International Law

Financial Ombudsman Service Annual Review

By David Jacobson

The Financial Ombudsman Service is an approved external dispution resolution (EDR) scheme for Australian Financial Services and Credit licensees, including insurers.

Its 2009-2010 Annual Review , especially the Comparative Tables, provides an insight into the changing nature of the customer-financial services provider relationship and regulatory supervision.

With the introduction of credit licensing FOS had 1416 new members in 2009-2010 and disputes increased by 6%.

The Annual Review focusses on disputes by product type, identifies dispute resolution performance by financial service provider and discusses 58 systemic issues.

These systemic issues included:

?application of incorrect interest rates
?incorrect break cost methodology on principal and interest loans
?inadequate refunds of lenders mortgage insurance premiums
?processing delays resulting in losses
?failure to link eligible offset accounts
?failure to cancel direct debits on request
?licensee notification delays
?failure to adequately disclose fees
?errors in credit listings
?incorrect claim denials
?misleading conduct
?incorrect policy interpretation.

The actions that FSPs took to fix systemic issues included:

?reimbursing affected customers for losses, including interest
?amending contractual and product documentation
?improving staff training
?case by case review of appropriate rectification for affected customers
?changing processing systems to rectify the problems
?undertaking to rectify future complaints
?reviewing their processes and procedures
?corresponding with affected customers to correct previous statements
?removing fees that had been charged incorrectly.

For some of the 58 systemic issues FOS resolved, the FSP was able to tell FOS how many customers were affected by the issue and how much money was paid to the affected customers. In total, for these cases, 36,544 customers were affected and over $17.5 million was paid to customers.

FOS reported one case of serious misconduct to ASIC in 2009-10. It involved a member that had repeatedly and wilfully breached its membership obligations by issuing legal proceedings and entered default judgment whilost a dispute resolution process was in progress.

Full post as published by Australian Regulatory Compliance Review on March 01, 2011 (boomark / email).