Financial disputes resolution

The schemes

The are four schemes providing financial dispute-resolution services in Aotearoa:

• Banking Ombudsman (BOS)
• Insurance and Financial Services Ombudsman (IFSO)
• Financial Services Complaints Ltd (FSCL)
• Financial Dispute Resolution Service (FDRS).

In April 2024, it was announced that the IFSO and FSCL will merge. The merger aims to simplify and improve how financial and insurance disputes are handled. It will take effect from 1 July 2025.

In the meantime, the four schemes are still available.

Which scheme to go to

All financial advisers and financial services providers must belong to one of these schemes.

You can find out which scheme your provider belongs to by asking them, or by checking the register on the Companies Office website.

If you can’t resolve an issue with your provider, you can escalate your complaint to the scheme that your adviser or provider belongs. You must use the scheme your provider is signed up with – you can’t take your dispute to another scheme.

What the schemes do

The schemes can investigate these types of complaints about their members:

• any breach of contract with a consumer
• not following industry codes of practice (which may include not dealing fairly or responsibly with a consumer)
• conduct that is not fair or reasonable in the circumstances
• breaking the law.

A scheme can terminate the membership of any provider who refuses to comply with its final decision – that also stops the provider from joining another scheme until the existing complaint is settled.

A provider who doesn’t belong to a scheme is no longer authorised to give financial advice and can be prosecuted by the Financial Markets Authority for continuing to act as an adviser.

What’s the financial compensation limit?

In July 2024, the maximum financial compensation available across all the schemes went up to $500,000 +GST.

If you have a complaint over that threshold, court is your only option to resolve the dispute.

The maximum compensation for non-financial loss, such as stress and inconvenience, has increased to $10,000 +GST. What this money can be awarded for has been standardised across the four schemes.

What the schemes can’t do

The schemes can’t investigate:

• a provider's commercial judgement (for example, whether an investment is suitable for you), unless it breaches a code of practice that the provider was bound by
• a provider's interest rates or standard fees and charges
• a product's investment performance
• events that took place before the establishment of the scheme, or before a provider belonged to the scheme (with the exception of FSCL, which can hear complaints from April 2010, even if a member didn’t belong to the scheme at that point), or more than 6 months prior to the complaint
• complaints that could be better dealt with by another body (such as the Commerce Commission), or have already been made to another body (such as the courts), or have already been investigated by the scheme (although BOS members can agree to a complaint being re-investigated and can also agree to waive the time limitations)
• complaints they regard as "frivolous" or "vexatious".

How to make a complaint

There are five steps to the complaints process.

Step 1

You must use your provider’s internal complaints process first. Many problems are minor misunderstandings that can be resolved directly. Your provider has a set time to respond to your complaint – about 3 months.

If your provider hasn’t responded within this time, or if you can't agree on a solution, you've reached what’s called a “deadlock”. Your next step is to contact your provider’s dispute-resolution scheme.

The dispute-resolution scheme can also check after the 3-month period to see what’s happened to your initial complaint. This is particularly useful if your provider hasn’t responded, and the deadlock time has passed.

Step 2

You must take your complaint to a dispute-resolution scheme within 2 months of deadlock occurring.

You can lodge your complaint with the scheme over the phone. All the schemes will tell you what info they need and how the process works. All have staff with legal training, so you don’t have to know the legal ins and outs.

It helps to have as much documentation as possible when you take your complaint to a scheme, such as relevant correspondence, loan documents or financial plans. This will speed up the investigation.

Step 3

The scheme gathers information from you and the provider. Your dispute may be resolved at this stage – but if it’s not, it goes on to the next step.

Step 4

This is the investigation and mediation stage. If they’re needed, meetings will be arranged between you and the provider. Meetings may be face-to-face or by video (or telephone) conference, with a representative from the dispute-resolution scheme acting as a mediator. The goal is to reach an agreement. If this doesn't happen or the meetings don't take place, the scheme will recommend a settlement based on the information that it’s collected. If you don't accept this settlement, the dispute goes to the final step.

Step 5

The scheme imposes a final decision. If you accept this decision, then it’s binding on the provider. If you don’t, then the case is closed, and you can pursue your complaint further through a disputes tribunal or the courts.

Disclaimer: Jon Duffy, Consumer NZ chief executive, is on the board of the Banking Ombudsman.