Ombudsman suffers reversal

Financial Services Ombudsman Joe Meade will hold talks with his legal advisers next week following a High Court ruling yesterday that he does not have the power to order financial services companies to refund all customers affected by a complaint made by an individual to his office.

Insurer Quinn Direct, which mounted the legal challenge to Mr Meade's powers, will now not have to repay a €25 administration charge it imposed on customers who switched motor policies from one car to another in the past six years.

The case arose after Mr Meade upheld a complaint from a customer that the charge was unfair because it was not mentioned in the policy documents. Quinn Direct agreed to refund the man and later changed its practice, but it challenged Mr Meade's direction that it should refund other customers who had been charged the fee.

The High Court ruled that the ombudsman does not have the power to do this under the legislation and can only make directions in relation to a specific person who has made a complaint.

The ruling is likely to lead to a logjam of individual complaints to the ombudsman's office.

The Consumers' Association of Ireland (CAI) has called on all Quinn Direct customers who believe they may have been charged the fee to make a complaint to the ombudsman, who can investigate cases dating within the last six years.

"The door is now open for people to make complaints . . . Start writing your letter today," said CAI chief executive Dermott Jewell.

Mr Jewell added that the ruling had come at an interesting time in light of EU moves to introduce a new system of "collective redress" that would allow consumers to take class actions.

The High Court's decision will also affect some 500 Ulster Bank investors, who are in line for compensation worth a total of €7.4 million following a direction from Mr Meade.

He said he welcomed the clarification of his powers and will now decide whether to appeal the judgement to the Supreme Court, accept it or seek a change in the legislation.

Mr Meade had an initial consultation with the Department of Finance and the Irish Financial Services Regulatory Authority yesterday.

He said he may also of alert consumers where he has upheld a complaint and believes more people could be in line for a refund or compensation. Up until now, he has not named the firms that have been the subject of complaints.

Mr Meade had understood that a provision in the legislation governing his office that he could "review, rectify, mitigate or change the conduct complained of or its consequences" meant that he could direct a company to refund or compensate all customers affected by a complaint.

He has made such directions in relation to Quinn Direct, Ulster Bank and Irish Nationwide. In the Nationwide case, the affected customers received their money after intervention from the financial regulator. The regulator said that it could not comment on individual cases.

Quinn Direct, which has about 400,000 motor insurance customers, said it welcomed the decision of the court.

"We have always disclosed to our customers the charges, if any, that they have to pay for changes to their policy and there was never any question of hidden charges," it said.