As my nine year term as a director of Credit Ombudsman Service Limited comes to a close, it is a good time to reflect on industry concerns about external dispute resolution generally.
COSL’s 2013 annual report (not written by me) deals with the industry’s frustrations well and fairly, and I thought it worthwhile to bring these comments to the attention of a wider audience. To quote this report:
‘Industry has expressed its frustration at various forums about having to discontinue enforcement action once a complaint is received by an EDR scheme. Common views are that:
- delays can result in significant cost to a FSP because the security property cannot be sold while the complaint is being addressed at EDR;
- there should be introduced a maximum time limit for EDR schemes to handle debt-recovery complaints, on the expiry of which the FSP would be free to resume or commence enforcement action;
- borrowers and their advocates are lodging complaints with EDR as a delaying tactic or negotiating manoeuvre;
- borrowers are not making payments while the complaint is being heard in EDR; and
- the borrower’s equity is being eroded by delays.
ASIC, in releasing the results of a review of the jurisdiction of EDR schemes, confirmed its view on “the appropriateness of the existing policy settings”. We think this is the correct regulatory response. After all, had the consumer defended the proceedings in court, FSPs would still face the same outcomes: they would not be able to realise the security; they would experience delays in having the case heard in court (and the delays would likely be more substantial than those that might be experienced in EDR); and the borrower’s equity would, consequently, be diminished by the delays, particularly as defaulting borrowers are unlikely to make payments while the case is being heard.
It is no answer for a FSP to say that borrowers would not usually defend enforcement proceedings in court. That is precisely why EDR schemes were established and given legislative recognition in the NCCP Act and the Corporations Act: to provide access to dispute resolution as an alternative to lengthy and costly legal proceedings.
But we appreciate that delays are in no one’s interest. On our part, we will continue to improve our processes and timelines and make EDR as quick and efficient as possible.
It is, however, troubling to note that, as far as some FSPs are concerned, all complaints made against them are seemingly vexatious or frivolous and should be closed by COSL without any investigation whatsoever. Others spend a disproportionate amount of time and effort insisting that the complaint is not within our jurisdiction when, on any reasonable interpretation, it clearly is. The attitude demonstrated by these FSPs suggests that their internal dispute resolution (IDR) processes can only be ineffective and possibly intimidating to their clients, which would perhaps explain why the consumer approached us in the first place.’
Thankfully, the overwhelming majority of financial service providers demonstrate a genuine willingness to resolve complaints in good faith.