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Interview with the Financial Ombudsman Service

Wednesday 13 September 2017


In light of the announcement of the Australian Financial Complaints Authority (AFCA), GRC Professional reached out to the Financial Ombudsman Service (FOS) about the role they have played in Australia’s financial system.

Shane Tregillis, Chief Ombudsman at the FOS, spoke about the inception of the complaints body and speculated on what will change in the future.
 


Interview 

When and why was the Financial Ombudsman Service (FOS) established?
The Financial Ombudsman Service (FOS) Australia offers fair, independent and accessible dispute resolution for people who are unable to resolve complaints with member financial services providers. 

We resolve disputes quickly and efficiently, providing a cheaper alternative to the courts.  Our service is free-of-charge for people who bring a dispute to us, with the costs of running the service being met by our members. We are not-for-profit and non-government. We ensure we understand all aspects of a dispute and resolve it fairly and efficiently. The key values of fairness, openness, simplicity and accessibility guide our daily work.

Our organisation was formed in 2008 from an Australian Securities & Investments Commission (ASIC)-approved merger of three industry-based financial dispute resolution schemes. These three schemes, known as the Banking and Financial Services Ombudsman, the Insurance Ombudsman Service Limited and the Financial Industry Complaints Service, operated on an industry sector basis, rather than across the spectrum of financial services. Two additional schemes joined FOS on 1 January 2009.

The merger of schemes to form FOS had been discussed by consumer, industry and government bodies for some time. In large part, this push was in response to broader structural changes occurring in the financial sector as a result of technological change and other innovations. These changes blurred the lines between financial firms, products and services. The aim of the merger was to reduce confusion for people who wanted to bring a dispute and provide a simpler, efficient and accessible dispute resolution for consumers, small business and financial services providers. The merger also helped simplify arrangements for financial services providers; instead of joining multiple schemes, they now only had to join one dispute resolution scheme.



What impact has the recent merger announcement had?
Fast forward to 2017, and FOS now deals with around 80 per cent of all disputes across the financial sector. Last year alone, we received 235,000 calls and dealt with almost 40,000 disputes across all areas of the financial sector, amounting to a 16 per cent increase in disputes over the previous year. We have 13,400 members across the full range of financial services products, most of whom will never have a dispute at FOS. Our members cover banking and finance, general insurance and life insurance, insurance broking, financial planning, managed investments and traditional trustee services.

Our ability to adapt successfully and respond flexibly to manage the current volume of disputes we receive is a direct outcome of the merger of the previous smaller predecessor industry-based schemes.

Prior to the merger, different schemes had very distinct operating models with different Terms of References, different processes for handling disputes and different funding and other arrangements. Some of the key issues for industry in the early stages of the merger were to ensure that FOS retained specialist industry expertise, continued to operate cost-effectively and retained an active program of industry engagement. 

These issues have all remained central to how FOS continues to operate. We have retained a strong focus on specialist industry expertise as part of our dispute resolution process across all our jurisdictions and have expanded our program of outreach and engagement with industry and consumer sectors. The FOS Board continues to have a strong focus on ensuring we operate as a properly-funded but cost-effective organisation. 

The amalgamation has enabled us to have a common set of rules on our jurisdiction and a single dispute process. It also means we have been able to invest in our IT systems, attract and retain professional staff and continue to enhance our organisational capabilities.

Only five years ago, all our dealings with firms and consumers were largely paper-based.  Currently, we operate on a completely paperless basis, with 80 per cent of all disputes lodged by consumers via our online interactive dispute form. Our dealings with financial services providers are also paperless via a secure portal platform. Without these changes, it would not have been possible to manage the increased volumes of disputes we now receive.

We also implemented an active program of consumer and industry engagement, with over 50 industry forums and consumer outreach events over the past year. We host a broad range of open forums and participate in industry conferences and workshops where we share our dispute knowledge and expertise with members. The aim is to help members understand our dispute process and how to avoid disputes. Members also share information, provide us with feedback and discuss industry developments.
We have a strong focus on increasing awareness of our service and ensuring we are accessible for all consumers—in particular, for consumers who might need extra support to access our service. For example, we ensure our publications are available in the thirteen most common languages to cater to people from culturally- and linguistically-diverse communities. We also have available and make regular use of translation services, and we attend community events and conferences to help spread the word about FOS and the work that we do.

FOS also works closely with consumer representatives and community organisations, including financial counsellors, legal aid and community lawyers. Working in partnership with consumer representative organisations enables us to ensure we are accessible to all groups across the broader community.  



What is FOS dispute resolution process?
FOS has power to resolve disputes and make decisions binding on member firms within the scope of our jurisdiction. Our ability to do so derives from our role as an ASIC-approved dispute resolution scheme and the membership contract with licensed financial firms. We deal with disputes across the whole financial sector up to specific monetary limits of $500,000. We can award compensation up to $309,000 for most disputes.

Over the last couple of years, we have made significant improvements in our dispute process based on feedback from financial sector firms and consumer organisations. These changes include reducing the number of staff handling each dispute, greater expertise in the early parts of our dispute process, increased use of case conferences and more active engagement with both parties through the course of a dispute. We also introduced a new, quicker and easier FastTrack process for lower value and simpler disputes.

These changes have resulted in a simpler and faster experience for consumers and financial services providers. We also developed a new format for decisions that is clearer and easier to understand.



What was the most significant contribution that FOS has made to the financial system?
Since July 2008, our service has resolved 282,020 disputes. People from all walks of life across Australia have been able to resolve a problem and get on with their lives as a result of the work that FOS staff do every day. 

We also look at problems that not only affect the person who lodged the dispute, but also other customers of financial services providers who might be affected. We call these systemic issues and we work with financial services providers to raise industry standards, help identify best practice and make sure that customers without the knowledge or ability to complain do not miss out. In the past five years, FOS has worked to achieve customer refunds of $100 million, resolution of problems for 900,000 customers, and the amendment or removal of 41,000 incorrect credit listings. 

We have been a significant contributor to government reviews and inquiries across a wide range of issues–including, most recently, the Federal Government’s Review of the financial system external dispute resolution and complaints framework (known as the Ramsay Review). With our unique position in the financial sector, and our commitment to what is fair in all the circumstances, we share our insights willingly to assist people who use financial services and help improve standards in the financial services marketplace.
 


What will the future of dispute resolution look like?
On Budget night 2017, the Government announcedits proposals to establish a new one-stop shop dispute resolution body, in response to the recommendations of the Ramsay Review final report. The new single scheme will be called the Australian Financial Complaints Authority (AFCA), replacing the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. It is proposed to be operational by 1 July 2018.

The proposed single body for financial and superannuation disputes will be based on the key features of the industry ombudsman model and should help simplify, strengthen and increase access to free external dispute resolution for consumers and small businesses. 

We support the proposed increase in claim and compensation limits for the new body.

Increased limits will enable more Australians, including those involved in small business, to obtain access to justice by being able to bring their dispute to a single, independent alternative dispute resolution body, rather than having to navigate multiple schemes or go to court. 

We’ve also been actively promoting the need for a compensation scheme of last resort and are looking forward to the Ramsay panel’s recommendations—due shortly—on the operation of such a scheme. 






Shane Tregillis, Chief Ombudsman at the FOS


For more information about FOS, please visit www.fos.org.auDisputes can be lodged online for free. The FOS Circular is a quarterly publication containing updates on the latest news and initiatives. You can access the latest issue and subscribe to future issues here.