If allegations of misconduct were to be made against the Financial Ombudsman Service (FOS), which entity would be responsible for conducting an investigation?
That was the question asked by Senator Deborah O’Neill during a March hearing, at which ASIC could not give a direct answer.
The corporate regulator stressed that as an approved dispute resolution scheme, FOS is subject to regular reviews by ASIC and is also required to report complaints data and systemic issues within the industry.
FOS is not, however, in a position to be scrutinised by the regulator, said Warren Day, senior executive leader for assessment and intelligence at ASIC.
“We don’t investigate FOS in that respect,” Mr Day told the parliamentary joint committee on corporations and financial services. “We oversee their external dispute resolution activities and schemes, but we don’t investigate matter by matter.”
Ms O’Neill, seemingly growing impatient, repeated her question: “If there was a general concern raised, who would do the investigation? Not the, what you called, ‘regular, independent reporting’ every 3 to 5 years,” she said.
“Who is responsible? If something goes wrong, who would do the investigation?”
“I would expect the Ombudsman himself,” Mr Day responded.
This was not the first time that concerns about FOS have arisen.
The grilling by Ms O’Neill stemmed from a submission to the committee last year which accused FOS of biased conduct.
Dispute Assist – a company that represents consumers in dispute with financial services providers – claimed FOS had an agenda to “get rid of complaints” and deny applicants “natural justice”.
The submission provided several examples of supporting cases, including an incident when a FOS representative had filed notes of a telephone conversation that were purportedly inconsistent with the recording.
“The Ombudsman’s file notes do not remotely resemble the facts they purport to represent,” Dispute Assist stated.
“This leads one to seriously question the Ombudsman’s conduct, whether [the rep] is a fit and proper person to hold the position of Financial Ombudsman and most importantly whether the public can trust the FOS.”
Despite heightened scepticism about FOS, ASIC stands by the approved scheme and reminded Ms O’Neill that the court had ultimately ruled in favour of FOS in the Goldie Marketing case.
“I’ve dealt with FOS for many, many years. I think I’m aware of [only] one allegation [of misconduct] out of the hundreds of thousands [of cases] that go to them,” said ASIC deputy chair Peter Kell.
“If it was the case that a scheme was completely failing, we would be in a position potentially to withdraw our approval but that’s not something, thankfully, that has been on the cards.”
Innocent or not, however, FOS is still not in the clear.
A review of FOS and other industry schemes was announced in May which, if continued after the 2 July election, may see the government finding the lack of a FOS watchdog a problem.
The Turnbull government said it commissioned a review of the role, powers, governance and accountability of the existing financial system external dispute resolution and complaints framework, Assistant Treasurer Kelly O’Dwyer has said.
At the same time, ASIC is set to undertake a separate review of FOS’s small business jurisdiction.
“Currently, there are three bodies to help consumers resolve disputes with financial services providers: the Financial Ombudsman Service (FOS); the Superannuation Complaints Tribunal; and the Credit and Investments Ombudsman,” Ms O’Dwyer said.
“The government is committed to ensuring that these bodies are working as effectively as possible to meet the needs of users.”
It is hard to tell what the government would propose as a solution should it find that FOS does lack proper governance and accountability.
At least one senator, however, has an idea.
Independent Senator Nick Xenophon has made calls to disband FOS entirely and to replace it with a government body, according to the ABC.
“Sooner rather than later, we need to go down the path of a statutory scheme that is supported by state and federal governments, that actually has real teeth,” he said.
Actually what was mentioned by ASIC is incorrect. The Court did not consider or compare the file notes in question.
I think none of us are fooled by the spin put on this by ASIC and FOS. In fact, the judge herself noted the following at paragraph [106] in the decision:
“It follows from my conclusion that there is no basis for the court to look behind the November Jurisdictional Decision. Accordingly, I do not consider that the 22 October 2014 conversation is relevant to the determination of the issues in this proceeding.”
Translation, the Court did not even consider the file notes at all. As such, the Court did not make any significant finding in the case regarding the file notes and comparison with the recordings. If the Court did not consider the matter of the file notes then why is ASIC replying to Bob Katter (see the Senate transcript; I dont think I can put a link here) when asked if the court did consider the issue.
What this means is that FOS is not in the clear. FOS needs to explain why the file notes are so divergent. And to quote Senator Xenophon once more, “FOS is finished as a credible institution if it does not take action on this.”
Explain the file notes FOS. How can someone believe the media statement if FOS fabricates evidence in front of a Court?
I would also add that the Senate should be seriously examining whether ASIC has mislead the Senate Committee on this matter because my reading of the decision is that the Court did not even consider the matter of the file notes. There was a ruling in favour of FOS on an unrelated issue about jurisdiction.
What is ASIC hiding exactly here? If you look at the transcript it seems that ASIC is saying that it is not in a position to examine misconduct by FOS. If that is the case then what body is in a position to examine FOS?