Terms of Reference and Operational Guidelines

The Board of the Financial Ombudsman Service approved our new Terms of Reference (TOR) on 18 December 2009.

The approved TOR will come into effect from 1 January 2010, and will apply to all disputes received by us on or after that date. Disputes received by us before 1 January 2010 will continue to be dealt with under the currently applicable TOR (Banking & Finance, General Insurance, Insurance Broking, Investments Life Insurance & Superannuation, or Mutuals). View/download 2010 Terms of Reference.

Our focus now turns to ensuring all of those who access the Financial Ombudsman Service are aware of how our new TOR and Operational Guidelines (OG), which come into effect on 1 January 2010, will operate. It is critical that our stakeholders have enough information to feel confident about using our services.

The focus of our communication for the next three months is on ensuring that helpful information is made available to you, including the following:

1. An overview of our dispute resolution process is now available on our website
2. A searchable version of the TOR and OG will be available on our website in January in a new format with added functionality to make the information easy to find and navigate through.
3. Hard copy start-up user guides will be posted out to stakeholders in January 2010 designed to highlight the main changes and where to go for more information.
4. Three e-learning modules (introduction to the Financial Ombudsman Service, our jurisdiction, and our dispute resolution processes) will be available on our website in February 2010.
5. Information sessions will be held in most capital cities in February/March 2010.

For more information about these activities, please contact Jane Hill – Member Relationship Manager or Robyn McCutchan – Community Program Manager.

Changes to our Constitution

At the Annual General Meeting on 7 December 2009, the membership approved a number of changes to our Constitution. The main changes can be summarised as follows:

• Membership will no longer be automatically terminated if a member becomes insolvent, ceases to trade or ceases to hold an Australian Financial Services licence. Instead the Board will have a discretion whether to cancel the membership, with applicable notice. 
• The requirement to conduct independent reviews of the Service has been more closely aligned to ASIC’s requirements, particularly Regulatory Guide 139.
• It has been made clearer that the Constitution and the applicable Terms of Reference form a binding contract between the Financial Ombudsman Service and each of its members.

View/download a copy of the amended Constitution.

New transitional funding approach

Each of our predecessor schemes had its own funding system and its own approach to case fees. We have been working to identify a single system of charging case fees and levies to operate across all of our member financial services providers (FSPs) in a fair and consistent manner.

We have consulted with a range of stakeholders including members and industry bodies to evaluate the options and seek feedback. Our Board has now approved a transitional funding model. This meets our criteria of:

• being fair and consistent for all member FSPs
• enabling us to operate effectively and sustainably
• being flexible and adaptable to allow for projected growth to occur, and
• being applicable to the expanding and diverse range of businesses who seek membership with us.

We have sent out information to member FSPs to further explain the new funding model and how it will operate for their business. Any member who has not received this information can contact us on 1300 56 55 62.

The fundamental core of the funding model is that the Financial Ombudsman Service is an industry funded service which operates on a user pays system. In accordance with ASIC Regulatory Guide 139, it must be offered free to consumers.

In addition, it is in the interests of all parties to resolve disputes at the earliest possible stage. Therefore we would prefer to adopt a model that provides incentives to appropriately reward members for effective resolution of their customers’ concerns.

Finally

I would like to thank you for your support throughout the year and wish you all a safe and enjoyable holiday season.