Media Release - Ombudsman cautions that mergers and tribunals will not help consumers

In its submission to the review of Australia’s three financial sector Ombudsman schemes (Ramsay Review), the Credit and Investments Ombudsman (CIO) has called for a common entry point or triage service. This would allow consumers and small businesses to call a phone number or visit a dedicated website to direct them to the organisation that could help them best.

“A ‘gatekeeper’ service will be able to direct consumers and small businesses to someone who can help them with their problem. This may be a dispute resolution scheme like CIO or the Small Business Ombudsman, a government department like Centrelink, financial counsellors, community legal centres, Legal Aid, State Fair Trading Offices, Government Ombudsman bodies and regulators such as Australian Securities and Investments Commission (ASIC)”, said Mr Raj Venga, Chief Executive Officer and Ombudsman, CIO.

Mr Venga also took aim at a proposal to establish a statutory tribunal to replicate the roles performed by CIO and the Financial Ombudsman Service (FOS). “This would not be in the interests of consumers and small businesses. Tribunals do not accept complaints over the phone or by email; application forms are not straight-forward and registrar officials cannot give consumers the help they need to complete them. In contrast, ombudsman services guide consumers through the process and tell them what information they need to provide to substantiate their complaint," said Mr Venga.

"The current ombudsman model is free to consumers. It is popular with consumer advocates and is an effective and logical alternative to the court system which the average Australian is neither able to navigate nor afford. There is no need to ‘lawyer up’ and the ombudsman processes are informal and quick," Mr Venga added.

“Ombudsman schemes are designed to level the playing field: an ordinary, unrepresented consumer is given a fair go against a well-resourced large financial services provider. Unlike ombudsman schemes, tribunals normally have hearings which require consumers to attend in person. Most consumers lack the knowledge, skills or confidence to pursue their case at a hearing. Some may also have to travel long distances to attend.”

“Importantly, decisions of a tribunal are subject to appeal - only the most well-to-do consumers can afford legal representation to challenge in court an appeal brought by a financial services provider. By contrast, an ombudsman’s decision is binding on the financial services provider. It is generally not subject to appeal,” continued Mr Venga.

However, Mr Venga suggested that there may be merit in having a tribunal where a consumer’s claim is beyond the jurisdiction, or exceeds the monetary limit, of the existing ombudsman schemes. Currently, claims are capped at $500,000 and compensation cannot exceed a maximum of $309,000 per claim. In the past, only a small proportion of complaints have involved amounts that have come close to this monetary cap.

The Ramsay Review canvassed the possibility of merging CIO, FOS and the Superannuation Complaints Scheme (SCT). 

According to Mr Venga, “Australia is currently very well served by the existing dispute resolution architecture in financial services. The existence of two ASIC-approved dispute resolution schemes in the finance sector (CIO and FOS) has spurred productivity growth and created a self-sustaining process for continual reform and reassessment.”

“We do not think integrating the existing arrangements would be desirable. Their separate existence has allowed each scheme to benchmark their performance against the other. The independent and periodic reviews of CIO and FOS compare both schemes and recommend the implementation of particular improvements seen in the other. This produces better outcomes for consumers, financial services providers and regulators alike, and could not be achieved under a single EDR scheme model.”

“A ‘one-stop shop’ cannot effectively deal with the distinctive features of the various sectors and products of the financial system. It would also be unique in the international context given that no other developed country in the world has adopted a single ombudsman model," Mr Venga concluded.