The ombudsman system needs a major overhaul following findings that many schemes lack the power to enforce judgments and consumers do not know who to turn to with their complaints, according to a group of MPs.
The All-Party Parliamentary Group (APPG) on Consumer Protection has recommended that the Law Commission overhaul the system to rid it of “far too much” variation across the schemes.
A review should result in one ombudsman for every sector with each able to enforce their decisions, the group said.
The APPG, which took written and oral evidence from a number of ombudsman bodies and consumer groups during its inquiry, has also recommended that all schemes have mandatory membership and are directly answerable to Parliament via select committees.
APPG chairwoman Yvonne Fovargue said: “There is much that is good about the provision of ombudsman services, but there is far too much variation in what each ombudsman can do.
“Some cover all the firms in their sector and have the power to enforce judgments, but many do not. The result is that many consumers do not know who to turn to with their complaints.
“The recommendations in our report are about ensuring that all ombudsman schemes follow best practice. We want to take what is good about the system and ensure that it applies uniformly and comprehensively.”
She added: “We make a number of suggestions for improvement that could be quickly implemented. But ultimately, we would like to see the ombudsman system overhauled by the Law Commission, who are best able to consolidate and extend the current statutory landscape.
“The ombudsman system has the potential to be the ‘gold standard’ of alternative dispute resolution if the standards of the rest can be brought up to the standards of the best.”
The APPG issued a call for evidence on the system in April last year amid long-standing concerns about the wide variation in the standards of complaints handling and reports of consumer confusion.
MoneySavingExpert.com, which produced the report Sharper Teeth: The Consumer Need For Ombudsman Reform in 2017 and funded the APPG inquiry, said it backed calls for the system to be referred to the Law Commission.
MoneySavingExpert founder and chairman Martin Lewis said: “Ombudsmen should be the gold standard in independent dispute resolution, with the ability to force all players in their sector to comply with rulings.
“Yet not all ombudsmen are equal. 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.
“To be called an ombudsman, you should have the statutory powers needed to enforce decisions and be under proper scrutiny, so consumers have confidence they’ll get a fair hearing. Plus, we need to change the antiquated pre-digital rule that means consumers have to wait a ridiculous eight weeks to escalate a problem to an ombudsman after complaining.”
A Department for Business, Energy and Industrial Strategy spokesman said: “It is vital that consumers have access to an effective, accessible and transparent system of redress.
“Our review of the Alternative Dispute Resolution (ADR) landscape is looking at how the Ombudsman system can be improved, and we expect to publish a White Paper later this year. We will study the recommendations of the APPG with interest.”