Regulator to investigate players wrongly recouping dispute costs from customers

Regulator to investigate players wrongly recouping dispute costs from customers | Insurance Business

Regulator to investigate players wrongly recouping dispute costs from customers
Some financial service providers (FSPs) are wrongly attempting to recover dispute resolution costs from customers, the Financial Ombudsman Service has identified in the June quarter.

The issue is currently under investigation by FOS, which has identified it as a ‘new definite systemic’ issue. In one case, FOS reported that an FSP has appointed solicitors to manage legal proceedings against the applicant, the FSP had passed on to the applicant the legal costs it incurred for work conducted in responding to the dispute.

FOS was also concerned that the FSP had not ceased all enforcement activity and therefore had breached clause 13.1 of FOS’s Terms of Reference.

“We are concerned that such costs have also been passed on to other customers, causing them loss,” it said in the latest circular.
Other ‘possible systemic issues’ under investigation include improper collection activity, particularly while a dispute is open with FOS, the conduct of employees and authorised representatives, processing errors such as whether processes for releasing pre-authorisations were subject to unreasonable delay and/or caused a wider group of customers financial difficulty or loss, inappropriate charging of a fee, particularly relating to over-limit fees on accounts entered into after July 2012.

FOS said sometimes they investigate issues that are “ultimately determined to be not systemic” but encourage the FSP to improve or change their processes. 

Giving an example, it stated that an FSP reviewed its current internal processes and procedures and has put in place new systems and conducted refresher training of IDR/EDR staff to ensure that it complies with EDR obligations and responds to FOS requests for information properly and within appropriate time frames.
  • Gwen Ford 2014-08-06 12:15:07 AM
    I believe that some unscrupulous Consumers know the FOS system, and know that there is costs to FSP for disputes, even if it is found in favour of the FSP. They also know that if the claim they are disputing is less than the disputes costs, it becomes cheaper to pay the disputed claim than fight it. Perhaps if the client had to pay a lodgement fee of say $100, that will only be refunded if the dispute is resolved prior to going to dispute, or is determined in favour of the customer. If FOS determine in favour of the FSP then the $100 is forfeited. This would stop a large number of vexatious and frivolous complaints.
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