COS denies it lacks regulatory oversight

The Credit Ombudsman Service (COS) has rebutted claims made against it including that it lacks regulatory oversight and could not be independent as it relied on fees from industry members. 

COS denied the claims in a submission to the Senate Inquiry into the Australian Securities and Investments Commission (ASIC). ASIC is responsible for the creation and ongoing oversight of the external dispute resolution (EDR) scheme. 

The Senate Inquiry has so far received 144 submissions related to lending practices of banks and non-bank lenders from a total of 418 submissions, and a further four submissions relating to the practices of EDRs such as COS. 

COS stated that its submission had been “prompted by some of the submissions to the (Senate) Committee that were critical of COS and the expectation that the Committee would wish for us to respond to these”. 

Among these criticisms was that ASIC did not have sufficient oversight of COS. This was rejected by COS, which stated that it regularly reported to ASIC on systemic issues and serious misconduct, alongside quarterly complaint and operational information reports to ensure it met the conditions of an approved EDR scheme. 

COS also defended its fees structure and independence, stating that the bulk of its funding came from membership fees and complaint fees levied on its members in the credit sector so that its services could be provided free to consumers. It also stated that the board continued an equal number of consumer and industry representatives and an independent chair. 

“Consequently, it is difficult for us to see why some of the submissions to the Committee suggest that our independence is compromised by the fact that we receive complaint fees from financial services providers.” 

COS also stated that while its submission would cover issues raised by consumer submissions, it would do so in general terms - since many of the submissions lacked details which enabled COS to identify if the consumer had dealt with the EDR, including the 5 per cent of submissions modelled on common templates. 

The membership of COS numbers about 17,000 financial services providers and is mainly made up of finance brokers, non-bank lenders, mutual banks, credit unions, building societies, time share operators, small amount short-term lenders, debt purchasers and some financial advice firms.