The Credit and Investments Ombudsman (CIO) has criticised the recommendation of the Coalition Members’ of the House of Representatives Standing Committee on Economics in their report into the Big Four Banks that a single tribunal should be established for all financial services complaints.
“This recommendation is a political solution to the reputational problems of the big four banks,” said Raj Venga, CIO CEO and Ombudsman. “Unfortunately it is the innocent smaller players within the financial services sector who will pay the price. This is clearly a win for the big four banks.
“The Tribunal solution, or indeed one which involves a single ombudsman scheme, will force all small financial services providers to join a scheme which is set up to deal with the big four banks.
“This is all fine if we want our financial system to remain uncompetitive. Larger dominant providers can afford high costs and simply pass the inefficiency on to consumers in the form of high rates and charges. If we want efficiency for the benefit of all consumers and the economy, we need a system of dispute resolution which facilitates increased competitiveness in financial services.
“Only the discipline of comparison to an alternative scheme keeps costs down and maintains accountability.
“This is why 97% of the industry outside the major banks, including leading fintechs looking to disrupt inefficient incumbents, favour the existing two Ombudsman scheme model.
“It is hard to believe that the Coalition Members made the recommendation favouring consolidation when the weight of evidence favours at least the maintenance of both CIO and the Financial Ombudsman Service (FOS).
“I would be interested to know if the Coalition Members of the Committee read the industry submissions* to the Ramsay review urging them to recommend the maintenance of the current competitive environment,” Mr Venga added.
Over the years, the existing two ombudsman scheme model has forced significant changes on the EDR process and environment. In 2007, CIO extended its remit to include complaints about financial hardship. Historically, financial hardship complaints make up over 30% of all complaints received by CIO and FOS.
Equally, the CIO has forced changes which have included accepting complaints even when legal proceedings had commenced and requiring lenders to cease enforcement action while the complaint was being dealt with by CIO. Such innovation will not occur under a tribunal or single ombudsman scheme.
“CIO calls on the Government to target its response to the problems in the sector and to the organisations which have caused them.
“If a tribunal is politically necessary, we suggest that its scope is limited to the areas that the existing Ombudsman schemes do not cover.
“This way the very successful Ombudsman schemes already operating in Australia will be left alone to continue their highly valuable work”, concluded Mr Venga.
*These organisations included:
- Mortgage & Finance Association of Australia (MFAA)
- Customer Owned Banking Association (COBA)
- Australian Collectors & Debt Buyers Association (ACDBA)
- Australian Finance Conference (AFC)
- Australian Retail Credit Association (ARCA)
- Association of Securities & Derivatives Advisers of Australia (ASDA)
- Financial Planning Association of Australia (FPA)
- Australian Timeshare and Holiday Ownership Council (ATHOC)
- Commercial Asset Finance Brokers Association of Australia Limited (CAFBAA)
- Insurance Council of Australia (ICA)