1. Financial Ombudsman Service Australia (FOS)
Geoffrey Bant
2017

2. What is FOS?
FOS is an external dispute resolution (EDR) scheme approved by ASIC
Free to consumers – Fair, open, simple, accessible
FOS is not a regulator or advocate for either party
In Australia, financial services providers (FSP) (including credit providers) must hold a licence issued by ASIC. It is a condition of holding a licence that the licensee is a member of an ASIC approved EDR scheme.
There are two approved schemes – FOS and Credit & Investments Ombudsman
FOS handles up to 80% of banking, insurance and investment disputes in Australia
The basis for approval is set out in ASIC’s Regulatory Guide 139 and the FOS jurisdiction is governed by the Terms of Reference (TOR)
RG139 provides that approved EDR schemes must also report “any systemic persistent or deliberate conduct” to ASIC. These matters include Systemic Issues and Serious Misconduct.

3. Who can lodge a dispute at FOS?
We can consider an allegation of an error or breach of obligation against a member FSP from individuals, partnerships, clubs, associations or a “small business”
Must relate to a financial service provided by the member to the applicant and arise by way of a contract or obligation under Australian law
We can consider disputes where “legal proceedings relating to debt recovery” are on foot at time the dispute is lodged
NOTE: Collection activity and legal proceedings must stop once dispute lodged
May also consider a privacy breach but only if part of a broader dispute or in relation to the banker / customer relationship

4. 2015 – 2016 Financial Year Total disputes received
Resolved by agreement
Resolved by decision
Time to resolve
34,095 (up 7%)
61%
15%
75% within 60 days
85% within 90 days
Accepted 25,338
Average 62 days
Financial difficulty only
2,875 accepted
Number of members
13,576
Systemic issues resolved 64
Systemic issues refund $12.75 million

5. What are the disputes about?
The figures for 2015/2016 showed that the disputes accepted at FOS (25,338) were about:
Banking & Finance
The provision of credit or credit related 47%
Payment systems or deposits %
General Insurance
General Insurance %
Investments & Advice
Investments and advice 5%
life insurance %

6. Terms of Reference limits on jurisdiction
Monetary limits – claim for loss is less than $500,000, but FOS can only award a maximum $309,000 compensation per claim
Time limits - must lodge the dispute within 6 years of becoming aware of the elements of the claim, with the exception of a claim relating to an unjust transaction under the National Credit Code (time limit of 2 years from the date credit contract comes to an end)
Disputes against Members only
Not about FSP practice or policy
Not about the level of a fee or interest rate
Not about FSP’s assessment of credit risk of a borrower or security (declining a loan) but can review responsible lending obligations
Not if already dealt with by a Court or FOS or CIO
Not if company employs more than 20 people unless manufacturer (small business definition)
Not if it is more appropriate in Court (requires external evidence)

7. What does FOS take into account?
Case Law and legal principles
Industry Codes such as the Code of Banking Practice (CBP) represents good industry practice and forms part of the contract as between a signatory FSP and guarantor
ASIC Act, Corporations Act, National Consumer Credit Protection Act and National Credit Code (NCC), State legislation, Insurance Contracts Act
Paragraph 8.2 TOR dispute resolution criteria
“Subject to paragraph 8.1, when deciding a Dispute and whether a remedy should be provided in accordance with paragraph 9, FOS will do what in its opinion is fair in all the circumstances, having regard to each of the following:
a) legal principles;
b) applicable industry codes or guidance as to practice;
c) good industry practice; and
d) previous relevant decisions of FOS or a Predecessor Scheme (although FOS will not be bound by these”

8. FOS Process
When a dispute is lodged the Registration Team will conduct an initial review to see if its about a member. If so, the dispute is referred back to the member to give the member a chance to resolve it within a specific time period
If the dispute is not resolved, then it is accepted and move into Case Management
Initial TOR review
Assigned to Case Analyst or Case Manager (low value claims to Fast Track)
Stays with that case worker through to final decision
Case worker gathers relevant information and identifies early opportunities to resolve by negotiation or telephone conciliation conference
If not resolved, case worker provides preliminary view (PV)
If PV accepted then the matter is resolved as per PV
If PV not accepted by both parties, the matter goes to a final decision (Determination)
Determination is binding on the FSP if accepted by the Applicant

9. Remedies available if Applicant’s claim is established
FOS may decide the FSP should undertake any course of action as part of the remedy (Para 9)
Remedy can include:
Payment of compensation up to $309,000
Forgiveness or variation of a debt
Release of security
Reinstatement or rectification of a contract
Variation of the terms of a contract
Payment of non-financial loss compensation for stress or inconvenience of up to $3,000 per claim
Payment of compensation for consequential loss of up to $3,300 per claim
As it’s a free accessible service, FOS will rarely reimburse legal or professional costs of conducting the dispute (limit of $3,000)

10. Banking & Finance disputes
The majority of Banking & Finance disputes are about:
Claim of irresponsible lending (business loan, home loan, credit card, car loan, personal loan etc). Remedies differ but general approach is that the applicant remains liable for the principal $ borrowed
Debt collection practices including repossession of assets
Misleading conduct or non-disclosure of terms
Mortgagee sales and FOS approach
Default listing on applicant’s credit file
Unauthorised transactions (lack of mandate, chargebacks or ePayments Code)
Guarantees
Allegations of “Unconscionable conduct” or breach of “fiduciary duty” or “duty of care”

11. Need to know more? FOS website www.fos.org.au
General enquiries
Our Approach to Issues

12. Questions?