The Coalition will undertake a review of the industry's external dispute resolution (EDR) arrangements next year if it is elected to government, according to Shadow Minister for Financial Services Mathias Cormann.
After attending a Western Australia Liberal Party fundraiser where he was lobbied by a number of financial planners, Cormann acknowledged the "legitimate concerns in terms of procedural matters and natural justice" when it came to the Financial Ombudsman Service (FOS) and the Credit Ombudsman Service.
He said the Productivity Commission's Review of Australia's Consumer Policy Framework called for a review of the EDR arrangements every five years.
"The current arrangements have been in place since 1 July 2008, so five years are up on 1 July 2013," Cormann said.
"If we are elected to government at the next election, then we will certainly be conducting a review consistent with the Productivity Commission recommendation to assess how the current process is operating," he said.
According to the emcee of the fundraiser, Knight Management Services managing director Stephen Knight, there was general agreement that a future ombudsman should be a government body.
As it currently stands, FOS is a private law body that planners must become a member of to comply with the conditions of their Australian Financial Services Licence, he said.
And even though planners enter into a contractual agreement with FOS, the organisation can change its terms of reference "once, twice or three times over the contract cycle", Knight said.
"It's quite bizarre, because normally contracts have to be agreed by both parties and you can't make things retrospective," he added.
In addition, planners who are unhappy with a FOS decision cannot appeal via the Administrative Appeals Tribunal – they have to go through the Supreme Court.
FOS Chief Ombudsman Shane Tregillis said the organisation consulted widely with the industry when it originally drafted its terms of reference, and continues to do so when they are amended.
"A number of amendments have been made to the terms of reference since its inception. All of these have been through stakeholder consultation processes and are subject to ASIC [Australian Securities and Investments Commission] approval," he said.
"As a public company that derives its authority from contract, there is opportunity for parties to that contract … to take legal proceedings against FOS for breach of that contract," Tregillis said.
Money Management has also obtained a number of questions on notice about EDRs for the Minister representing the Treasurer in the Senate, Senator Penny Wong, posed by Liberal Senator David Bushby.
Bushby asks: "What are the requirements for EDRs in disclosing information on their performance and operations?", "What has been the performance of these agencies in relation to disclosure of this information?", and "Does ASIC require these agencies to publish information on financial accounts and director and executive remuneration? If not, why not?".
