The function of Financial Services and Pensions Ombudsman (FSPO) is to investigate complaints made against financial service providers and pension providers in an appropriate manner, proportionate to the nature of the complaint, by informal means, mediation or formal investigation including Oral Hearings if required.
To be eligible to make a complaint to the FSPO, the person making the complaint must fall within the definition of a “complainant”, which includes an actual or potential beneficiary, or a "consumer".
The term "consumer" in relation to a financial service includes:
(1) a natural person, not acting in the course of business,
(2) a sole trader, a partnership, trust club or charity (not being a body corporate) with an annual turnover in its previous financial year of €3 million or less, or
(3) an incorporated body that had an annual turnover in its previous financial year of €3 million or less (and is not a body corporate that is a member of a group of companies with a combined annual turnover of greater than €3 million).
This definition of "consumer" in the Act, aligns with the definition within the Consumer Protection Code 2012 (CPC) published by the Central Bank of Ireland as regulator of financial service providers.
Current Position
I am advised that data for 2018, published by the Central Statistics Office, confirms that micro enterprises accounted for 91.9% of all enterprises in Ireland, during that year. Such enterprises are already within the jurisdiction of the FSPO, as their turnover comes within the €3 million limit prescribed by the Act. As more than 90% of all enterprises are already within the remit of the FSPO, there does not appear to be any need to expand the remit of the FSPO, to include eligibility for enterprises with an annual turnover of more than €3 million.
Potential Legal Challenge
I am further advised that the FSPO believes that an expansion of its remit to include eligibility for enterprises with a turnover higher than that currently specified by the Act could give rise to a Constitutional challenge.
Article 34.1 of the Constitution provides that the administration of justice is reserved to the Courts. Administrative bodies, such as the FSPO, are permitted by Article 37.1 of the Constitution, but only insofar as they exercise: “Limited functions and powers of a judicial nature in matters other than criminal matters”
Expanding the jurisdiction of the FSPO to include enterprises with a higher turnover may be open to challenge on the basis that the FSPO would no longer exercise limited functions and powers.
The comments of Hogan J. (of the High Court at the time) in Lyons and Murray v Financial Services Ombudsman [2011] IEHC 454, are particularly noteworthy. The Judge expressed considerable reservations regarding the regulations made by the Financial Services Ombudsman Council to expand the definition of "consumer" to include a person or group of persons and incorporated bodies having an annual turnover of €3 million or less. In considering an appeal against a finding of the FSO in a complaint concerning borrowings of €17M, he commented that
“The FSO cannot be regarded as some form of miniature version of the Commercial Court…it could not practically function if this was what was expected of it.”
Similarly, in Hooper Dolan Financial Services Limited v Financial Services Ombudsman and Abbeyleix Credit Union Ltdooper Dolan Financial Service [2011] IEHC296, McMenamin J. upheld the definition of "consumer" applying to the FSO, but in so doing the Judge stated that the category of "consumers" should be:
"Seen as distinct from large corporations, well-versed in the financial world, which would be precluded and outside any legislative principle or policy…”
It is also worth noting that the overall value of redress potentially sought by a complainant with a higher turnover may go beyond the current maximum compensation of €500,000 which the Ombudsman may direct, in addition to rectification. Contracts of insurance or investments products held by organisations with a higher turnover also seem likely to give rise to disputes involving considerable value, and the potential for very considerable redress being required. Such enterprises seem likely to hold potentially very valuable financial products and services and arguably will not require the type of protection generally accepted as being appropriate for entities coming within the current definition of "consumer".
Compliance Obligations
Any change in the turnover limit for the definition of “consumer” would of course require a similar amendment to the definition of "consumer" within the CPC, in order to maintain that alignment. Any such extension of the definition of "consumer" within the CPC and the FSPO Act 2017, could give rise to significant extra compliance obligations for most types of regulated entities, having regard to the scope of application of the CPC which applies to most types of regulated entities with some exceptions. Such compliance work would of course give rise to significant costs and could transpire to be a significant disincentive to any financial service providers considering Ireland as a potential base for operations, thereby potentially diminishing Ireland’s competitiveness. It also appears likely that regulated entities may in certain instances either withdraw or increase the prices of certain products or services to newly defined “consumers ”, in light of such potential new compliance obligations.
The Ombudsman has informed me that for the reasons outlined above it does not appear either necessary or appropriate to expand the remit of the FSPO to include eligibility for enterprises with a turnover of over €3 million.
