Review of the Financial System External Dispute Resolution and Complaints Framework: Supplementary Final Report
Review of the Financial System External Dispute Resolution and Complaints Framework: Supplementary Final Report, Commonwealth of Australia (2017); ISBN 978-1-925504-64-4
217 Pages Posted: 6 Jan 2018
Date Written: September 6, 2017
This is the supplementary final report of the independent Panel which was asked by the Australian government to review the financial system external dispute resolution and complaints framework. The Panel has prepared this supplementary report to address two matters in the amended terms of reference given to it by the government. The amended terms of reference require the Panel make recommendations on the establishment, merits and potential design of a compensation scheme of last resort and to consider the merits and issues involved in providing access to redress for past disputes. In relation to a compensation scheme of last resort, the Panel notes that the Corporations Act 2001 and the National Consumer Credit Protection Act 2009 impose an obligation on licensees to have arrangements for providing compensation where certain specified losses occur. As a result, consumers and small businesses have a reasonable expectation that they will receive compensation in these circumstances. There is, however, clear evidence that current arrangements are failing to meet this expectation, with some consumers and small businesses not receiving compensation that has been awarded to them. To fill what the Panel regards as a gap in the dispute resolution framework, the Panel recommends that a limited and carefully targeted compensation scheme of last resort be introduced for future unpaid compensation in the area of financial advice failures as this is where there is evidence of a significant problem of compensation not being paid. The Panel identifies the key design features of this scheme. In relation to providing access to redress for past disputes, while the Panel identifies a range of circumstances where there may be merit in considering providing access to redress for past disputes, the Panel also identifies a number of issues that make this particularly challenging. In many cases the financial firm whose misconduct has resulted in the loss is not available to bear the costs (for example, due to insolvency). As a result, in order to provide access to redress the costs of considering disputes and paying compensation arising from any misconduct will fall to the broader financial services industry or the Australian taxpayer. Adding to this complexity is the lack of data on the scale and scope of these past disputes and the potential value of compensation that could be sought. Without an accurate quantification of the size, scale and nature of the potential claims it is not possible to fully assess the merits and issues in this area. The Panel identifies four possible options for providing access to redress for past disputes.
Keywords: alternative dispute resolution; financial disputes; compensation; financial advice; ombudsman; consumers
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