Terms of Reference to change on 1July 2010
The Financial Ombudsman Service is approved to operate as an external dispute resolution (EDR) scheme under ASIC's Regulatory Guide 139 (RG 139). To retain our approval, we have to ensure that our Constitution and Terms of Reference (TOR) comply with RG 139 as revised from time to time. ASIC revised RG 139 on 7 May 2010. To comply with the revised version of RG 139, we have to amend paragraph 6 of the TOR by 1 July 2010.
In May, we prepared proposed amendments to paragraph 6 and invited stakeholders to comment on the proposals. We modified the proposed amendments after considering the comments made by stakeholders and our board approved the modified amendments on 3 June 2010.
Full details of the amendments are provided at the FOS website. The effect of the amendments, which will apply from 1 July 2010, is outlined below. Due to the amendments, we also have to revise section 6 of the Operational Guidelines to the TOR.
Paragraph 6.2 – Time limits (for lodgement of disputes)
The amendments insert a new time limit for lodgement of certain credit related disputes. The new time limit will apply where a dispute relates to a variation of a credit contract regulated by the National Credit Code (Credit Contract) as a result of financial hardship, an unjust transaction or unconscionable interest and other charges under the code. The new time limit will require a dispute to be lodged before the later of:
- 2 years after the date when the Credit Contract is rescinded, discharged or otherwise comes to an end, or
- where prior to lodging the dispute with FOS the applicant received an internal dispute resolution (IDR) response in relation to the dispute from the financial services provider – 2 years after the date of that IDR response.
The time limit currently stated in paragraph 6.2 continues to apply to disputes not subject to the new time limit. We will continue to be able to consider a dispute lodged after a time limit in exceptional circumstances or with the agreement of all parties to the dispute.
Paragraph 6.3 – Opportunity for IDR
The amendments reflect the periods allowed for the internal resolution of certain credit related disputes. The period usually allowed for IDR under paragraph 6.3 at present is 45 days. With the amendments, paragraph 6.3 will provide for the usual IDR periods to be as follows:
- in a dispute involving a request to vary a Credit Contract as a result of financial hardship or to postpone enforcement proceedings:
- 21 days from the date of the request, or
- if an agreement has been made as a result of the request, a further 30 days from the date of the agreement,
- in a dispute involving a default notice under the National Credit Code, 21 days from the date when the applicant first requested the FSP to remedy the matter, and
- in any other dispute, 45 days from the date when the applicant first requested the FSP to remedy the matter.
Paragraph 6.4 allows us to extend or reduce the IDR period for a dispute in certain circumstances. It will continue to do so after the amendments.
New paragraph 6.5 – Disputes lodged with other ASIC approved EDR schemes
The amendments insert a new paragraph 6.5 to provide for disputes referred to FOS by other EDR schemes approved by ASIC. For a referred dispute, the time limits specified in paragraph 6.2 will apply from the date when the dispute was lodged with the referring scheme and that date will be deemed to be the date of lodgement with FOS.