Consumers rarely pursue EDR without legal counsel
Consumers are rarely capable of pursuing a dispute through external dispute resolution (EDR) without some form of legal representation or advice, according to a key committee of the Law Council of Australia.
What was more, the same committee argued that those consumers who did pursue a dispute through EDR were not given enough scope to recover their legal costs because of the cap on such claims.
The Law Council's submission to the Government's inquiry into financial services EDR framework has cited the view of the organisation's SME Business Law Committee as stating one of the biggest problems with respect to the existing Financial Ombudsman Service (FOS) regime was the documentation required to progress the process and the different schemes applicable depending on the product or service the complaint related to.
"At FOS, there is no opportunity for verbal evidence or acceptance of transcripts of verbal evidence given in other related proceedings in FOS," the submission said.
"Most consumers are not aware of this during their engagement with their financial adviser and face adverse outcomes in FOS when coming up against financial advisers who have intentionally left no paper trail."
It said that from the SME Committee's experience, "consumers are rarely capable of pursuing a dispute through EDR without some form of legal representation or advice".
"The $3,000 cap for recovery of complainant legal costs in FOS is nowhere near adequate to cover proper representation," the submission said.
It went on to note that the SME Committee "also observes that both FOS and CIO [Credit and Investments Ombudsman] in practice suffer from a perceived bias by providers for favouring of consumer complainants, and from an inherent bias by complainants in favouring providers due to being funded by providers".
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