Banks and Financial Services Providers
Banks and financial services providers must be licensed to provide their services to consumers. It is a condition of such a licence that the bank or financial services provider be a member of an External Dispute Resolution (EDR) scheme that is approved by ASIC.
Before complaining to one of the EDR schemes about the conduct of a bank or financial services provider, consumers must try to resolve the dispute with the organisation through its own Internal Dispute Resolution service.
Currently there are two EDR schemes for banks and financial services providers, the Financial Ombudsman Service and the Credit and Investments Ombudsman (formerly the Credit Ombudsman Service Limited). These are described in more detail below.
Code of Banking Practice
Banking standards are determined by the Code of Banking Practice. The Code outlines the banking industry's obligations to customers. The Code was most recently amended in 2013. If your dispute arose before 1 February 2014, you will need to look at the earlier versions of the Code.
Whilst the Code is not legislation, banks that adopt it are contractually bound to honour the obligations the Code sets out.
The Code ensures customers rights with regards to such things as:
- Privacy and confidentiality
- Statements of account
- Direct debits
- Disclosure of fees and other terms and conditions
- Changes to terms and conditions and fees and charges
- Complaints handling
- Debt collection
- Financial hardship
- Chargebacks (where credit card transactions are in dispute)
- Onselling of debts.
If you think your bank has breached the Code you need to first raise it with your bank. It is a condition of the Code that all banks that adopt it must have an internal complain handling service to deal with customer complaints. If the complaint is not handled to your satisfaction you can then contact the Financial Ombudsman Service for further assistance.
Consumers also may make a complaint to the Code Compliance Monitoring Committee (CCMC) about any possible breach of the Code by a subscribing Bank, although the CCMC will not help with the resolution of the dispute.
Financial Ombudsman Service
The Financial Ombudsman Service (FOS) is an independent dispute resolution service for individuals and small business holders. Access to the Financial Ombudsman Service is free and it has proved to be an effective forum for people with certain types of complaints.
The FOS can generally hear disputes if:
- the dispute is between an individual or small business and a bank or financial institution (including credit unions);
- the financial services provider is a member of FOS;
- the dispute relates to:
- an act or omission by a financial services provider in relation to a financial service in Australia; or
- any act or omission by a financial services provider relating to confidentiality and in the case of an individual disputant, privacy;
- the amount claimed is less than $309,000 (or $280,000 if the complaint was lodged before 1 January 2015);
- the event to which the dispute relates occurred no more than 6 years earlier.
There are some types of disputes which the FOS is unable to consider, including commercial judgments and policies about fees, interest rates and branch closures. The FOS can only consider disputes about financial services provided by banks and non-bank members who are members of the FOS scheme.
Further information about the types of disputes the FOS can consider is available on the Financial Ombudsman Service website.
The FOS may investigate a complaint and attempt to resolve it by negotiating between the financial services provider and customer. If this fails, the FOS may recommend a solution for the parties to consider. If this also fails, the FOS may determine the dispute, which may include monetary compensation or other options to resolve the dispute.
If the customer accepts the determination, it is binding on the financial services provider, and the customer loses the right to have the dispute heard by a court. However, should customers choose not to accept the award, the financial services provider cannot enforce the award. The customer may then proceed to have his/her case decided by a court.
FOS can also take complaints about insurers, and other financial services providers. As a first step before lodging a complaint, consumers need to ensure that their financial services provider is a member of FOS, as well as attempting to resolve the dispute with the provider.
Credit and Investments Ombudsman (CIO)
The Credit and Investments Ombudsman (formerly the Credit Ombudsman Service Limited or COSL) operates in a similar manner to FOS. It offers a free service to consumers who may have a dispute with their financial service provider. Participants of the scheme include credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, investment managers, debt services and a wide range of other financial services and product providers.
It is best to check with the CIO to see if your financial services provider is a member before lodging a dispute. In addition, consumers need to attempt a resolution through the financial services provider's own internal dispute resolution service first.
The CIO has Rules, a copy of which can be found on their website. The Rules set out who can lodge a complaint, what the complaint can be about, what the CIO can and cannot do, and the procedures for making a complaint.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.