In recent editions of The FOS Circular and submissions to public inquiries we have discussed the issue of some consumers not receiving compensation from financial services providers (FSPs) following FOS determinations. This article provides an update on the number of unpaid FOS determinations for the period 1 January 2010 to 30 September 2015 (the period for which FOS’s Terms of Reference has been operating).
Since 1 January 2010:
- 33 FSPs have been unwilling or unable to comply with 133 FOS determinations made in favour of consumers.
- The value of the outstanding amounts awarded by these determinations was $12,564,735.82 plus interest as at 30 September 2015.
- Inclusive of the interest awarded by the decision-maker and adjusted for inflation over time, the real value of this uncompensated loss is $16,592,456.55.
This issue affects approximately 188 individuals whose claims FOS upheld, but who have not been paid the compensation awarded to them.
For the first time since reporting on this issue began, there have been no incidents of non-compliance since the last report, and indeed, there have been some partial payments made by FSPs on the list (or their insolvency practitioners).
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, unpaid determinations represent 23.17% of all determinations issued in the Investments and Advice (I&A) area, and 58% of these relate to disputes in the financial planning and advisory sector. This is despite the small number of FSPs involved.
Possible actions to address uncompensated losses
We will continue to explore more appropriate mechanisms for a limited last resort compensation scheme for consumers with ASIC, industry, consumers and policy-makers to ensure that when decisions of compensation in favour of consumers are made, these are able to be paid. We look forward to working with the industry to develop a workable scheme.