The Treasury released the interim report today, containing a number of recommendations for consideration. Interested parties are invited to lodge written submissions on the issues raised in this Interim Report by 27 January 2017. The expert panel led by Professor Ian Ramsay has recommended a review of the existing financial ombudsmen system but says there is no need for a specialised tribunal to resolve financial disputes.
By way of background, on 5 May 2016, the Minister for Small Business and Assistant Treasurer, the Hon Kelly O’Dwyer MP, announced the establishment of an independent expert panel to lead the review into the financial system’s external dispute resolution and complaints framework.
The expert panel is be chaired by Professor Ian Ramsay, with Mr Alan Kirkland and Ms Julie Abramson as members. A final report is to be provided to the Minister for Revenue and Financial Services by the end of March 2017.
The purpose of this Interim Report is to make draft recommendations for changes to the EDR framework and seek further submissions and information on those draft recommendations prior to providing a final report to government. Submissions received in response to the Issues Paper have informed the draft recommendations.
The Panel has found that the existing industry ombudsman schemes are a cornerstone of the EDR framework and perform well against the Review’s core principles. However, there is scope to improve outcomes for consumers, in particular by addressing problems caused by the existence of two industry ombudsman schemes with overlapping jurisdictions.
- The Panel’s draft recommendation is that there should be a single industry ombudsman scheme for financial, credit and investment disputes (other than superannuation disputes) to replace FOS and CIO.SCT has strengths, including its unlimited monetary jurisdiction, but the rigidity of the statutory model makes it more difficult to match the industry ombudsman schemes in terms of flexibility and innovation. This is a significant problem as existing pressures on SCT will continue to grow as the superannuation system matures and an ever increasing number of Australians enter the drawdown (retirement) phase.
- The Panel’s draft recommendation is that SCT should transition into an industry ombudsman scheme for superannuation disputes.
The Panel considered the merits of moving immediately to a single industry ombudsman scheme to cover all disputes in the financial system, including superannuation disputes. On balance, the Panel’s view is that it is preferable to initially introduce an industry ombudsman scheme focused exclusively on superannuation disputes, given the significance of the change relative to the status quo. Once both of the new ombudsman schemes are fully operational and have garnered strong consumer and industry support, consideration should be given to further integrating the schemes to create a single scheme covering all disputes in the financial system.The Panel also made other draft recommendations to address gaps in the EDR framework. These include:
- that the monetary limits and compensation caps for the new scheme for financial, credit and investment disputes be increased (relative to the existing limits and caps imposed by FOS and CIO), including for small business disputes; and
- that there be enhanced accountability and oversight over the two new schemes, including through strengthening the Australian Securities and Investments Commission’s powers.
The Panel’s view is that these draft recommendations represent an integrated package of reforms to address shortcomings in the current EDR framework and ensure that the framework is well-placed to address both current problems and withstand future challenges.
In its Issues Paper, the Panel sought views on an additional statutory body for dispute resolution. The majority of submissions did not support this proposal. Having considered the views expressed in submissions and for reasons outlined in the body of its Interim Report, the Panel is of the view that an additional statutory dispute resolution body is not required.