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An Alternative Dispute Resolution (ADR) Scheme can be used to settle a dispute over goods and services, through negotiation rather than taking court action. A scheme may be preferable to using the courts because it may cost less, it is a less formal procedure and compensation may be awarded. In some schemes the decision may be binding on the trader but not on the individual leaving them free to use the courts if they wish.

The main types of ADR that deal with consumer disputes are:-

This is where the 2 parties discuss the problem either at a face-to-face meeting, by telephone or in a letter and try to find an acceptable solution. Discussion should be stated as being ‘without prejudice’, so that the negotiations cannot be used by either side if the matter eventually goes to court. A conciliator who is usually a member of a trade association, may help with this process. If an agreement is reached, both parties should sign a document accepting the stated terms of the agreement.

A neutral mediator helps the two sides come to an agreement. The mediator cannot force an agreement on either party. If the dispute is complicated or of high value, a trained mediator would be appropriate. The mediator will ask for details of the dispute and copies of any evidence and will ask both parties to sign a mediation agreement giving a framework for the mediation. The mediator may arrange joint or separate meetings with the parties and will help identify the strengths and weaknesses of both sides’ positions. If an agreement is reached, the terms of the settlement will be drafted. This will be legally binding unless it is stated otherwise and will prevent any court action except to enforce an award.

This is a more informal style of court hearing during which the arbitrator decides how to resolve the dispute. The arbitrator is chosen by both parties and is often a member of the Chartered Institute of Arbitrators. Procedure is governed by the Arbitration Act. The decision will be based on the written and oral evidence presented and is confidential and cannot be made public without the agreement of both parties. The decision will be binding unless successfully challenged in Court.

Third Party Determination
This is where an independent expert decides on technical points in a dispute between two parties. The parties need to agree what needs to be determined, who should be the independent expert, who should pay the fees and that the expert’s opinion is final.
Appeals aren’t normally allowed.

Ombudsman Schemes
Many services run an Ombudsman scheme. For example, services provided by insurance companies, banks and building societies are all covered by the Financial Ombudsman Service (FOS). Disputes can be referred to the Ombudsman only when the internal complaints procedure has been exhausted. The Ombudsman will require written details of the complaint, together with copies of any evidence. He or she will make a recommendation or a ruling but this will not be legally binding so court action may still be taken. The court will however take the Ombudsman’s ruling into account when deciding the claim. All the Ombudsman schemes are free.