Govt dispute resolution scheme in the gun
The government's Financial Dispute Resolution (FDR) scheme is under fire, with critics saying it shouldn't be subsidised to compete against private operators.
Thursday, February 9th 2012, 6:30AM
by Niko Kloeten
The Ministry of Economic Development raised the issue of dispute resolution schemes in its briefing to the Minister of Consumer Affairs, noting there were four in the financial sector and suggesting the government should look at merging them into one scheme.
But Susan Taylor, chief executive of rival scheme Financial Services Complaints Limited (FSCL), said the real issue was what role the government's scheme should play.
She said FDR, which as well as fees from its members also receives a $30 per year levy on financial service providers, was originally set up with the purpose of being a reserve scheme for those who weren't members of one of the other three schemes (FSCL, ISO, Banking Ombudsman).
"However, the government shifted the goalposts at the last minute in 2010 and allowed FDR to compete with the private sector - it did so with the government subsidy.
"I think there is a question as to whether or not we need a reserve scheme, given that we and the ISO are both open to all types of financial services.
"There's a whole policy issue as to whether it's right the government should be competing with the private sector.
"If there's any question of merger it may be that the reserve scheme should be merged into one or more of the private sector schemes."
Professional Advisers Association chief executive Edward Richards described the annual levy as a "cross-subsidy" paid by financial service providers who weren't members of FDR.
"I'm unsure whether that should continue - they should stand on their own two feet."
FDR didn't respond to a Good Returns request for comment.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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