There are currently two separate bills making their way through the legislative process which propose to extend the limitation period for complaints to the Financial Services Ombudsman (the "FSO").
The first bill is the Central Bank and Financial Services Authority of Ireland (Amendment) Bill 2014 (the "Amendment Bill"), a private member's bill which was published in September 2014 and passed the final stage in the Dáil on 23 May 2017. The Amendment Bill proposes to amend the Central Bank and Financial Services Authority of Ireland Act 2004 to strengthen the functions of the FSO and to also amend the limitation period for bringing complaints to the FSO.
The second and more comprehensive bill is the Financial Services and Pensions Ombudsman Bill 2017 (the "FSO / PO Bill") (see here), which was published on 10 May 2017. One of the FSO / PO Bill's primary objectives is to amalgamate the offices of the FSO and the Pensions Ombudsman ("PO") into one entity, called the Office of the Financial Services and Pensions Ombudsman (the "Office"). Of particular significance for regulated financial service providers, the FSO / PO Bill proposes to amend the limitation period for bringing complaints to the Office in certain circumstances.
Currently, the FSO has no jurisdiction to investigate complaints made by consumers where the conduct complained of occurred more than six years before the complaint is made. Both the Amendment Bill and the FSO / PO Bill (the "Bills") propose an extension of the limitation period for consumers' complaints in respect of "long-term financial services". The definition of a long-term financial service however differs between the Bills.
What is a long-term financial service?
Under the Amendment Bill, a "long-term financial service" is defined as services where the actual or intended duration of the service is five years and one month or more.
Under the FSO / PO Bill "long-term financial services" has a similar definition but has an important exclusion. Under the FSO / PO Bill, long-term financial services are services where the actual or intended duration of the service is five years and one month or more. However, this definition excludes any services which are a) subject to annual renewal or b) which contain a right to unilateral cancellation by either party prior to the expiry of the actual or intended duration.
This difference is potentially significant as if the Amendment Bill was enacted as currently drafted, it could result in a broader range of financial services being subject to the proposed longer limitation period for complaints to the FSO.
For other short-term financial services, the limitation period of six years is unchanged.
What is the Proposed New Limitation Period?
Under both Bills, the proposed new limitation period for complaints in relation to all pension products and for long-term financial services is either:
(a) six years from the date of the act or conduct giving rise to the complaint; or
(b) three years from the earlier of the following two dates:
- the date on which the person making the complaint first became aware of the said act or conduct; and
- the date on which that person ought to have become aware of that act or conduct.
The Bills also propose that the FSO / Office will have discretion to extend this new limitation period. The discretion may be applied where it appears to the FSO / Office that there are "reasonable grounds for requiring a longer period and that it would be just and equitable in all the circumstances to do so". This is a very significant proposal as the FSO has not been afforded discretion to extend the limitation period.
Do the Bills apply retrospectively?
Significantly, the extension to the limitation period for long-term financial services will have retrospective effect. If the Bills are enacted as currently drafted, a consumer will be entitled to avail of the longer limitation period even if the conduct complained of occurred before the commencement of the act. The retrospective effect of the Bills is not unlimited however, with both Bills specifying that the new time limits for long-term financial services will only apply to complaints made to the FSO / Office about conduct that occurred during or after 2002. The service to which the complaint relates must also not have expired or have been terminated more than six years before the date of complaint.
Can both Bills be enacted together?
As matters currently stand, it is possible that the Bills could be enacted consecutively.
The Amendment Bill is slightly further ahead in the legislative approval process having been passed the final stage in the Dáil. As such it could be enacted into law in the coming months.
The FSO / PO Bill has been designated as priority legislation by the Minister for Finance and it is anticipated that it will progress to the final stage before the end of May 2017, at which point it will be subject to further scrutiny and debate.
Assuming that the Amendment Bill will be enacted into law, it will be for short period only as it will be repealed by the subsequent enactment of the FSO / PO Bill. In light of this, there is a consensus within the Government that there should be consistency between the Bills on the issue of limitation periods to minimise confusion and disruption to consumers. It remains to be seen however how the discrepancy of the definition of 'long-term financial products' will be managed.
Given the potentially far-reaching consequences for regulated financial service providers and their exposure to consumer complaints, we are continuing to closely monitor the progression of the Bills through the Oireachtas.
This article was authored by Sharon Daly and Aoife McCluskey.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.