Mixed views on dispute scheme merger

Dispute resolution schemes are split between old and new over whether to reduce the number of such schemes in the market, as the government reviews the sector.

Friday, November 30th 2012, 7:32AM 4 Comments

by Niko Kloeten

There are four schemes operating: the Banking Ombudsman, which has been around for 20 years; the Insurance and Savings Ombudsman (ISO), which has been around for 17; Financial Services Complaint Limited (FSCL), and Financial Dispute Resolution (FDR).

“There is an underlying question as to whether less is more for consumers in relation to the financial dispute resolution regime,” Consumer Affairs Minister Simon Bridges said. “This work is on-going and no decisions have been made.”

And the review has attracted a mixed reaction from the industry, with the two more established schemes saying reducing competition could benefit consumers.

“There’s real concern internationally about having competition in a dispute resolution marketplace,” ISO Karen Stevens said.

“It can encourage ‘forum shopping’ by the various financial service providers, who will tend to choose the dispute resolution system that is best for them but not necessarily best for consumers.”

And Stevens said financial service providers wouldn’t be disadvantaged by having fewer schemes or even only scheme to choose from.

Banking Ombudsman Deborah Battell said competition is “not ideal” in the dispute resolution marketplace.

“Competition is usually effected by consumers making choices; we have a situation where financial service providers are able to effect choice.”

However, FSCL is strongly opposed to any merger and its chief executive Susan Taylor said there was no evidence consumers were being disadvantaged by the current set-up or that providers were gaming the system.
“I don’t think it’s a question of whether it [reducing the number of schemes] benefits consumers but whether it has been shown to have any disadvantages for consumers. I haven’t seen anything that suggests there are disadvantages.
“There have been suggestions that if some participants don’t like a decision they will scheme-hop but I have seen absolutely no evidence of that it this stage.”
She said all schemes operate by the same rules, particularly now FSCL has removed the $200,000 limit on claim size and doubled the maximum pay-out on a claim from $100,000 to $200,000.
FDR scheme manager Stuart Ayres said he had a view on the issue but he was “not really at liberty to say anything. It’s all being considered at the moment and we simply operate the reserve scheme.”
The government is also looking at the role of FDR, which was set up as a reserve scheme and receives government subsidies.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Fund managers call for level playing field »

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Comments from our readers

On 30 November 2012 at 9:10 am LPL said:

Competition in this space is reasonable and positive. While the scheme must work for consumers it also needs to work for other participants.
It is a reality that schemes such as this will see the worst of the industry and internal views I believe could become entrenched in a view that doesn't fairly represent all parties. Participants having choice I believe can help to manage this.
Tenancy Tribunal is an example of such an area where there is no competition and where parties involved can be held to account by bias and entrenched views that don’t fairly represent the facts of the parties present.

On 30 November 2012 at 10:41 pm billy the broker said:

Sorry to say been in the game for years and am still waiting for my first dispute...its not that I am great..but I show a bit care with my clients....money generating people that's all it is...this is a load of....well you get my drift...good luck:( we are getting royally dealt too here, yet again...JOKE!

On 3 December 2012 at 11:45 am David Whyte said:

What has become apparent is that Billy the Broker's experience is the norm and not the exception. The excessive machinery established in this context at the onset of regulation is overkill. The regime has had long enough to assess the frequency of disputes and it is clear that rationalisation is needed. A single provider would be disastrous, so pick a number that's greater than 1, but less than the current crop!

On 3 December 2012 at 1:04 pm Amused said:

Well said Billy the broker & David Whyte.

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