Resolving complaints about financial services

Resolving disputes about financial services should be a priority for any business, writes Sarah Edmondson, a consultant with ASIC's regulatory policy branch. Not only will this help to minimise disruption and costs, but it also promotes sound commercial relationships.

Under the broad banner of consumer protection, one of the key new roles of the Australian Securities and Investments Commission is overseeing, and in some cases approving, external complaints resolution schemes operating in the financial system. External complaints resolution schemes, such as ombudsman schemes, are impartial decision-making bodies that help to resolve complaints between service providers and their customers. In Australia, such schemes operate in industries including financial services, telecommunications and health and legal services. These schemes offer accessible resolution procedures to many consumers and small businesses who could not otherwise afford to go to court to settle a complaint. They operate, effectively, as alternatives to the courts.

Financial services schemes

In the financial services sector, there are schemes operating in banking and credit, general and life insurance, insurance broking, financial planning and advisory services and managed investments. With the exception of the Superannuation Complaints Tribunal, established under Commonwealth legislation, all of these schemes operate contractually and are funded by industry members. During the past two years, ASIC has worked closely with the finance sector schemes, and with industry and consumer representatives, to promote the adoption of strong standards of scheme governance and complaints resolution. Our objective is to make sure that the schemes continue to operate independently and to deliver fair outcomes for everyone involved.

An alternative to legal action

At a broader policy level, complaints resolution is now an integral part of the Federal Government's consumer protection agenda. The implication is that industry-funded schemes will become the primary forum for resolution of consumer complaints in the financial services sector - particularly those where the amounts in dispute make it uneconomic to pursue costly legal action. These developments also recognise that ASIC, as the regulator, is unable to deal with all individual complaints about financial services which do not go through the formal legal system. If your business has reached deadlock over a complaint with a financial services provider, you may be able to go to an external complaints resolution scheme for assistance. Remember that the primary function of most schemes is to compensate people for financial loss suffered because of the actions of their financial service provider. The schemes do not operate to punish members or to award damages to complainants.

Frequently asked questions

What should I do if my business has an unresolved complaint about a financial service provider?

Always give the financial service provider an opportunity to fully respond to your complaint. In most cases, a complaints resolution scheme will be unable to consider a complaint unless you have first tried to resolve it directly with the service provider. One of the positive side-effects of the growth of external complaints resolution schemes is that many financial service providers have had to improve their internal dispute resolution procedures. What scheme should I go to?

You can only access a complaints resolution scheme if your financial service provider is a member. Ask your service provider what scheme they belong to.

Will the scheme be able to consider my complaint?

When you lodge a complaint, the scheme will make a preliminary assessment about whether it has jurisdiction to consider your complaint. All schemes have rules that set the parameters about the types of complaints the scheme can consider. For example, some schemes restrict access to "small" business or incorporated complainants. This is the case with the Australian Banking Industry Ombudsman and the Insurance Enquiries and Complaints scheme. And all schemes, except the Superannuation Complaints Tribunal, have a monetary limit on claims. As a rough guide, most schemes can consider complaints about financial services where you have suffered a loss of up to $100,000. Some schemes, notably those that consider complaints about superannuation and life insurance products, can consider complaints involving considerably higher amounts. How much will it cost to have my complaint considered by the scheme? The schemes generally operate free of charge. However some schemes may require that incorporated or small business complainants pay to use the scheme. This fee will often be reimbursed if the complaint is resolved in your favour.

What procedures will the scheme follow in considering my complaint?

The procedures are designed to be informal and mutual resolution of complaints is encouraged from an early stage. You will generally need to lodge a complaint in writing and provide copies of any documents that support your claim. Complaints resolution procedures are interactive, and you should be prepared to substantiate your claim and to respond to information from your service provider.

Scheme decisions are generally made with reference to:

* the law;

* fairness; and

* principles of good practice in the relevant industry or industries.

What can I do if I disagree with the scheme's decision?

If you disagree with the scheme's decision you are still able to take your own private legal action. If you do accept the scheme's decision, then it is binding on your service provider. Does my business or company need to become a member of a scheme? If you are a responsible entity of a managed investment scheme or if you provide financial advice to retail investors, then you must join an approved external complaints resolution scheme. The only scheme currently approved by ASIC for these purposes is the Financial Industry Complaints Service. If you provide other financial services, and would like information about joining a complaints resolution scheme, then you should contact the relevant scheme or your industry association for advice.

For more information about how the finance sector complaints resolution schemes operate, or if you have a complaint about a financial service provider, you can contact:

Australian Banking Industry Ombudsman 1800 337 444

Credit Union Dispute Reference Centre 1800 624 241

Financial Industry Complaints Service 1800 335 405

Insurance Brokers Dispute Facility 1800 064 169

Insurance Enquiries and Complaints 1300 363 683

Superannuation Complaints Tribunal 131434

If you are unsure about which scheme to contact, call ASIC's Financial Complaints Referral Centre on 1800 780 885. If you want more information on ASIC's policy in this area you can download Policy Statement 139, Approval of external complaints resolution schemes from the Policy and Practitioners section of ASIC's website at www.asic.gov.au

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.