Financial Ombudsman Service (“FOS”): an important avenue for resolving disputes with banks and other financial services providers

The Financial Ombudsman Service Australia (“FOS”) provides a free external dispute resolution scheme (“EDR”) approved by the Australian Securities and Investments Commission (“ASIC”).[1]

It deals with complaints across a diverse range of financial and credit products and services and provides an independent forum to resolve disputes between applicants and member financial services providers (“Financial Services Provider”) that is free to consumers.

Generally speaking, FOS can consider most disputes relating to banking, finance, insurance (home, contents, travel and life), managed funds, mortgages, pooled superannuation funds, estate planning and management, and traditional trustee services, provided that the Financial Services Provider is one of its members.  However, FOS cannot consider matters that have already been dealt with by a court, tribunal, arbitrator or another external dispute resolution scheme.

The FOS Terms of Reference sets out in detail the many matters which it can and which it cannot consider.  Accordingly, it is important to refer to the most recent version of the FOS Terms of Reference when determining whether FOS is able to consider a particular dispute.

Benefits to consumers

The ability to lodge a complaint with FOS provides significant advantages to consumers, particularly in times of financial stress.  The advantages offered by the FOS dispute resolution include:

• The service is free of charge for applicants;
• The Financial Services Provider is usually prohibited from commencing or continuing legal action against the applicant while FOS is dealing with the dealing with the dispute;
• The process is relatively simple and FOS is not bound by the rules of evidence of a court;
• While the Financial Services Provider is bound to comply with a FOS decision, an applicant is free to choose whether to accept the decision or not.

Time limits

Disputes must be lodged with FOS within six years of the applicant first becoming aware that they suffered the loss (or should have reasonably have become aware of it).

For disputes involving variation of a credit contract as a result of financial hardship, an unjust transaction or unconscionable interest and other charges, the dispute must be lodged within two years of the credit contract ending.

If the applicant received an Internal Dispute Resolution (“IDR”) response from the Financial Services Provider, they must lodge their dispute with FOS within two years of that response.

FOS Dispute Resolution Process

There are generally three stages in the FOS dispute resolution process:

• Registration and Referral;
• Case Management; and
• Decision.

Stage 1: Registration and Referral

A person can lodge a complaint with FOS by filling out an online dispute form on the FOS website.

FOS will then refer the dispute to the relevant Financial Services Provider to provide it with the opportunity to resolve the matter with the applicant directly.

If the applicant has previously complained to the Financial Services Provider and the provider’s IDR process was completed, then the Financial Services Provider will have 21 days to resolve the dispute directly with the applicant.  If the dispute is not resolved between the parties, the Financial Services Provider must provide FOS and the applicant with its written response to the applicant’s complaint.

Alternatively, if the Financial Services Provider’s IDR process has not been completed, then the Financial Services Provider will have up to 45 days to resolve the dispute directly with the applicant. Again, if the dispute is not resolved between the parties, it must provide FOS and the applicant with its written response to the applicant’s complaint.

Accordingly, the applicant is likely to be contacted directly by the Financial Services Provider after lodging their application with FOS.  The Financial Services Provider will usually seek further information from the applicant to assist with the process, but it is worth remembering that while FOS may be carrying out an independent investigation of the complaint, the Financial Services Provider will be acting to protect and further its own interests throughout this process.

If the dispute is not resolved between the parties within the stipulated timeframe, then the application will progress to the case management stage.

Stage 2: Case Management

Assuming FOS has jurisdiction to deal with the matter, the matter will be given a case number and allocated to a case manager, who will then have carriage of it until it is either resolved or referred to the Ombudsman for a final decision.

The case manager will initially write to the Applicant explaining the FOS role, its powers, and its method of assessing the dispute, confirming the case manager’s understanding of the dispute, identifying the issues that FOS is required to investigate, and requesting further information to assist the investigation.

If the complaint relates to matters regulated under the National Consumer Code (“Code”), then as part of its investigation, the case manager will consider whether the relevant transaction was regulated by the Code and whether the Code has been contravened.

Conciliation

As part of its dispute resolution process, FOS may decide that it is appropriate to convene a conciliation conference with the applicant and the Financial Services Provider.  The conciliation is done by way of a pre-scheduled telephone conference call between a FOS conciliator (often the case manager handling the complaint), the Applicant, and a representative of the Financial Services Provider.  According to FOS’s conciliation conference brochure:

“The aim of a conciliation conference is for the conversation to result in a solution to the dispute which both you and your financial services provider agree to. This doesn’t always happen, but we do find conciliation is a very effective way for both parties to gain a better understanding of the dispute.”[2]

A conciliation may last for between 2 to 4 hours.  The FOS conciliator will conduct the conciliation, ask questions, offer information and make suggestions regarding resolution, but he or she will not provide legal advice, or act as an advocate for either the applicant or the financial services provider.

If the applicant and the financial services provider resolve the dispute, then FOS will record the agreement reached.  If the dispute is resolved, FOS will end its involvement.

If agreement is not reached, then the FOS case manager will consider whether further investigation is required and proceed towards delivering his or her recommendation.

Preliminary View / Recommendation

If the dispute is not resolved at conciliation, then the FOS case manager will request any additional information necessary, review all of the information provided by parties and prepare a written preliminary view or recommendation regarding the dispute.   The recommendation will set out a summary of the dispute, key issues and findings, the recommendations, and the reasons for recommendation, and will usually make reference to the supporting information relied upon.

Acceptance or rejection of recommendation

Once the recommendation has been made, the parties will have 30 days to advise FOS whether they accept or reject the recommendation.

Both parties must accept the recommendation if it is to be binding.  If either party wishes to reject the recommendation and request that FOS issue a final determination, then they are required to write to FOS within 30 days, setting out their reasons for rejecting the recommendation and providing any new and relevant information.  A copy of the rejection of the recommendation and supporting material will be provided to the other party for their consideration and response.

If the recommendation is rejected, then the FOS case officer will refer the matter to the Ombudsman for a final determination.

Stage 3: Decision

If no new information is following the delivery of FOS’ recommendation, then the determination will be made by the Ombudsman based upon the information already on file.

If new information has been provided or is needed, the FOS case manager will carry out any necessary further investigation and once satisfied that FOS has the necessary information for making the decision, will refer the matter to the Ombudsman for determination.

The Ombudsman will review all of the evidence on the file and make his or her own decision as to whether to determine in favour of the applicant or the Financial Services Provider, and on what terms.

If the applicant accepts the final decision by FOS, then the decision will become binding on the Financial Services Provider.

If the applicant does not accept the final decision by FOS, then the neither party is bound to the determination, and the Financial Services Provider is released from any restrictions that stopped it from pursuing legal action against the applicant during the FOS dispute resolution process.

Remedies

FOS may decide that the Financial Services Provider or Applicant undertake a course of action to resolve the dispute including:

• the payment of a sum of money;
• the forgiveness or variation of a debt;
• the release of security for debt;
• the repayment, waiver or variation of a fee or other amount paid to or owing to the Financial Services Provider or to its representative or agent including the variation in the applicable interest rate on a loan;
• the reinstatement or rectification of a contract;
• the variation of the terms of a Credit Contract in cases of financial hardship;
• the meeting of a claim under an insurance policy by, for example, repairing, reinstating or replacing items of property; and
• in the case of a Dispute involving a privacy issue with an individual – that the Financial Services Provider should not repeat conduct on the basis that it constitutes an interference with the privacy of an individual or that the Financial Services Provider should correct, add to or delete information pertaining to the Applicant or an ‘other affected party’.

FOS may decide that the Financial Services Provider compensate the applicant for direct financial loss or damage. Under its Terms of Reference, the monetary cap on awards FOS can make for a claim lodged with FOS on or after 1 January 2018 is $323,500 for all disputes, except general insurance broking ($174,000), income stream life insurance ($8,700 per month) and uninsured third party motor vehicle claims( $5,000).

Further, consequential loss claims are capped at is $3,500 per claim, and awards of non-financial loss are capped at $3,000 per claim. This applies even if the actual loss is more than the relevant cap. Disputes lodged before 2015 may be subject to lower caps. The limit does not apply to any interest or costs (to the extent these are awarded).

Comment

The FOS dispute resolution process can offer an effective alternative avenue for consumers involved in a dispute with a Financial Services Provider.  The service is free of charge for applicants, and in many cases an application can stop the Financial Services Provider from pursuing legal action against the applicant until the FOS process is completed.

Although FOS services are relatively simple and user friendly, FOS is still required to rely on the interpretation of statutory provisions to make its determinations in respect of disputes which may often involves a series of events and transactions in a complex factual scenario.  Further, most Financial Services Providers are experienced with responding to FOS and have access to legal advice when doing so.  Accordingly, particularly in some of the more complex disputes, an applicant who was proper legal assistance and advice is in a much better position to achieve the best possible result.

At Boss Lawyers, we have experience in assisting clients with application to FOS regarding complex claims.  For practical legal advice, support and assistance regarding your particular circumstances, contact our FOS Lawyers today.  We are ready to step in and assist you

About David Grant | Lawyer

David has practiced exclusively in commercial litigation and dispute resolution since 2010.  David is a distinguished litigator among his peers and his approach to commercial disputes is pragmatic and outcome-orientated.

Article references:

[1] From July 1, 2018, the Australian Financial Complaints Authority (AFCA) will replace the Financial Ombudsman Service (FOS), the Superannuation Complaints Tribunal (SCT) and the Credit and Investments Ombudsman

[2] ‘A Guide to Conciliation Conferences’, brochure, Financial Ombudsman Service Australia.