FOS Finds Room for Improvement by Financial Services Providers

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The Financial Ombudsman Service Australia (FOS) has identified a number of failures by FSPs and details some concerns about industry behaviours in their latest Circular report. We outline these below.

Failure to engage with FOS

FOS has identified a failure by FSPs to engage meaningfully with FOS where a dispute has been registered by an applicant and notes this is a systemic issue in the financial services industry. This trend has been particularly noticeable in the general insurance industry.

In response to this behaviour, FOS has implemented a new process for handling disputes. Once the parties to the dispute have had further opportunity to respond to a dispute and information has been provided by either party that is sufficient for FOS to form a determination, the dispute will be referred to the decision stage and a determination will be made based on the information that has been provided.

In practical terms, this means that if a FSP declines to co-operate with the process, a determination can be made against them based on the information provided by the complainant.

It is important to note that once a determination is made by FOS based on the merits of the dispute, irrespective of whether the FSP has elected to contribute to the process, there is no further ‘appeal’ or review process within the FOS regime for the FSP. It is the applicant who registered the dispute, in most cases a client of the FSP, who has the right to accept or reject the determination within 30 days of it being released to the parties.

Where the applicant accepts the determination, it will be binding on both parties. If the applicant does not accept the determination then it will not be binding on the parties and the applicant is free to pursue other courses of action against the FSP, including litigation.

The FSP does not have the right to accept or reject the determination, where a determination is made and accepted by the applicant it will become binding, and the FSP is required to implement the determination.

It is therefore in a FSP’s interests to provide any information requested and assist FOS with the investigation to ensure that FOS receives balanced information about the dispute and can make their determination accordingly. A failure to engage with FOS will not make a complaint go away.

In the Circular, FOS also identified some outcomes from interactions with FSPs that should serve as timely reminders for all FSPs.

Policies for dealing with customers in financial difficulty

Where a FSP has supported an application by a client for the early release of their superannuation due to financial hardship, it is inappropriate for the FSP to continue with recovery action against the client. Recovery action may only be resumed where the application has not been approved within a reasonable period of time.

Continuing to pursue recovery from a client where the client has registered a dispute with FOS

FOS reiterated the obligation for FSPs to place recovery action on hold where a dispute is registered with FOS.

In addition, FSPs need to be aware of the collection systems they have in place to ensure that they have the ability to manually override any collection process where a recovery needs to be placed on hold.

Internal dispute resolution process

FOS confirmed that during an internal dispute resolution process a final letter about a complaint sent by the FSP to the complainant should be clear that it contains the final decision about the complaint, provide full contact details for FOS in the event that the recipient is not satisfied with the resolution and should not suggest or infer that FOS may not have the jurisdiction to consider the matter raised by the client.

This article is based on FOS’s April 2017 “Circular” newsletter which outlines the key findings from the March 2017 quarter. The FOS Circular provides practical information and explains FOS’s approach on substantive issues when making their determinations. The Circular can be viewed here:

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