Govt reserve resolution scheme axed

The somewhat controversial Government-backed dispute resolution scheme for financial advisers has been axed. But it will return in a new form.

Tuesday, April 23rd 2013, 6:00AM 1 Comment

by Susan Edmunds

As part of the amendments to the Credit Contracts and Consumer Finance Act last week, the Government has chosen to disestablish its reserve scheme, Financial Dispute Resolution, in 2014.

But it has approved Crown-owned Dispute Resolution Services, which has been running the scheme, as another dispute resolution provider.

It joins the Banking Ombudsman, Insurance and Savings Ombudsman and Financial Services Complaints Ltd.

It will be the only scheme with a commercial imperative. As a reserve scheme, FDR had been receiving about $1 million a year from the Government, which it recouped in membership fees. That financial support will stop.

Director Stuart Ayres said there was no intention at the moment to change the fees charged to its 1500 members. “As a commercial entity we are always looking at these things.”

Ayres said the Government had set up the reserve scheme because it had been concerned that financial services providers who did not fit into the Banking Ombudsman or Insurance and Savings Ombudsman’s remit would fall through the gaps. But that had not been the case and a reserve scheme was no longer necessary.

FSCL chief executive Susan Taylor had previously spoken out against the reserve scheme, saying it was unnecessary.

She said last night her organisation was pleased at the move but thought the year-long lead-in was unnecessary. “But we note with interest the Ministry has approved DRSL as the scheme. In practice, there may not be much difference.”

She said she hoped it would make a more level playing field. “It’s worth noting that DRSL is a Crown-owned entity and is required to make a profit. The other [schemes] are not-for-profit.”

Ayres said the new FDR would retain the same jurisdiction and members should notice no difference in the move. He said as an independent Crown-owned entity, FDR would be able to introduce new initiatives and training options.

There have been concerns that the dispute resolution landscape is overcrowded with providers but Ayres said that was not the case. He suggested one 0800 number for consumers to contact all schemes at once could be a possibility in future.

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