Complaints and disputes

You may be surprised to know, however, that the vast majority (70% -75% respectively) of disputes handled by FOS and COSL are resolved by agreement between the parties. Of those that reach a determination the majority are decided in favour of the FSP. Incentives, however, are built into the fee structure of both services to encourage FSP’s to settle early.

If you receive a notice from either FOS or COSL about a consumer complaint, there should be no need to panic. Firstly, if that consumer has not already been through your internal dispute resolution system (IDR) then the ombudsman’s service will refer them back to you. The consumer must put their complaint in writing and your IDR process must reach a decision within 45 days under the Australian Standard for Complaints Handling. Most firms do better than this.

Secondly, if the consumer has already been through your firm’s IDR, and the outcome was not to their satisfaction, you probably knew the complaint was coming anyway. Of course, for some small firms the designated IDR officer is the same person as the service provider. This is not an “ideal” position but is often unavoidable. The trick here for compliance is to keep good records of all complaints and how you responded.

Depending on your professional indemnity insurance policy and the size and nature of the complaint, you may have to notify your insurer at this stage. Sometimes FSPs handle ombudsman complaints themselves and sometimes they or their insurer appoint lawyers. Quite often, the process is staged with initial responses and negotiations being conducted by the FSP itself and, if the outcome looks as though it is going to be adverse (that is the ombudsman’s service produces a negative Recommendation but has not yet moved to Determination) then solicitors are engaged.

If you are handling the response yourself, there are a few things you need to remember. Don’t dismiss the consumer’s position no matter how much you disagree with it. The ombudsmen and their case managers will take it very seriously. Read everything the consumer has said and answer each and every one of their allegations. If you don’t, the case manager will just come back to you and ask you to do so. If you ignore this, they may resolve the particular question against you.

Consumers often do not express themselves in ways which are familiar to those of us who work in or with the industry. If you do not understand what the consumer is getting at, pick up the phone or write and email to the FOS or COSL case manager and ask them to explain. If they can’t then they will seek more information from the complaining consumer. Simply saying “we don’t understand this” in your response documents will not help resolve the complaint.

Provide all the documents that are relevant to the dispute as early as possible, preferably with your initial response. If you are unsure about a particular document, get advice from your lawyer or the one appointed by your insurer. Failing to provide relevant documents is a breach of the Terms of Reference (in the case of FOS) and the Rules (in the case of COSL) and can lead to case managers and ombudsmen drawing adverse inferences from the absence of particular documents.

There is nothing more annoying to case managers, ombudsman and FOS panel members than “last minute” disclosures of important and relevant documents. This is bad enough when it comes from the consumers. When it comes from industry, who are charged under their licence obligations with high standards of record keeping, it does not go down well.

After both parties have made their initial responses, the case manager will often produce a summary of the case and the arguments. This is another opportunity to clarify your position and improve your argument. Take it and do so in a way that is helpful to the case manager. Soon they will be writing a Recommendation. Although these are exactly what they say, only a recommendation, it is rare that subsequent Determinations do more than modify earlier Recommendations. The take home message, is get your message across early. It will also save you some case management fees.

Ultimately, however, your complaint may end up in a determination either by an individual ombudsman or a panel. If it goes against you, you most certainly need legal advice. Unfortunately, there have been no completely successful appeals by any FSP against an determination of FOS (there have been no appeals at all against decisions by COSL).

To get a good idea of how FOS and COSL deal with complaints in your industry, go to their respective websites and take a look at case studies and published determinations. They can help you understand how to handle complaints and, better still, how to avoid them.

Dr Paul O'Shea, director and principal solicitor of O’Shea Lawyers Pty Ltd

Dr Paul O’Shea is the director and principal solicitor of O’Shea Lawyers Pty Ltd. He has conducted some of the leading cases in consumer credit law.  He has advised governments, consumer groups and industry. Dr O’Shea has published widely and conducted many seminars for the Queensland Law Society, state and federal governments and private agencies in Australia, Singapore, Thailand, Brunei and China and is currently a member of the Investment, Life Insurance and Stock Broking Panel of the Financial Ombudsman Service. He also has advised other industry dispute resolution schemes and has been a member of the Banking and Finance Committee of the Queensland Law Society for more than 15 years.  He is the author of The Legal Environment of Business published by Thomson Reuters and his most recent publication is a chapter on “Regulatory Powers” in the 2013 Federation Press book Consumer Law and Policy in Australia and New Zealand.