A “one-stop shop” to receive complaints about banks and financial institutions will be a focal point of next Tuesday’s budget in line with the recommendations of an independent review of external dispute resolution schemes.
Pushed by Financial Services Minister Kelly O’Dwyer, the new body would replace the Financial Ombudsman Service and the Credit & Investments Ombudsman and might eventually replace the Superannuation Complaints Tribunal.
Finance Minister Mathias Cormann said the government would respond to the external dispute review on budget night. Photo: Andrew Meares
Finance Minister Mathias Cormann who is acting while Ms Kelly is on maternity leave said the government would respond to the review on budget night.
The measures would be consistent with the recommendation for a “one-stop shop” model to resolve disputes to reduce confusion and streamline complaints.
“When these measures are enacted more consumers and small businesses will be able to have their dispute heard, and will also be able to access fair compensation if they have wrongfully suffered,” he said.
The inquiry, led by Melbourne University commercial law professor Ian Ramsay, is believed to have recommended monetary limits and compensation caps that are higher than the current arrangements and subject to regular indexation.
The finance industry would be required to set up an industry-funded compensation scheme and the superannuation industry would be required to develop a code of practice.
“Consumers in the financial system can be disengaged, have low financial literacy and find it difficult to understand complex financial products,” Professor Ramsay said in his interim report.
“Collapses in the past 10 years involving problems such as poor advice and exploitation of consumer responses to information imbalances and complex documents and products have affected over 80,000 consumers, with losses totalling more than $5 billion, or $4 billion after compensation and liquidator recoveries.”
“While the amounts and number of consumers affected is relatively small compared to the overall size of the system, the effect on individuals’ lives can be devastating. Consumers should be able to expect that financial products will perform in the way they are led to believe and, where they do not, have access to effective redress.”
The one-stop proposal is a step back from a Coalition backbench demand for a new banking-only tribunal.
In October, Prime Minister Malcolm Turnbull said the government was preparing to set up a low-cost tribunal for victims of poor practices by banks amid pressure from Labor for a royal commission and calls for a new tribunal by Queensland Liberal MP Warren Entsch and Nationals senator John “Wacka” Williams.
On receiving the report in December Ms O’Dwyer said an all-encompassing tribunal would be better, but that it should be a “small-T’ tribunal” that would operate without formal hearings which made it “difficult for consumers to engage”.
“I don’t care what it’s called as long as people can seek justice fairly without it costing them an arm and a leg,” Senator Williams said at the time.