The chief executive of the Credit and Investments Ombudsman has supported calls for a royal commission into the major banks after the government’s decision to merge two existing ombudsman services into a ‘one-stop shop’.
The new Australian Financial Complaints Authority (AFCA) is being created in response to a review of financial sector ombudsman schemes by a panel appointed by the government and led by Professor Ian Ramsay.
On Tuesday (9 May), the Hon. Scott Morrison MP, Treasurer of the Commonwealth of Australia revealed the federal budget for 2017-18 and said of the AFCA: "We want customers and taxpayers to get a fairer deal from our banks.
"For the system to be fairer, there needs to be greater competition and accountability — now.
"In response to the Ramsay review, we are establishing a simpler, more accessible and more affordable one-stop shop for Australians to resolve their disputes and obtain binding outcomes from the banks and other financial institutions, to be known as the Australian Financial Complaints Authority."
However, the Credit and Investments Ombudsman (CIO) —which previously petitioned the Treasury against the merger of the CIO and Financial Ombudsman Service (FOS), amid concerns that a single dispute resolution scheme would "be prone to be monopolistic in its behaviour" — has come out against the new financial complaints authority.
"The Ramsay review was hastily commissioned to fend off calls for a royal commission and placate the Coalition backbench who were calling for a wide-ranging statutory financial services tribunal. The review is a complete whitewash and a politically expedient solution that fixes nothing,’ CIO’s Raj Venga said.
"This has been a wasted opportunity to expose entrenched big bank culture and put consumers first,” he said.
"Instead of investigating the root cause of the big bank scandals, the review has focused on the current two-ombudsman scheme model ─ CIO and FOS ─ although both are acknowledged by consumer advocates, ASIC and the Ramsay review itself, to be performing well for Mum and Dad complaints and straight-forward small business disputes.”
'AFCA won’t be able to deal with bank scandals'
Not having statutory powers, Mr Venga argues that the CIO and FOS were never intended, nor are they equipped, to publicly expose bad behaviour, impose penalties on financial firms or deal with complicated disputes involving large sums of money. He said that the AFCA will be no different.
"The AFCA will not be equipped to weed out poor corporate culture, call out moral obloquy or fix embedded organisational cultures. Only a royal commission can do this. Nor will it be able to impose penalties for wrong doing – only a statutory tribunal can do this,” Mr Venga said.
"AFCA won’t be able to deal with bank scandals which have caused public outrage, invited the scrutiny of numerous parliamentary inquiries, prompted calls for a royal commission, and spurred the government to commission the Ramsay review in the first place”
The Credit and Investments Ombudsman’s members include mortgage brokers, non-bank lenders and mutual banks. It is an alternative dispute resolution scheme approved by ASIC to provide consumers with an alternative to legal proceedings for resolving financial services-related disputes with its members.
Mr Venga said that not having statutory powers, the new AFCA won’t be able to redress the power imbalance between big banks and small businesses or deal effectively with small business claims against banks.
"This is because AFCA won’t be able to subpoena a third party to attend as a witness or produce documents, join third parties or bind them to its decisions, cross-examine witnesses, take evidence on oath, investigate criminal fraud or impose penalties. Only a statutory tribunal can do this,” he said.
"It is painfully ironic that the major banks will be the big winners of AFCA. They know the one-stop shop is a diversion to avoid a royal commission.”
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
The mortgage technology provider has tapped into open banking dat...
The lender’s co-chief executive believes this will sustain gro...