Response to the Civil Aviation Authority consultation on reforming consumer complaints handling

Transcription

1 Response to the Civil Aviation Authority consultation on reforming consumer complaints handling 23 February 2015

2 Response to the Civil Aviation Authority consultation on reforming consumer complaint handling Ombudsman Services consultation response 1 Summary 1.1 About Ombudsman Services Established in 2002, the Ombudsman Service Ltd (Ombudsman Services) is a not for profit private limited company which runs national, multi sectorial private sector ombudsman schemes for the telecommunications, energy, property, copyright licensing, the glass and glazing sectors, the Green Deal, the Asset Based Finance Association (ABFA), reallymoving.com and Which? Trusted Traders. We re an entirely independent, service-oriented organization. Through the different services we run, we help our members to provide independent dispute resolution to their customers and each scheme is entirely funded by its members. Our aim is to raise public trust and confidence in the sectors we work with by providing effective independent redress when problems arise. We now have around 9,200 participating companies. During the year ending 31 December 2014, we resolved 72,806 complaints. The company currently employs more than 500 people in Warrington and has a turnover in excess of 27 million. Ombudsman Services complaints resolution service operates once a company s own complaints handling system has been exhausted, and we have the authority to determine a final resolution to each complaint. We have an enquiries department which handles primary contacts and where decisions on eligibility are taken. If a complaint is not for us, or has been brought to us too early, we signpost the consumer and offer assistance. Eligible complaints are then triaged. The simplest can be resolved quickly, 2

3 usually by phone, and taking a maximum of three hours. Around 10% are dealt with in this way. For the majority of complaints we collect and consider the evidence from both parties, reach a determination and seek agreement; about 55% are settled like this. The most complex cases require a more intensive investigation, may require more information and lead to further discussion with the complainant and the company to achieve clarification. The outcome will be an Ombudsman Services Decision. Whatever process is followed there is always a right of appeal and escalation. An ombudsman can issue a final decision in any one of the processes where it is clear that there is no evidence that would require changes to the initial determination. Our service is free to consumers and, with the exception of an annual subscription from DECC for the Green Deal, operates at no expense to the public purse. It is paid for by the participating companies under our jurisdiction by a combination of subscription and case fee on a polluter pays principle. Participating companies do not exercise any financial or other control over the company. Ombudsman Services governance ensures that we are independent from the companies that fall under our jurisdiction. 2 Specific response to the questions Q1: Do you agree with our definition of ADR? We agree with the definition used by the CAA - ADR provides a quick and easy way of resolving disputes between consumers and traders without the need to resort to the courts. It is particularly important that any approved ADR scheme must be able to demonstrate that it is independent of consumers, traders and anyone else that might have an interest in the ADR outcome. The scheme should also be capable of providing impartial, transparent, effective, fast and fair alternative dispute resolution procedures. Ombudsman Services is funded directly through participating companies paying a combination of subscription and case fees. We find that this arrangement works well; ensuring that the fixed costs of the service are accommodated while promoting the polluter pays principle through the levying of case fees. We have also found that such 3

4 an arrangement encourages companies to resolve complaints themselves and modify procedures so complaints do not occur in the first place. Q2: Do you agree with the type of complaints that we think should be covered by our policy? We agree with the proposal set out in the consultation that both statutory and nonstatutory consumer complaints, as defined in the consultation, should come under the jurisdiction of the new ADR scheme. Whilst we understand that statutory complaints would make up the overwhelming majority of the contacts received by any future aviation ADR scheme, we support the belief that non-contractual complaints such as customer service should also be within the jurisdiction of any future ADR scheme. To limit access to ADR for only certain types of complaint would serve to confuse and frustrate consumers who do not understand the distinction between statutory, contractual and non-contractual disputes. To them a dispute is a dispute - for which redress should be available. Furthermore, our experience from other sectors suggests that an ADR scheme with patchy coverage only serves to undermine it, as consumers lose faith when their complaint is not covered. This ultimately damages the image of the whole industry. Q3: Do you agree with the geographical scope of our policy? We support the CAA s proposal that the geographical scope of the policy should cover consumers of any nationality where their flights depart from or arrive at UK airports. This will mean, of course, that whichever ADR provider is selected, it should be able to accept and deal with complaints in a range of languages. We, along with some other established ADR providers, are already set up to provide this service and it is crucial that this is part of the qualification criteria for ADR providers. We also have extensive experience in dealing with ADR matters on a transnational level. For example, we advised the EU Directorate for Health and Food Safety (DG SANCO) on the embryonic ADR Directive and were selected by the European Commission to be one of only two ADR schemes to test drive the Online Dispute 4

5 Resolution platform. We also have a track record of dealing with a variety of sectors which operate with their own cultures and languages. Q4: Do you agree with our vision for aviation complaints handling? As drafted, one interpretation of the vision could be that an airline may be able to prevent a consumer accessing the ADR scheme if, having considered a complaint, it found there was no case to answer, and judged that it had followed the processes correctly. We fully support a process whereby an airline is given the opportunity to resolve the complaint in the first instance 8 weeks is a generally accepted period across different sectors operating ADR. However (and for the avoidance of doubt) we suggest that a consumer should be able to have their complaint considered by the company and, as is the case in most ombudsman schemes, if they remain dissatisfied with the outcome, they must retain the right to refer their complaint to the ADR scheme. Q5: Do you agree that private provision of complaints handling with regulatory oversight by the CAA is the best way to achieve our vision for aviation complaints handling? In our view there is no reason why an independently operated ADR scheme could not provide redress for the aviation sector. We operate under similar arrangements in other regulated services such as energy and communications. The costs of independently operated ADR schemes are ultimately borne by the consumers of the businesses in the sectors covered. As a result it is preferable that ADR schemes are not run for the benefit of shareholders. We provide fast, effective and independent redress services, and as a not-for-profit company any surplus that is made is reinvested to ensure that we remain as efficient as possible. Such a funding model also incentivises good quality in-house complaint handling and removes the ability of companies to avoid paying for a service they benefit from. 5

6 Q6: Do you agree that 50% of the market contractually committed to private ADR is an appropriate threshold for the CAA to cease the complaints handling service provided by PACT? It is difficult to set an appropriate percentage for market coverage in order to cease operating the PACT service. We do however understand that a figure does need to be decided upon and as a result it s our view that in the absence of mandatory membership of an ADR scheme as we have in energy and telecoms, a 50% commitment appears reasonable. It is logical that the CAA wishes to achieve the widest possible ADR coverage in the aviation sector. We have considerable experience of, and success in, attracting new companies to our schemes through effective marketing and tailoring our processes to meet the needs of the customer. Another issue the CAA may wish to provide clarification on is how the threshold would be calculated; is it based on membership of a UK ADR scheme(s) or membership of EU ADR schemes? Q7: Do you have any comments on the additional measures that the CAA could put in place to encourage airlines to participate in ADR? Are there any measures that we have not considered above that we should explore? The CAA may wish to consider requiring businesses to confirm their membership of ADR prominently, such as on the homepage of a website and in terms and conditions. This should include an explanation of what ADR is as well as what benefits this has to the customer. Consumers are encouraged to consider the availability of ATOL protection before deciding upon a holiday booking an informed consumer would likely see the availability of ADR as offering similar valuable protection in the event that things go wrong. It is our view that informed consumers can often drive behaviour change in companies and drive the inclusion of ADR within a sector without the need for over restrictive regulation. 6

7 The CAA should make robust use of its information duties under section 83 of the Civil Aviation Act This should ensure that consumers have access at the most appropriate time in their purchasing decision to information about the availability of ADR should it be required. This will in turn allow and encourage consumers to make choices based on the published willingness of the business to accede to an ADR scheme. Armed with this information consumers can manage risk through their purchasing decisions and these decisions will in turn put pressure on businesses by allowing consumers to choose the products and services that best meet their needs. The provision of information on ADR at or before the point of sale must be part of the CAA's commitment to make markets work well for consumers by requiring businesses to provide information that affects choice. We also suggest that the CAA may wish to consider putting in place additional measures and incentives in order to maintain momentum with 100% membership being the aim. This could include publishing a list of airlines that agree to provide ADR or potentially require prominent information on company websites confirming membership or otherwise. The Directive requires information to be provided by the company about their participation in an ADR scheme, but only in the event of an unresolved complaint. This is likely to be too late to have been a consideration in the customer s consumption choice. On many routes where there is consumer choice of airlines, information about ADR, if made available before or at the time of purchase, may have a positive influence on consumer behaviour. An ADR scheme with patchy coverage will only serve to undermine its value for consumers, potentially generating frustration among consumers in the industry s commitment to dealing with complaints and dissatisfaction with ADR generally. This will incentivise membership with the chosen ADR scheme. 7

8 Q8: Do you have any comments on the additional criteria that the CAA will adopt beyond the minimum required by the ADR Directive? Do you consider that the criteria are proportionate? Are there any criteria that we have not considered above that we should explore? Given our considerable experience in the dispute resolution sector we suggest a number of additional measures that the CAA may wish to consider. Binding decisions We support the CAA s proposal that the decisions of the ADR scheme should be binding on the business as not to do so would in our experience undermine the integrity and operational efficiency of the particular scheme and ADR in general. Such a requirement in our experience also avoids consumers taking their case directly to the courts so saving both time and money for the airline and the consumer. Fees While the ADR Directive makes provision for a nominal fee to be charged of the consumer, this is not the normal practice for ombudsman schemes in the UK. We note that the preference of the CAA is for ADR to be free at the point of use. BIS has also expressed a strong preference for the residual body to be free for consumers and will ask any potential ADR supplier to justify a proposal to charge a nominal fee stated by BIS to be no more than 20. It has been made clear by Emily O Reilly, the European Ombudsman and within the Ombudsman Association that an ADR entity that is not free to the consumer should not be permitted to use the title ombudsman. The highly successful Schlichtungsstelle für den öffentlichen Personenverkehr (söp) (German Conciliation Body for Public Transport) which the airlines are familiar with is 100% free to consumers. We recognise the argument that the requirement to pay a nominal fee could encourage consumers to take a more serious approach to complaining and perhaps deter consumers from submitting trivial or vexatious complaints. Through our knowledge of 8

9 the sectors covered by Ombudsman Services and our experience of handling complaints in those sectors we are skilled at spotting and rejecting the frivolous or vexatious. Only 20% of initial approaches to OS are accepted as complaints. If a fee is charged we agree that it should be no more than the lowest fee for starting a claim in the civil court - 25, that only one fee should be charged per booking and that it should be refundable if the complaint is upheld and financial or other redress is due to the consumer. We suggest that the cost of collecting and refunding the fee may be more than its actual value. If a fee is payable then it is important that an ADR provider is able to adapt its processes and governance to meet the needs of the industry. The inclusion of such a fee may give confidence to a sceptical industry and encourage individual businesses to sign up to an ADR scheme. Our experience suggests there is often a strong instinct with sectors that are new to ADR to fear high costs and exposure to unfair and frivolous claims. If a fee is payable then it is important that an ADR provider is able to adapt its processes to meet the needs of the aviation industry, something that we are able to do. Signposting The ADR Directive requires traders that subscribe to an ADR scheme to publicise the fact on their website and on bills of sale. It is our view that while this is welcome it is limited in scope and will leave many consumers not knowing where to go if they have a complaint about a company. As mentioned in our response to Q6 and Q7 above, we believe that as the industry regulator the CAA is well placed to impose greater requirements on companies to publicise whether they are members of an ADR scheme at a time that is relevant to consumers purchasing decisions with the aim of creating more confident consumers. We believe that there should be greater requirements on businesses to signpost consumers to the ADR scheme over and above those required by the Directive. 9

10 Q9: Do you agree that the approach the CAA intends to take will help ensure the ADR landscape is navigable for consumers? We welcome the CAA proposals to help consumers navigate the consumer landscape. We agree that the single point of contact being developed through Citizens Advice (CA) is long overdue and we are working closely with them to ensure that the helpdesk is of benefit to consumers, companies and ADR schemes alike. In addition to CA we are working with a range of other stakeholders including our own participating companies and regulators, the Ombudsman Association, British Standards Institute and Which?, to ensure that consumers are able to access redress as easily as possible. Our view is that the success of redress schemes should also be part of a wider commitment to the simplification of the redress landscape. In its response to the Directive the government singles out transport sectors (other than aviation) where it is unclear who should act as competent authority for these sectors. There are existing complaints handling bodies in some parts of the transport sector but these are disparate and may not meet the definition of ADR schemes under the Directive. Passenger transport was specifically identified as a sector where there were gaps in the provision of ADR. Some voluntary schemes do exist in transport but these often depend on individual businesses being members of a trade association offering ADR. The provision of ADR across the passenger transport sector is sparse and confusing and as such an opportunity exists for the CAA to seek competent authority status for the wider transport sector. This could be achieved by the CAA leading engagement with other regulators and oversight (i.e. non-regulatory) bodies in the transport sector to ensure that passenger / consumer interests are better served by a single entry point to ADR for transport complaints. Q10: Do you agree that the approach the CAA intends to take will help ensure that it continues to meet its statutory duties to receive complaints and that it can continue to carry out its enforcement functions effectively? Complaints data is essential for regulators to carry out their enforcement functions efficiently and effectively, as well as to ensure that practical guidance and policies are developed and targeted for the benefit of consumers and regulated businesses. As 10

11 such, we support the CAA proposals on how it will receive complaints data to meet its statutory duties. We work closely with Ofgem and Ofcom for instance and supply them with the data they need to carry out their statutory functions. We also agree that if the CAA were to retain a complaints function this would act as a disincentive for companies to use a private ADR scheme. We agree that the CAA should limit itself to simply collecting complaints data directly from non-adr participating companies and should refrain from investigating or mediating their complaints that role is better served by an ombudsman rather than a regulator. Q11: Do you have any comments at this stage on any of the fall back options available to the CAA if our preferred approach to ADR does not deliver? Are there any other options we should consider? It appears (p24) that the CAA will be looking to the airline industry through the British Air Transport Association to appoint the ADR provider. The CAA s role appears to be limited to that of the competent authority and its duty to approve the ADR scheme. While this model can operate well and, for example, is one that we operate in the copyright licensing sector, the CAA may wish to consider a fall back option given the possibility that some airlines (and presumably other companies) that will be affected by the choice of ADR provider, may not see BATA representing their interests in its decision. The model is where CAA appoints the ADR provider and reviews them on a regular basis - this model works in the case of the energy or telecoms sectors and is one that we are also familiar with. 11

12 Q12: Do you have any other comments to make that are not covered by our other questions? The CAA s role is to promote choice and value to aviation customers now and in the future. An independent, swift, fair ADR scheme which covers complaints from across the aviation sector is intrinsic to this vision. The establishment of such an ADR scheme will ultimately benefit passengers, airlines and the sector as a whole. In a number of places, the consultation paper refers to ADR schemes. It is our experience that the consumer is best served if there is only one ADR scheme per sector as it avoids confusion in the mind of the consumer and prevents companies from trading one ADR scheme off against the other and selecting the scheme that favours it the most in the decisions it makes. It is our view that in the interests of the consumer the CAA may wish to consider that once the 50% threshold has been met and that PACT has been disbanded, there is only one ADR scheme for the aviation sector. We understand that it is likely that BATA will be issuing the tender for the aviation sector s redress scheme and while we would not wish to prejudice our ability to tender for any future scheme, given our considerable experience in this area, we are willing if required to assist the CAA and the aviation industry in helping it develop a redress scheme that can operate effectively for the benefit of both consumers and the industry alike. In addition, as outlined in our response to Q9 above, we would welcome the CAA exploring its leadership role in finding ways to ensure there is simplified ADR provision in the wider transport sector. The CAA already refers to airlines, airports and travel agents as being within its current ADR remit. We suggest that at least there could be a 'single entry point' to ADR for consumers who have complaints about transport. Multiple entry points can be extremely confusing for consumers and for businesses, and the property sector is a prime example of where such confusion lies. 12

13 The CAA has the most developed thinking on ADR across all parts of the transport sector, and it is well placed to take a leadership role in encouraging the development of a single transport ADR service. We welcome the opportunity to have further discussions with the CAA and with other regulators and oversight bodies across the wider transport sector to encourage the development of a single transport ADR scheme. This would include Passenger Focus, Transport for London, Association of British Travel Agents, the Passenger Shipping Association, the Public Carriage Office and the Department for Transport. Lewis Shand Smith Chief Ombudsman 23 February