Financial disputes resolution

The schemes

The 4 schemes providing financial dispute-resolution services are:

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

The Banking Ombudsman (BOS) and the Insurance and Financial Services Ombudsman (IFSO) schemes have existed since the 1990s. They started out as self-regulatory schemes established by the banking and insurance industries and over that time have considered thousands of complaints.

Financial Dispute Resolution Service (FDRS) is an independent dispute resolution service operated by FairWay Resolution Ltd, New Zealand's largest specialist dispute resolution organisation.

Financial Services Complaints Ltd (FSCL) was established in 2009. Its members include non-bank lenders, finance companies, brokers and other financial advisers.

All financial advisers and financial services providers must belong to one of these schemes. Your complaint is then heard by the scheme to which 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.

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

What they 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 – which also stops a 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 they don't do

The schemes have compensation limits. IFSO can’t award more than $200,000 (this limit is under review) and BOS, FSCL and FDRS can’t award more than $350,000 – although both parties to the dispute can agree to extend these limits.

As well, it can’t investigate:

• a provider's commercial judgement (for example, whether an investment is suitable for you) unless this 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 that’s already been made to another body (such as the courts) or that’s already been investigated by the scheme (although Banking Ombudsman scheme members can agree to a complaint being re-investigated and can also agree to waive the time limitations).

A scheme won't accept complaints it regards as "frivolous" or "vexatious".

Making a complaint

The 6 steps of 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 deadlock. Your next step is to contact your provider’s dispute-resolution scheme.

Tip: FDRS suggests contacting your provider's dispute-resolution scheme before you try the internal complaints process. Having taken basic details, the scheme will refer you back to your financial service provider so the complaint can be processed through the provider's internal complaints process. This makes the scheme aware of possible upcoming complaints and any wider industry issues.

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

Step 2

Before you can lodge your complaint with the scheme, you must show you have used your provider's internal complaints process. However, if your provider hasn’t responded then the scheme can decide to start the process on your behalf.

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

Step 3

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.

Tip: 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 4

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 5

This is the investigation/mediation stage. If they’re needed meetings are arranged, either 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 6

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 through the courts.

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