The theme for our 2016 FOS National Conference today is 'beyond the promise – a new resolve'.
The theme's intent is to move us beyond the promise in the much-touted 'putting the customer first' language that has been part of the financial service industry for some time, to actually deliver this as the consistent customer experience across sectors, firms and products.
This is the new resolve.
The conference today is designed to enable us all to take time out, to reflect on what we can all do individually within our own organisations, and collectively as a group, to contribute to the linked goals of ensuring fair outcomes for consumers and increasing trust in financial services.
Living in interesting times
Perhaps, in the light of current events, we could have chosen as our theme that much used, apocryphal and double-edged saying – 'may you live in interesting times'!
The financial services industry is certainly operating in interesting and challenging times. The issue of trust is front and centre on a daily basis.
While the financial services sector has its own causes and drivers for the so-called ‘trust deficit’, it is also possible to see this as part of a larger dynamic.
One where we are seeing an erosion of trust in a range of institutions due to political, economic, social and technological changes across the globe.
The ‘trust deficit’ impacts on financial services providers, particularly those of you working in front line customer complaint resolution.
And, it also impacts on the environment in which FOS operates.
Indeed, the range of current reviews, industry reform initiatives, ongoing intense scrutiny of financial services and the general volatile environment impacts on our work at FOS, both directly and indirectly.
Some of the current initiatives directly relate to FOS, such as the government’s expert panel review of External Dispute Resolution or EDR (the Ramsay Review).
Others, such as the review into bank remuneration, new draft life insurance code, proposed code of ethics for financial advisers, review of the current banking code and the review of impaired loans by the Small Business and Family Enterprise Ombudsman, impact on us indirectly.
In addition, FOS continues to push for a compensation scheme of last resort as the missing element in reform efforts. We have welcomed the ABA's April commitment to evaluate such a scheme and the expert panel’s ability to make observations about the establishment of a scheme as part of its review of EDR.
This busy and volatile environment means that FOS’s role, and the broader EDR framework, have been subject to heightened scrutiny, commentary and sometimes trenchant criticism.
Criticism that covers both ends of the spectrum – on the one hand that we are too beholden to industry and on the other that we are biased in favour of consumers.
Interesting times indeed.
But there are also upsides.
FOS has received strong support from consumer organisations and industry bodies, in the findings of the Murray and other parliamentary and government inquiries, and from other stakeholders.
Notable in this broad-ranging support is the acknowledgment of the important role FOS plays in enhancing redress for consumers as part of the broader access to justice arrangements in Australia.
Back to basics
In times of turbulence, it is easy to get caught up and distracted by all the 'noise' swirling around. Sorting out the important matters can often prove difficult.
It is important, now more than ever, to focus on the basics and remind ourselves, and others, about:
- who we are
- what we do
- and what we stand for
in pursuing our continued resolve to improve our service.
In doing so, my focus today will be on our role as an external dispute resolution scheme, with less emphasis on the important role played by industry codes and of the independent committees responsible for their monitoring, such as the code team within FOS.
Who we are (and just as importantly, who we are not)
So, who are we, and importantly, who aren't we?
Our main role is to resolve individual complaints once the customer has tried and failed to do so with the financial service business.
It is sometimes forgotten that FOS is not the primary "resolver" of customer complaints in the financial sector.
This is the role of financial service firms dealing directly with their customers. This is what many of you attending today do in your roles within your firms.
We continue to subscribe to the view that it is better for both parties if firms can resolve problems directly with their customers.
We have embedded this view in our new dispute process by ensuring that all complaints we register are referred back to the FSP for another chance to sort them out directly with your customer.
What this also means is that our new Registration and Referral process is giving us clearer line of sight into the performance of our member firms’ internal dispute processes (IDR).
Sharing our insights and experience on this will be a focus for us in the coming year.
For example, we can already see clear differences between firms and sectors in how well they are taking advantage of FOS’s new Registration and Referral process.
In our view, this means there are potentially significant opportunities for some firms and sectors to improve their IDR processes in the coming 12 months.
Fixing problems at source
Of course it is even better to deal with the root causes of customer problems to avoid them occurring in the first place.
This can be done by, among other things:
- designing products fit for purpose
- ensuring distribution processes are properly tailored for fair dealing with customers and
- making sure incentives do not promote mis-selling or inappropriate treatment of claims.
While cost control is key for all businesses, it is important that cost cutting does not just drive poor customer outcomes in the rush to temporarily bolster the bottom line.
Ultimately, such a focus will impact negatively on the promise of a business culture that says it is all about putting customers first and on sustainable longer-term performance of firms.
I will talk a little later about how what we do contributes to preventing disputes arising in the first place through our role dealing with systemic issues, sharing lessons from our dispute experience and by making available information about the disputes we handle
We are independent
In order to fairly and impartially resolve the disputes that come to FOS, we are independent of the parties in a dispute, and of government and regulators.
We are not an advocate for any one sector, consumer or industry group.
To do so would not be consistent with our role as an independent Ombudsman scheme fairly and impartially resolving and adjudicating on specific disputes.
This also means we remain neutral on the form and means by which the review and improvements to customer outcomes in the financial sector might best proceed.
Accordingly, we do not take sides on whether this is best done by current industry-led initiatives, government reviews, law reform inquiries, a Royal Commission or indeed by other means.
While this stance may sometimes frustrate some advocates of competing positions and commentators, not taking sides on this type of issue is inherent in our role as an independent and impartial dispute resolution scheme.
We are close enough to the MCG for me to be able to say that on these matters, FOS has and will continue to play a very straight bat.
We share our experience to prevent disputes
However, being independent does not mean we do not care about efforts to achieve fairer outcomes for consumers and improve community trust in the financial sector.
FOS plays an important role in sharing our experience and expertise in resolving individual disputes, and dealing with systemic issues, in order to try to address the causes of disputes occurring in the first place.
We do so in a variety of ways, such as:
- publishing our determinations and FOS Approach documents
- making submissions to various inquiries
- holding industry and consumer forums
- providing detailed dispute data in our Annual Review and our Comparative Tables.
Applicants often confuse our role with the regulator responsible for policing the conduct of firms in their dealings with customers to ensure compliance with current laws.
They are sometimes disappointed and frustrated when we explain this is not what we do. We are not the regulator charged with enforcing the law.
This is the role of ASIC.
We do, however, help inform the focus of ASIC’s regulatory and enforcement activities through our regular reporting to ASIC on dispute numbers, sharing of information on systemic issues, and work on general remediation programs,.
Fair in all circumstances
We have been consistent in all our submissions over the past five years about the importance of fairness in consumer outcomes as a key underpinning of consumer trust in financial services.
This was the message in our first submission to the Murray Inquiry and it has remained our message in more recent submissions, for example, on the draft Life Insurance Code.
This is not surprising given that our role and jurisdiction is all about making decisions on financial sector disputes based on what is fair in all the circumstances, taking into account the law and other factors set out in the FOS Terms of Reference.
We are pleased this was a key theme in the Murray Financial Sector Inquiry findings and recommendations.
What we do
So what does FOS do?
Our Terms of Reference (TOR) clearly set out our jurisdiction, the criteria by which we make decisions and the principles on which our dispute process is based.
Our claim and compensation limits in our TOR define the types of disputes that we are able to deal with within our jurisdiction.
Over the years our jurisdiction has evolved and adapted to changes in community expectations, law reform and new financial developments.
For example, and as many of you would be aware, we are currently consulting on an expansion in our small business jurisdiction.
Our process for dealing with disputes and decision-making criteria are clearly set out in our TOR. These have been well tested and supported by the courts on numerous occasions.
However, I think most importantly, and too often overlooked, even by those of you who deal with FOS on a regular basis, is the clear set of principles in the introduction to our TOR that guide our dispute processes and decision making. These are that FOS:
- must do what in its opinion is appropriate with a view to resolving disputes in a cooperative, efficient, timely and fair manner
- shall proceed with the minimum formality and technicality and
- shall be as transparent as possible, whilst also acting in accordance with its confidentiality and privacy obligations.
These principles highlight what we consider to be the essential attributes of what we do at FOS as an independent Ombudsman scheme that provides an alternative to the courts for resolving disputes within our jurisdiction.
These principles emphasise that what we do is resolve disputes fairly, informally and in a timely manner. They stress the importance of seeking to resolve disputes co-operatively and transparently.
This is what distinguishes us from the courts and many tribunals who, given the nature of their jurisdictions, require technical procedural rules of process and evidence, a more adversarial approach, representation of parties to a dispute by lawyers, and by necessity involve a more legalistic and costly approach to resolving disputes.
These principles mean that in resolving disputes we seek to understand all aspects of a dispute without taking sides, and make decisions based on the specific facts and circumstances of each dispute.
It is these principles that underpin our approach to the reforms we have implemented over the past few years to improve and streamline our dispute process.
We are seeing some encouraging results from the changes we have made in reducing timeframes and improving user experience, both without compromising quality.
Our recently released Annual Review for 2015-16 highlighted that through our resolve to improve our dispute process, the changes we embedded from 1 July have seen:
- a reduction in the average time taken to close disputes from 95 days in 2014-15, to 62 days last financial year, and
- the proportion of disputes closed within 30 days, increase from 22% to 43% for the same period.
What we stand for
So what can we say FOS stands for as we consider our responses to the Ramsay and other reviews?
We have welcomed the current expert panel review of EDR established by the Government.
We are strongly supportive of efforts to reduce complexity for consumers in accessing effective redress for financial sector disputes, which are not able to be sorted out directly between the firm and its customer.
We clearly set out in our submissions to the Murray Inquiry why the existence of multiple schemes can create unnecessary complexity for consumers, especially given the changes we are experiencing, and will continue to experience, in financial services.
The terms of reference for the review by the independent expert panel set out the important criteria against which it is required to assess how well the current dispute resolution arrangements are working.
These criteria are: efficiency, equity, complexity, transparency, accountability, comparability of outcomes and regulatory costs.
While we are still in the process of formulating our views to put to the review, we consider some fundamentals should remain at the centre of financial sector dispute resolution, whatever specific institutional or legal structures eventuate.
These principles are fairness, simplicity, being open and accessible, and being adaptable.
Fairness: We must have a dispute resolution framework in Australia that promotes and fosters fair outcomes for consumers, thereby building and sustaining community trust in financial services.
This means retaining decision-making based on what is fair in all the circumstances, taking into account the law and other relevant factors rather than a more technical, legalistic approach.
Simple: It has to be easy for consumers to explain their problem and seek a solution without having to engage expensive and unnecessary representation.
Moreover, we need to ensure that people can lodge a dispute easily, no matter who they are, where they live or what technology they use to connect.
Open and accessible: People need to know about the scheme when they need it.
The scheme must understand the needs of the community and have the means to address barriers to access, particularly for the vulnerable and disadvantaged.
Outreach programs and sector engagement must remain a core part of a scheme’s activities and DNA.
And finally, Adaptable: One of the hallmarks of the EDR framework operating in the financial services sector, and of FOS in particular, has been the ability to be responsive, adapting to changes in the financial system (including legislative change), changing consumer behaviour and changing service provision.
We can be certain that the pace of change will continue to accelerate.
This makes it more important than ever that future structures of financial services EDR do not compromise the ability to flexibly respond and adapt to meet changing consumer and service provider expectations.
As I indicated earlier, given the challenges we all face in just keeping up with the busy-ness of daily life, it is often hard to get the time to focus on the things that really matter.
We hope that the FOS conference today enables you to take a little time out from the pressures of your day-to-day work to reflect on some of the key issues and common challenges we all face.
We have designed the program to be interactive, informative and with an element of fun.
Beyond the formal sessions, we hope that the conference provides you with plenty of opportunities to catch up with long-standing colleagues and network with new ones.
We have plenty of FOS staff in attendance, so please do take the opportunity to introduce yourself and have a chat.
I suggest you download and try out the FOS Conference app to help you do so.
Thank you for your attention. I wish you a successful and enjoyable conference.
The views expressed are those of the Office of the Chief Ombudsman and do not necessarily represent the views of the FOS Board or individual FOS Directors.