FOS calls for last resort compensation

22-Apr-2016

By Sarah Kendell

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The Financial Ombudsman Service (FOS) has called for the introduction of a compensation scheme of last resort for individuals who lose money as a result of financial institutions’ misconduct or mismanagement, in light of the government’s proposed review of the financial system’s external dispute process.

Chief ombudsman Shane Tregillis said it was critical that the idea of a scheme of last resort be addressed by the government’s panel, which was yet to be appointed, in its review of all the current dispute resolution and complaints schemes, to restore consumer trust in the industry.

“FOS has consistently argued this clear gap should be addressed so that consumers can have confidence that if things go wrong, they will be compensated when a decision is made by FOS in their favour,” said Tregillis.

“We look forward to working with ASIC and the review panel to enhance current dispute resolution arrangements for consumers of financial services.”

The government’s review will look at the role, powers and governance of external dispute resolution bodies within financial services and will report back by the end of this year.

Among other topics, it will explore the possibility of potentially merging existing complaints schemes to create greater efficiency.

In a television interview following the announcement of a $127 million funding package for ASIC, federal Treasurer Scott Morrison said there was more work to be done to improve outcomes for financial services consumers.

“One of the most important areas of further work is trying to look at whether we can rationalise the existing various complaints, ombudsmen, tribunals and these sorts of things and get more of a one-stop shop,” he said.

Elsewhere, the Australian Banking Association (ABA) flagged it would roll out a new consumer protection package across its membership base, including an independent review of product-based sales commissions and payments, and improved internal support and protections for whistle-blowers.

ABA chief executive Steven Munchenberg said the package aimed to address recent consumer concerns around issues such as remuneration, complaint handling and identifying misconduct.

“Customers expect banks to keep working hard to make sure they have the right culture, practices and behaviours in place,” Munchenberg said.

“Banks recognise the importance of community discussion about the delivery of banking and financial services, and are pleased to put forward this plan.”

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