Resolver for Business – A Guide to Ombudsman and Dispute Resolution Schemes

7 min read
June 05, 2022
Resolver for Business – A Guide to Ombudsman and Dispute Resolution Schemes

Dispute resolution schemes are currently in the news as the Government considers the responses to its consultation paper: Dispute Resolution in England and Wales. You can read the responses to the consultation here:

But what are dispute resolution schemes, how do they work and do they benefit businesses? Here’s Resolver’s guide to Ombudsman, Alternative Dispute Resolution Schemes (ADR) and mediation services.

What are the schemes and how do they work? 

Dispute resolution schemes were created to provide businesses and their customers with a way to mediate and resolve disputes without the expense of going to court. In allowing the same service all, the schemes in effect democratise the process of resolving a complaint, so everyone gets treated equally. 

In the UK, some dispute resolution schemes have existed in law and regulation for decades. There are generally three categories:

Ombudsman schemes

Considered to be the most empowered dispute resolution schemes on account of the wide-ranging powers they have, Ombudsman schemes tend to be found in more tightly regulated services, like finance, energy and telecommunications, though many more have appeared over the years, covering everything from motoring to furniture. Ombudsman often – though not always – have the power to enforce a decision on a business. You can find a full list of Ombudsman at the Ombudsman Association website here: 

Alternative Dispute Resolution Schemes (ADR) 

In 2015, the Alternative Dispute Resolution (ADR) Directive came into effect. Widely misunderstood, the directive requires dispute resolution schemes in some sectors (largely the ones that already had Ombudsmen) and in others voluntary schemes are encouraged to operate (but aren’t mandatory). This is enormously complicated (hence the current consultation). You can read the Government’s summary here:

ADR schemes are available in lots of sectors, from aviation to retail. Often there are multiple ADR schemes giving rise to criticism that some businesses can simply pick the most pro-business option. They are, in the main, free for the consumer. 

Mediation and conciliation services

Mediation and conciliation services are sometimes offered as a way to resolve disputes that may be more likely to end up in court, like workplace disputes. However, many businesses use third party mediation and conciliation services to help them avoid the cost of court action. Mediation is often available through trade associations, independent/official mediation services like ACAS and even through the Small Claims Court.

What sectors have dispute resolution schemes? 

In 2017, MoneySavingExpert released a report on Ombudsman and dispute resolution services, commissioned by the All-Party Parliamentary Group on Consumer Protection. You can read the report here:

The report concluded:

This report shows that the Alternative Dispute Resolution (ADR) landscape that ombudsman exist within is a complex maze, full of inconsistencies. Ombudsman are not equal. Despite sharing a name, ombudsman have different powers, and vary widely in effectiveness.

Resolver works with all the main Ombudsman services and ADR schemes. Our role is to ensure that the seven million people who used our website to sort out a complaint were able to escalate their case to a free (where possible) service for a fair and impartial hearing if the matter was not resolved by the business to their satisfaction. 

However, it’s clear from the comments given by the people using our website that a bad experience with one dispute resolution service can have a negative impact on how people view all dispute resolution services. 

Resolver compiles statistics about complaint volumes twice a year. In our most recent compiled data (April 2022) we listed the 88 most complained-about products or sectors. 

Of the 88 products and sectors featuring in our research data: 

  • 33 did not have an ombudsman or ADR scheme at all or were members of a trade body that had few powers or were considered to be business focused. 
  • 14 were members of ADR schemes which could not generally compel a business to pay compensation or allowed the firm to choose from a range of ADR options. 
  • 41 Ombudsmen or Government complaint schemes were in place, though within those schemes are considerable variations in powers and compensation limits. 

So an Ombudsman was available in less than half (47%) of all sectors, and in four in ten sectors (37%) there was no ADR scheme at all – including the top four most complained about areas. 

How do the dispute resolution scheme work? 

As the MSE report concluded, there’s a considerable amount of variation in how dispute resolution schemes work, but in the main, the models operate like this:

  • The consumer must make a complaint to the business in the first instance. When a consumer mentions the word ‘complaint’ or puts it in writing, it must be treated as such by the business. 
  • As a general rule, businesses have up to 8 weeks to resolve the matter in full (some sectors have different timescales). 
  • A business must issue a ‘final decision’ in writing within the 8 weeks, or if it has run out of time, must write to the consumer to explain that they can now go to the Ombudsman/ADR scheme. 
  • The dispute resolution scheme will then investigate the complaint and give an adjudication or decision. Some Ombudsmen have a two-tier system where both consumer and business have the option to object to the initial decision. After which a final decision is issued. 
  • Depending on the scheme, the decision is binding on the business but not the consumer. However, the Pensions Ombudsman decisions are binding on both. 
  • Businesses can, in theory, judicially review an Ombudsman or ADR decision. In practice this is rare and often backfires if the Courts agree with the decision, setting precedent. 


Can dispute resolution schemes help or hinder businesses?

One of the most hotly debated subjects when it comes to dispute resolution schemes is, do they make life harder for businesses or easier? 

On the downside, businesses are obliged to pay fees to an ombudsman or ADR scheme (or with voluntary schemes, opt in). These fees can vary depending on the size of the business, the volume of complaints that go to be adjudicated or could involve a regulatory fee or levy as a requirement for businesses in that sector. These fees can lead to dissatisfaction with dispute schemes, particularly if they are small-to-medium enterprises (SMEs). 

In addition, businesses have been known to question the impartiality of a dispute resolution scheme or object to its reasoning in an individual complaint. Occasionally, a ‘mass claims’ incident might emerge where the general dispute resolution scheme approach could have a huge impact on the financial stability of businesses in that sector. The PPI mis-selling scandal is often considered to be one of the most contentious of these mass claims issues, with banks forced to pay out billions of pounds in compensation. However, it’s worth noting that these payments ultimately came as a result of legal action and High Court decisions.   

Benefits of dispute resolution schemes

An Ombudsman decision, for example, is a decision based on the individual circumstances of a case. It does not (in theory) set a legal precedent. That means that a similar case might result in the consumer’s case being rejected due to nuances in the situation. However, if a ‘test case’ goes to court and the judge agrees with the claimant, that decision ultimately can set a precedent after the judicial process has been exhausted. And that can be very pricey for businesses indeed. It makes sense to sometimes make a pragmatic decision about a consumer complaint that might have wide-ranging implications if it went to court. 

Ultimately, the existence of dispute resolution schemes is beneficial for consumer confidence. Knowing that there’s free and impartial services for people to turn to if things go wrong actually encourages wider take up of the sale and provision of goods or services. Following the patterns of the rulings of these schemes can also help you ‘future proof’ your organisation and amend things like sales practices or staff training so you can avoid costly errors. Some canny businesses have also latched on to trends in dispute resolution scheme decisions to advertise and promote their businesses as ‘consumer-focused’. 

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