Since our last update, there have been five reportable incidents of determinations not being paid. As a result, between 1 January 2010 and 31 March 2018, there have been 40 FSPs unwilling or unable to comply with 162 determinations, affecting 230 consumers.
In 123 of these determinations, the consumer received no payments at all, despite the requirement on financial services licensees to have ‘adequate compensation arrangements’ in place. Of the remaining 39 determinations, partial payment to consumers was usually the proceeds of insolvency proceedings and represented a minimal return on the dollar.
Due to this non-compliance of FOS determinations, $14,899,949.56 has not been returned to affected consumers. This figure does not include any interest awarded on the base award by the Ombudsman.
Only a very small percentage of all FOS members are involved, and these figures represent only a small proportion of all the awards we issue across all our jurisdictions in banking, insurance, life insurance and investments.
However, despite the small number of FSPs involved, unpaid determinations represent:
- 16.63% of all accepted determinations issued in favour of consumers by the Investments and Advice (I&A) team and
- 23.45% of the total compensation awarded by the I&A team.
The issue of non-compliance is not spread evenly throughout different sectors of the financial services industry. The top three categories of non-compliant financial services providers are:
- Financial Planners and Advisors: 55%
- Operators of Managed Investment Schemes: 13%
- Credit Providers: 10%
Possible actions to address uncompensated losses
FOS looks forward to the government’s response to the independent expert panel’s report on a compensation scheme of last resort for consumers of financial services. We also look forward to any comments that the Royal Commission may have in this regard.
FOS believes that for external dispute resolution to operate effectively, consumers who are awarded compensation should be confident that this compensation will be paid.