Govt looks to shake up disputes resolution schemes
The government is looking at a potential overhaul of the financial services disputes resolution schemes, including imposing greater uniformity of standards, increasing oversight and increasing promotion of the schemes to raise consumer awareness.
Friday, May 24th 2024, 6:00AM
by Jenny Ruth
The proposed changes are on top of changes to the regulations, including increasing and standardising the penalty regime, which kick in from July 18, but the door remains open to maintaining the status quo while these new regulations kick in.
The Ministry of Business, Innovation and Employment has issued a discussion paper this week outlining the proposed changes.
All financial services providers have to belong to one of the dispute resolution schemes.
MBIE said its consumer survey in 2022 found that awareness varies across the four schemes.
The most well known with 46% awareness was the banking ombudsman scheme, which has been in place since 1992 and covers institutions that are supervised by the Reserve Bank.
Of the three schemes covering other financial services providers, the next highest awareness was of the Insurance and Financial Services Ombudsman scheme with 27%.
It was established in 1995 for the insurance sector but widened in 2010 to covere all financial service providers.
Financial Services Complaints Ltd (FSCL) and Financial Dispute Resolution Service, which used to be the government reserve scheme, were both established in 2010 and awarenes of both was low at 14% and 16% respectively.
FSCL and the insurance ombudsman scheme are looking at merging from July 1 next year, a move supported by the government, but there are no plans at this stage to combine all the schemes into a single entity, as has happened in Australia and Britain.
The government is looking to simplify and streamline financial services regulation generally but wants to ensure that consumers have a quick and low-cost avenue to resolve issues withouth having to go to the courts.
MBIE notes that “while most people have general awareness of the availability of dispute resolution – if not specific schemes – they still do not access it. This is for reasons such as lack of knowledge of their rights and the process, the time and effort involved, or fear of repercussions.”
Financial Dispute Resolution Service's 2022/23 annual report showed it had financial service providers as members 1,278 members and revenue of $541,000.
It dealt with 451 complaints that year, up from 401 the previous year, but accepted only 22 for its formal process, down 67% from the previous year.
The annual reports of the other two services didn't disclose member numbers but FSCL's revenue in 2022/23 was just under $2 million while the insurance ombudsman scheme's revenue was nearly $2.6 million.
FSCL received 1,349 complaints, up from 1,077 the previous year and dealt with 274 formal disputes, up from 214 the previous year, while the obudsman scheme received 4,120 complaints, up from 2,847 the previous year, and dealt with 327 formal disputes, up from 285.
Submissions on MBIE's proposals are due by June 19.
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