Little agreement on merits of multiple schemes

Whether having multiple dispute resolution schemes brings down participants' costs or not is up for debate among submitters to the Financial Advisers Act review issues paper.

Wednesday, October 28th 2015, 6:00AM

by Susan Edmunds

Whether there should be multiple schemes, and whether their jurisdictional limit should be increased, were two of the questions asked of submitters.

There are three EDRs operating for the financial services sector outside banks: Financial Services Complaints Ltd (FSCL), the Insurance and Financial Services Ombudsman (IFSO, formerly the Insurance and Savings Ombudsman), and Financial Dispute Resolution. Banks are catered for by the Banking Ombudsman.

Some submitters, such as former Institute of Financial Advisers president Nigel Tate, said there were too many EDRs and that had increased costs to industry participants.

Consumer NZ said it had concerns about the number of schemes, the variability of the schemes’ rules and the fact the schemes were not required to publish their decision.

Even IFSO said the existence of multiple schemes was not necessarily a driving factor in making sure the schemes remained efficient and fees were controlled. “It is an easy means of justifying the existence of multiple schemes and competition.”

Dealer group Kepa said: “It is hard to find anecdotal evidence that competition among schemes is having an impact on effective dispute resolution. We would imagine each scheme breathes a sign of relief when a complaint comes in at the moment because of the low level of complaints."

Others, such as the Financial Services Council, FSCL, and SiFA said the competition was welcome. SiFA said having multiple schemes led to reduced membership fees.

There is wider support for increased jurisdictional limits, so that the schemes can deal with claims relating to larger amounts of money. All can only deal with complaints relating to amounts up to $200,000 at present.

AMP said it would support a higher limit provided the insurer had the right for a matter to be resolved by the courts where it was over a particular limit if there was a significant point of law.

ANZ supported an increase to $250,000.

FSCL said consideration should be given to pegging schemes’ limits to those of the district courts. IFSO agreed and said a $350,000 limit would be appropriate.

But former PAA president Peter Leitch said: “I fear if the limits increase further, it brings in additional complications which will likely reduce both these - as well as timeliness.”

Tags: disputes FSCL ISO