A record number of disputes were reported to the FOS in FY18, partly due to heightened attention on the industry brought on by the financial services royal commission.
The Financial Ombudsman Service’s annual review — the last before it becomes part of the new Australian Financial Complaints Authority (AFCA) — shows a record number of complaints.
Specifically, 43,684 complaints were received in the last financial year, an increase of 11 per cent from the 39,479 recorded in FY17, while 43,325 disputes were closed, up by 10 per cent over the year from 39,481.
The “unprecedented” dispute numbers have been attributed to the FOS’ community outreach activities over several years, as well as the enhanced attention on the sector brought on by the ongoing financial services royal commission and public debate on the future of external dispute resolution (EDR).
All categories of disputes increased in FY18, except for general insurance, with credit-related disputes ranking the highest. Last financial year, there were 11,295 complaints pertaining to credit products, up by 3 per cent on the previous year and accounting for 43 per cent of total FOS disputes.
Complaints in relation to payment systems rose the most, by 24 per cent, to 1,656 in the 2018 financial year. This was followed by those pertaining to deposit-taking and investments and advice products, both of which increased by 18 per cent year-on-year to 2,195 and 1,524, respectively.
According to the FOS’ final annual report, the top three products disputed were credit cards, accounting for 15 per cent of all disputes, followed by home loans and vehicle insurance, each accounting for 10 per cent of total complaints. The main complaints were denial of claim (8 per cent), claim amount (7 per cent) and failure to follow instructions/agreement (7 per cent).
The FOS further reported that 43 per cent of total disputes, or 26,570, were from the banking sales and service channels, 28 per cent from general insurers and 9 per cent from credit providers.
Mortgage brokers, which accounted for 3 per cent of the FOS’ membership base, made 11 complaints in total, which were in relation to advice (1), charges (2), disclosure (3), FSP decision (1), instructions (2), outside terms of reference (1), and privacy and confidentiality (1).
Finance brokers submitted 94 complaints in FY18, most of which were related to instructions (25), charges (20), disclosure (16) and financial difficulty (6).
Only three complaints were made by mortgage aggregators, with their issues falling into the categories of FSP decision (1), outside terms of reference (1) and service (1).
There were also disputes submitted by mortgage managers (12 in total) and mortgage originators (4 in total).
The average time to close disputes in FY18 remained stagnant at 54 days, with 48 per cent of disputes being closed within 30 days (up from 44 per cent) and 80 per cent within 60 days (up from 78 per cent).
The FOS identified and referred 306 possible systemic issues to financial firms in the 2018 financial year and resolved 91 definite systemic issues.
More than 295,000 customers were estimated to have been affected by the systemic issues the FOS investigated over the same year.
AFCA — which is the consolidation of three EDR schemes: the Financial Ombudsman Service, the Superannuation Complaints Tribunal, and the Credit and Investments Ombudsman, is set to commence operation on 1 November, with around 550 staff members and expects to receive 50,000 complaints within its first year.
Speaking at the recent National Small Business Summit, the CEO of AFCA, David Locke, commented that the authority has “tremendous data” on financial services organisations at its disposal due to the “tens of thousands of disputes that are coming through”, and that this will help it to identify systemic issues moving forward.
“We already do work identifying where there are systemic issues and actually working with ASIC to put in place remediation schemes in respect of those,” Mr Locke said.
Tas Bindi is the features editor for The Adviser magazine.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.
Improved broker services and the FHLDS have helped the Queensland...
Raine & Horne Group’s executive chairman has said that pre...
The major brokerage has hired 148 new client service managers sin...