Claims FOS distracted by commercial matters
Senior Federal ministers have been told that commercial borrowers, many of them property developers with access to millions of dollars in resources, are making inappropriate use of the Financial Ombudsman Service (FOS), effectively "hijacking" the regime.
The claim has been made in a letter sent to the Minister for Finance, Senator Mathias Cormann, by Perth-based AFSL-holder Private Mortgage and Management Limited, which states that while it supports the Ombudsman model for Australian consumers and investors, it feels "that the use of FOS has been partly hijacked by complaints lodged by commercial borrowers".
"These substantial commercial borrowers are predominantly in the property development sector and can be well resourced and more than capable of defending their position in court," the letter said.
However it said that repeated attempts to have a particular matter excluded from FOS jurisdiction — on the ground that it was a commercial matter which should be property dealt with in court — had been refused by FOS.
The letter went on to complain that while FOS had no jurisdiction over the underlying contracts, any complaint lodged by a borrower was sufficient to delay recovery action for prolonged periods and this could result in the lawful rights of lenders "being restrained for many months and in some cases we believe for over a year".
"This is the case even where the complaint is not sustained, frivolous or manufactured by the borrower so as to seek a legal action-free period in which to carry on their business," it said.
The letter said there was concern that the scarce resources of FOS were being "diverted from truly needy stakeholders (consumer and investors) to commercial borrowers with highly complex matters".
"We are greatly concerned as to the damage this is causing to our private mortgage investors, individuals who are retired and rely upon regular income — individual investors who should truly be the province of an ombudsman."
AUTHOR
Mike Taylor
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