A single external disputes resolution scheme replacing the Financial Ombudsman Service (FOS), the Credit Industry Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT) has been formally placed on the table as part of the Government’s review of the financial system external dispute resolution framework.
The proposal is contained in an issues paper, which will form the basis of industry discussion of the future of the financial services external dispute resolution (EDR) framework, alongside a proposal for the formation of a one-stop-shop overlayed with a “triage” service provided by the existing schemes.
Dealing with the proposal for a single scheme, the issues paper said this could be achieved by creating one entirely new body, “or integrating the existing schemes and arrangements, which would hear all consumer disputes in the financial system”.
“As well as lessening consumer confusion, such a model would have the potential to simplify the overall framework, enhance consistency in outcomes and decision-making processes and reduce administration costs for regulators,” the issues paper said.
The issues paper also asked whether, if a ‘one-stop shop’ in the form of a new single dispute resolution body were desirable it should take the form of an ombudsman or statutory tribunal or a combination of both.
It also asked what the jurisdictional limits of such a body should be and how it should be funded.
The issues paper also sought to deal with the prickly issue of uncompensated consumer losses and the broader question of implementing a last resort compensation scheme — something which has been strongly advocated by the FOS.
The paper pointed out that although EDR scheme determinations were binding on members, losses might go uncompensated where the firm was insolvent, did not have adequate professional indemnity (PI) insurance or when PI insurance did not respond to all claims.
“Since 1 January 2010, 32 financial firms have been unwilling or unable to comply with 137 FOS determinations made in favour of approximately 194 consumers. The value of these outstanding determinations was over $16.6 million as at August 2016,” it said.
“In addition to the losses incurred by consumers in these cases, EDR schemes also bore the costs of unpaid case fees. Since 1 December 2014, four financial firms had been unwilling or unable to comply with five CIO determinations made in favour of seven consumers. The value of these outstanding determinations was approximately $413,415 (including interest) as at 30 August 2016.”
