Ombudsman's foreword

Colin Neave AM

This year marks my tenth year in office. It is therefore timely for me to reflect not only on developments in this past year but on the significant changes in the financial services environment and at BFSO over the past 10 years.

Resolving disputes early

This year has seen an increase in the number of disputes received which were resolved prior to investigation by BFSO. It is important that disputes are resolved at the earliest opportunity and our processes encourage early resolution where possible. However, referral to an external dispute resolution scheme should not be the impetus for resolving a dispute which could have otherwise been resolved by a member through its internal dispute resolution processes. I hope that members will continue to strive to resolve such disputes internally so that easily resolved disputes are not escalated to BFSO.

Financial over-commitment and hardship disputes rise

This year has also seen an increase in disputes in investigation where the underlying problem is financial over- commitment and hardship. This indicates that an increasing number of consumers are experiencing difficulty meeting existing financial commitments, particularly credit card repayments. In some circumstances, our investigations indicate that consumers received a loan or credit facility they could not afford to repay. We support the ongoing efforts of our members to work with consumers in financial difficulty and to minimise financial over-commitment.

Expansion of our jurisdiction and membership base

When I commenced my term in office, the Scheme was known as the Australian Banking Industry Ombudsman. Only banks could be members. Over the last 10 years, our membership base has expanded to include 33 bank members and 54 non-bank members, including 23 new members this year. The monetary limit of the Scheme has also increased from $100,000 to $250,000, ensuring the ongoing accessibility of the Scheme for the majority of consumers, and our jurisdiction has expanded to include incorporated small business enterprises.

The expertise of our staff has grown beyond traditional banking disputes as we have developed the knowledge and skills to handle disputes in relation to a complete range of financial services in response to our expanding membership base. As I write, our members include banks, mortgage brokers, financial planners, debt collection agencies, foreign exchange providers, non-cash payment facilitators and a credit reporting agency. In addition, we provide dispute resolution services for the Credit Union Dispute Resolution Centre and Insurance Brokers Disputes Limited schemes and have developed our expertise in relation to the range of disputes that those schemes receive, including general and life insurance.

Regulatory reforms in the financial services sector

The expansion of our membership base has resulted, in part, from significant reforms in the regulation of the financial services sector. In September 2001, as part of a package of reforms leading to the enactment of the Financial Services Reform Act (Cth), BFSO received approval from ASIC as an external dispute resolution scheme for financial services licensees. This saw the Scheme linked to the regulatory framework in the financial services sector and reflected an increased recognition by Government of the importance of alternative dispute resolution mechanisms.

These regulatory reforms have been coupled with some important self-regulatory initiatives. The revised EFT Code of Conduct, which came into operation in 2002, provided comprehensive protection for consumers when conducting electronic funds transfers. In 2003, the Australian Bankers’ Association launched the new Code of Banking Practice. This Code, which forms part of the contract between a subscribing bank and its customer, further enhances the legal protections available to consumers when dealing with their bank.

Changes to the Scheme’s Terms of Reference in 2002 saw the extension of our decision making criteria to require the Ombudsman to take account of relevant industry codes. The EFT Code of Conduct and the Code of Banking Practice are now considered regularly in Findings made by case managers and Recommendations made by the Ombudsman.

Increase in the complexity of disputes

The last decade has also seen considerable changes in the type and complexity of products offered by Australian financial services providers. The growing use and acceptance of internet and telephone banking, for example, has given rise to new types of disputes. More generally, as members become more efficient at resolving disputes internally, there has been an increase in the level of difficulty of disputes investigated by the Scheme. In a recent audit of the Scheme’s decision making processes, following on from an earlier review conducted in 1999, I was heartened by the auditor’s comments that:

‘Overall, the files audited in this review involve more complex fact finding and often more complex legal and banking issues than the case in the 1999 audit. This is due in part to the addition of small business disputes to the jurisdiction. We were pleased to note that the quality of investigations and findings overall has increased from 1999 notwithstanding the increase of complexity and difficulty.’

I am pleased by the observation that, in the midst of increasingly complicated disputes and the ever changing financial services environment, the quality of investigations and Findings overall has increased and that the Scheme has enhanced its reputation as an expert in the resolution of banking and financial services disputes. These remarks, along with the positive endorsement received from the 2004 Review of the Scheme, reflect an organisational culture committed to fair, impartial and consistently high quality decision making.

The commitment and expertise of our staff

During my time in office, I have been supported by a skilled and dedicated team, many of whom have been with the Scheme since my appointment in 1996. I would like particularly to thank Diane Carmody, General Manager of the Scheme, for her professionalism, enthusiasm and expertise. I have been fortunate to have Diane working with me for the whole of my period in office. She has provided the organisation during that time with enormous support and has played an important role in the success the Scheme now enjoys.

I am also grateful to the Chairmen and members of the BFSO Board with whom I have worked over the last decade for their contribution to the achievements of our BFSO Scheme. All of Sir James Gobbo, Sir Edward Woodward, Jillian Segal and now Michael Lavarch, have provided sound leadership to the Board and counsel to the Ombudsman in such a way as to contribute very positively to our reputation as a leading dispute resolution scheme.