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Members of the mortgage industry are being called on to petition the Treasury against the merger of the Credit and Investments Ombudsman and Financial Ombudsman Service.
The Treasury has released an issues paper on the Review of the external dispute resolution (EDR) framework, which is looking into the existing two-EDR scheme model and considering alternatives. These currently include the merger of two ombudsman schemes or an industry-funded statuary scheme.
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However, the Credit and Investments Ombudsman (CIO) is calling on its members and mortgage brokers to support the CIO’s stance for the two bodies to remain separate and “forward their comments about the review to the Treasury if they feel strongly about the issue”.
According to the CIO, the ombudsman has been the ‘natural’ home for the non-bank sector since it was formed in 2003.
It states that it understands the sector well and highlights that Financial Ombudsman Service's (FOS) funding comes from complaint fees, and thus its funding is “more variable from year to year, being more dependent on the overall number of complaints received”.
It adds that as 70 per cent of CIO's funding comes from membership fees (of which there are 23,000 members), it “means its funding is potentially more stable overall, and there is no incentive to needlessly generate complaints or escalate them”.
The CIO stated: “Having two EDR schemes allow each scheme to benchmark its performance against the other. This produces better outcomes for finance services providers and consumers alike because the schemes are forced to adopt best practice and improve their service offering. This cannot be achieved under a single EDR scheme model.
“Without this competitive tension, turnaround times, service levels, innovation and continuous improvement would suffer, and there would be less incentive to keep costs in check and run the scheme efficiently.”
It added: “A single merged EDR scheme would be prone to be monopolistic in its behaviour — dictating terms, rather than being responsive to stakeholder concerns about performance.
“A mega statutory scheme is not the answer because a large bureaucracy would have less specialisation, be substantially less flexible or capable of responding quickly to changes in the market. This will affect turnaround times, service levels and innovation.”
According to the CIO, a “consumer-facing common help desk”, jointly funded by EDR schemes — essentially an online and telephone access point — would be “a far better option than merging the EDR schemes”.
