Consumer groups and other organisations are calling for the creation of a unified agency to handle complaints regarding the financial services sector.
The move would bring together the functions of four financial services dispute schemes – the Insurance and Financial Services Ombudsman (IFSO), the Banking Ombudsman, the Financial Services Complaints Limited (FSCL) and the Fairway Dispute Resolution Service.
The Salvation Army, Consumer NZ, Fincap, Citizens Advice Bureau Ngā Pou Whakawhiriinaki o Aotearoa (CAB) and Christians Against Poverty are the groups calling for the merging of the four agencies, Stuff reported.
All financial service providers, such as insurers, banks and lenders must be under the jurisdiction of one of the schemes, which seek to address customer complaints and ensure companies adhere to their industries’ regulations.
According to the Salvation Army, many New Zealanders, especially those in extreme financial hardship, are finding it difficult to access these schemes. These include traditionally “hard-to-reach” populations such as Māori and Pasifika.
“The current schemes are too complex, complicated, and burdensome for our financial mentors and budgeters to navigate for themselves, and difficult for them to help clients navigate,” the organisation said in a submission to the Ministry of Business, Innovation and Employment, which was conducting a review of the financial complaints schemes.
Some people in financial trouble, the Salvation Army said, may have to approach multiple agencies to solve their problems. It cited the case of a debt-burdened couple in Auckland, who had to complain to all four schemes because each of the lenders they were indebted to each belonged to a different scheme.
Fincap, a nationwide association of budget mentors, said that the current system has very high barriers for those who are most likely to complain.
“Vulnerabilities like experiencing mental health issues, family violence, difficulty finding work, imprisonment, the death of someone close, difficulty reading and writing or with maths, injury or illness or a multitude of other issues can make ongoing engagement with organisations difficult,” Fincap said in its submission.
Christians Against Poverty said lenders often keep silent on the existence of these schemes, to reduce the likelihood of having a complaint filed against them. Some lenders also join the scheme that they believe would be most lenient to them.
CAB, in its submission, said that having four schemes was confusing for people having financial difficulties, making it less likely for them to complain.
Consumer NZ argued that having a single scheme will remove the problem of each of the four schemes having differing financial caps for complaints.
The heads of all four schemes agreed that there is a need for greater harmonisation of rules and financial caps.
Insurance Ombudsman Karen Stevens said that the current IFSO cap of $200,000 was too low. For comparison, the Banking Ombudsman’s cap is $350,000.
Stevens said that many insurance policies, such as life insurance and home insurance for total loss deal with amounts exceeding $200,000.
The Insurance Council of New Zealand (ICNZ) said that it supported the lifting of the IFSO cap “in principle”, but it also had concerns with regard to fraud.
“Where there are indicators of fraud, particularly in relation to a large claim, it is important that decision makers have the opportunity to assess a complainant in person,” ICNZ said. “Increasing the cap to $350,000 would allow more claims where fraud is suspected to be heard by a financial dispute resolution scheme without there being an opportunity to hold a hearing and cross-examine the complainant about the circumstances giving rise to the claim.”