FOS should be subject to investigation, report recommends
A government appointed panel has called for the establishment of an independent assessor to investigate the Financial Ombudsman Service’s handling of disputes whenever a client or financial adviser is unhappy with a decision.
According to a report, titled Review of the financial system external dispute resolution and complaints framework, the independent panel has found that while Australia's industry ombudsman schemes are generally working well, significant areas need reform.
One of these includes the need for FOS and the Credit and Investments Ombudsman (CIO) to be subject to more frequent independent reviews.
The panel also recommends that each scheme establish an independent assessor whose role would be to investigate complaints by users, including clients and financial advice firms.
“The independent assessor’s role would not involve reviewing the findings or outcomes of the relevant decision,” the report states.
“The assessor would make a recommendation in relation to the service handling of the dispute which, where the dispute was not handled satisfactorily, may include that the scheme makes an apology or provides compensation to the affected user.”
The panel also recommends that there be a single industry ombudsman scheme for financial credit and investment disputes to replace FOS and CIO.
This will allow for a focus on providing “low cost, fair and accessible dispute resolution, the ability to innovate and adapt to changes in the regulatory and broader socio-economic environment, and ... on improving industry behaviour — while addressing the problems that arise where the framework consists of multiple schemes with overlapping jurisdictions”, the report states.
This recommendation is different from the one in a report by the House of Representatives Standing Committee on Economics, which called for the establishment of a banking and financial sector tribunal by 1 July 2017.
The panel further recommended lifting monetary limits and compensation caps for consumers and small business as well as developing a superannuation code of practice.
Finally, there needs to be increased ASIC oversight of the industry ombudsman schemes and a requirement for debt management firms to be a member of a scheme.
“ASIC’s oversight powers in relation to industry ombudsman schemes should be enhanced by providing ASIC with more specific powers to allow it to compel performance where the schemes do not comply with benchmarks,” the report states.
“The absence of a requirement for debt management firms to be a member of an EDR scheme represents a gap in the framework (for consumers of services these firms provide) and hampers the effectiveness of the industry ombudsman schemes.”
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