New Complaints Service To Streamline Handling Process
Newcastle Herald
Thursday December 13, 2007
CONSUMERS will have a one-stop shop for complaints against banks, insurers, financial planners, stockbrokers and fund managers from the middle of next year.
Three schemes, the Banking and Financial Services Ombudsman, the Insurance Ombudsman Service and the Financial Industry Complaints Service, are to merge.However, the streamlining of the complaints handling process is likely to go only so far. The hotchpotch of monetary and jurisdictional limits looks set to continue. The boards of the three services have established a committee to work through the details of the merger. Each service is likely to retain its distinctive complaints handling process. The Financial Industry Complaints Service (FICS), for example, has a panel for adjudicating complaints whereas complaints with the banking service are settled by an ombudsman. A condition of an Australian Financial Services licence is that providers join a complaints resolution service approved by the Australian Securities and Investments Commission. The service is paid for by industry members and is free to consumers. Most complaints are resolved by conciliation. If a complaint goes to adjudication and the consumer wins, the financial services provider is directed to compensate the consumer.The merger moves Australia's complaints resolution system closer to the British model, where the Financial Ombudsman Service is the only dispute resolution service for complaints against financial services companies.The British service has a single monetary limit for complaints, #100,000 ($235,000). Consumer groups have long argued that a deficiency in the Australian complaints resolution schemes is that they exclude claims from consumers who have lost more than each scheme's monetary limit. Consumers can always go down the litigation route but this is an expensive way to seek redress especially for claims under $250,000.FICS's relatively low monetary limit of $100,000 was highlighted after the collapse of property developer Westpoint in late 2005, with about 3500 investors owed more than $300 million. Up to two-thirds of the Westpoint-related complaints have been rejected because the claims exceeded the service's limit.ASIC's chairman, Tony D'Aloisio, said the limit should be $280,000, in line with regulators such as the Banking and Financial Services Ombudsman and the Insurance Ombudsman.As a compromise, FICS has proposed to its members that the monetary limit be increased to $150,000. FICS chief executive Alison Maynard is confident the compromise proposal will be accepted by members. She expects the new limit to take effect from July 1. Every three years the limit will be increased with inflation. FICS will also raise the limit on lump-sum life insurance compensation from $250,000 to $280,000.Consumer advocate Denise Brailey, who works for litigation funder IMF, says a limit of $150,000 or even $280,000 is inadequate. "The losses we are seeing now have risen to between $300,000 and $500,000 in a lot of cases," she says. "It is now quite usual for large amounts of money to be lost where the complaint against the bank, insurer or financial planner is legitimate."While Ms Brailey welcomes the move to a single complaints service, she doubts the merger signals a fresh approach to complaints resolution. As long as complaints resolution schemes are "owned" by the financial services industry they will have a "conflict of interest which sees them try to bury complaints", she says.She believes the best way to ensure impartiality would be to create a consumer protection agency that is administered by government. SMH
© 2007 Newcastle Herald
