant should first have exhausted the internal complaints procedures of the person or body being investigated. (b) Save as otherwise provided by law, have the right to require all relevant information, documents and other materials from those subject to investigation. (c) Be entitled but not obliged, to disclose to the complainant or to the person being investigated such information, documents and other materials as shall have been obtained by the Ombudsman from the other of them unless there shall be some special reason for not making such disclosure, for example, where sensitive information is involved or disclosure would be a breach of the law. (d) Proceed fairly and in accordance with the principles of natural justice. (e) Be required to make reasoned decisions in accordance with what is fair in all the circumstances, having regard to principles of law, to good practice and to any inequitable conduct or maladministration. (f) In all cases which it is decided not to accept for investigation, notify that decision to the complainant and the reasons for it. (g) In all cases investigated, notify in writing the decision and the reasons for it to the parties concerned. 4. Implementation of Decisions Either (a) Those investigated should be legally bound by the decisions or recommendations of the Ombudsman; or (b) There should be a reasonable expectation that the Ombudsman’s decisions or recommendations will be complied with. In all those cases where they are not complied with, the Ombudsman should have the power to publicise, or require the publication of such non-compliance at the expense of those investigated. 5. Annual Report The Ombudsman should publish an Annual Report. The Ombudsman should be entitled in that report, or elsewhere, to publish anonymised reports of investigations. UK (AND ITS DEPENDENT TERRITORIES) OMBUDSMEN IN FULL MEMBERSHIP Parliamentary
Ombudsman OMBUDSMEN IN THE REPUBLIC OF IRELAND WHO ARE IN FULL MEMBERSHIP The
Ombudsman, Ireland
Responses to the consultation document The following organisations responded to Oftel’s consultation document, Developing a Telecommunications Ombudsman, March 2001: 1 ACSP 2 BIOA, British and Irish Ombudsman Association 3 BT 5 Cable & Wireless 6 CCE 7 Centrica 8 Colt 10 DIEL 11 Energis 12 ICSTIS 13 JD Power and Associates 14 Kingston | |||||||
