Industry divided on single EDR scheme
The financial services industry has expressed divided views on the preliminary report that has recommended a single industry external dispute resolution (EDR) body.
The Ramsay review said the scheme would replace the existing Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT).
The CIO rejected the recommendation and said the Ramsay review failed to make the case for the single ombudsman scheme as it ignored the weight of evidence that small businesses would be better served by their own scope statutory tribunal for disputes outside the existing remit of CIO and FOS.
CIO chief executive, Raj Venga, said the recommendation was "vexing, considering CIO members have not perpetrated the various financial planning, life insurance, and farm foreclosure scandals that have prompted the Government to commission the Ramsay review".
"It will create a new giant quasi-regulatory bureaucracy which will be geared towards large institutional players, such as banks and insurers, who attract the vast majority of complaints, not small financial service providers," Venga said.
"Australia deserves better. A single monolith ombudsman scheme is likely to be inefficient in the absence of competitive pressures, complacent about innovation and continuous improvement and incapable of responding quickly to market changes.
"Like most monopolies, there will be little or no imperative to improve service levels for consumers and keep costs down for financial services providers."
FOS, along with the Government, supported the recommendation and said it welcomed the proposals designed to strengthen current arrangements based on fairness, openness, simplicity, and adaptability as core features of future arrangements for dispute resolution in the financial sector.
FOS chief ombudsman, Shane Tregillis, said the recommendation would reduce the complexity for consumers in accessing timely, low-cost, and efficient EDR for all financial sector disputes.
"Our submission to the panel made five main recommendations. These included consolidation of the existing schemes, the expansion of FOS's small business jurisdiction and a review of monetary limits for the general consumer division. We also called for an enhancement in some powers, along with a compensation scheme of last resort to deal with unpaid determinations," Tregillis said.
"We are pleased that the panel considers that there is merit in an industry-funded compensation scheme of last resort and that we will have an opportunity to provide further input into how this might work, prior to the release of the Ramsay Review's final report."
The Association of Superannuation Funds of Australia (ASFA) welcomed the report but recommended that a separate superannuation EDR body should be retained.
ASFA CEO, Dr Martin Fahy, said: "Super is a $2 trillion industry and as the system grows larger and evolves, particularly into the post-retirement phase, confidence in the system must be maintained through an EDR body that provides an appropriate level of consumer protection".
"It should also be adequately funded and resourced to provide timely resolution of disputes," he said.
"ASFA will work through the implications for industry and consumers in the context of this proposed change to ensure the many benefits and protections of the current SCT model are not lost."
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
