Customers are being left out of pocket because of arcane rules that force them to wait eight weeks before they can take unresolved complaints to an ombudsman.
Campaigners are calling for the system to be updated after research by the consumer website MoneySavingExpert showed that 89% of respondents wanted the waiting time halved to allow swifter redress when companies fail to deliver.
Ombudsman schemes were first launched 50 years ago and gave companies eight weeks to address complaints to allow for the postal system. Customers can only approach an ombudsman earlier than that if the company sends a letter of deadlock. But by the time eight weeks have passed it can be too late.
According to MoneySavingExpert founder Martin Lewis, the rules are causing severe hardship to some customers. “It allows bad situations in our rapid world to snowball out of control, having the potential to destroy people’s finances and wellbeing before an ombudsman can even start looking at what’s going on,” he says. “This is bad news for consumers, but potentially for companies too. If a firm is judged to be at fault – and as a result of the eight-week wait the problem has grown into a catastrophe – the cost of righting the wrong can be many times more than it would have been if there had been earlier intervention.”
Derek Coop was owed £178.84 by his energy supplier Solarplicity when he switched companies in October last year. Solarplicity ignored his requests to refund the credit and Coop had to wait eight weeks before he could appeal to the Energy Ombudsman.
The ombudsman ordered Solarplicity to pay up within 14 days in April, but it failed to do so. When Coop informed the ombudsman, he was told to wait another eight weeks and lodge a new complaint.
In June Solarplicity was again ordered to pay the sum plus £75 compensation. It ceased trading soon afterwards without paying up. If he had not been forced to wait eight weeks twice, Coop says, the ombudsman could have enforced redress before the company went into administration.
The eight-week requirement cost Emma Jenkins more than £500. She had rejected her faulty new car after its fifth unsuccessful repair, but had to continue paying £272 a month to the credit hire company, which had financed it while she waited to escalate her complaint to the ombudsman. By the time the ombudsman ruled in her favour, another four months of payments had passed.
“It was so stressful and frustrating having to go through those eight weeks knowing they were going to reject my complaint at the end of it,” she says. “I knew they were just dragging their heels for as long as possible in the hope I would go away.”
Yvonne Fovargue, chair of the all-party parliamentary group on consumer protection, has called for the system to be overhauled to reflect new technology. “The eight-week rule was created in a pre-digital age,” she says. “Since we now have the ability to transfer information far more freely and quickly, a waiting time somewhere between two and four weeks should be more than ample.”
The campaign is supported by ombudsman service providers. Caroline Wayman, chief ombudsman and chief executive of the Financial Ombudsman Service, said: “From the hundreds of thousands of complaints against financial businesses that we deal with every year, we know it is really important that complaints are dealt with as soon as possible, especially when consumers are vulnerable.”
Matthew Vickers, chief executive of the Energy Ombudsman, agrees that the eight-week rule is incompatible with the modern age.
Campaigners are also calling for ombudsman services to be given statutory status, to give legal force to their rulings, and for a single complaints portal to help customers find the relevant ombudsman. In January the parliamentary group concluded that membership of an ombudsman scheme should be mandatory and asked for the system to be overhauled by the Law Commission.
“Ombudsmen should be the gold standard in independent dispute resolution, with the ability to force all players in their sector to comply with rulings,” says Lewis.
“Yet some are little more than opt-in trade bodies that firms can ignore with impunity, and are about as useful to consumers as a chocolate teapot.”