Terms of Reference Process

Transcription

1 Terms of Reference & Operational Guidelines Information session Consumer Representatives March 2010 Terms of Reference Process Legal proceedings 1

2 Terms of Reference Background FOS is an ASIC approved External Dispute Resolution (EDR) Scheme Merger of 5 EDR Schemes BFSO, FICS, IOS, CUDRC, IBD Condition of AFSL if dealing with retail clients that a Financial Services Provider (FSP) belongs to an approved EDR Scheme Conditions for ASIC approval of FOS are in RG139 (updated in May 2009) 2

3 Requirements of RG 139 RG139 requirements for an EDR Scheme include: Independent & fair Accessible Free to consumers Able to make binding decisions Obligation to accept disputes up to $500,000 $280,000 compensation cap by 1 January 2012 Terms of Reference and Operational Guidelines Terms of Reference (TOR): - outline jurisdiction for considering a dispute lodged with FOS - provide power to establish internal procedures and types of remedies FOS can provide Operational Guidelines (OG) explain how TOR operate and provide extra detail as to how FOS will resolve disputes FOS developed TOR and OG with extensive stakeholder consultation 3

4 Some key changes Key changes affect matters including: Time limits for lodgement IDR requirements Decision making process Remedies eg caps Legal proceedings after lodgement Transition to FOS TOR Applicable TOR depends on date dispute lodged Dispute lodged before 1/1/2010 Dispute lodged between 1/1/2010 and 31/12/2011 Old TOR apply FOS TOR apply Schedule 1 states remedy cap FOS TOR apply Dispute lodged on or after 1/1/2012 Schedule 2 states remedy cap 4

5 When can FOS consider a dispute? FSP must be member when dispute lodged (need not be a member at time of events giving rise to dispute) Applicant must be eligible to lodge a dispute Dispute must be lodged within time limits FSP must have had an opportunity to resolve the dispute Dispute must not be excluded Any dispute can be considered if all parties and FOS agree Who are members of FOS? Administration Services Provider Bank Building Society Charity/Community Fund Clearing/Settlement House Corporate Advisor Credit Provider Coverholder Credit Representative Credit Reporting Agency Credit Union Custodial & Depository Service Debt Collector or Buyer Derivatives Dealer Warranty Provider Finance Broker Financial Advisor/Planner Foreign Exchange Dealer Friendly Society Fund Manager General Insurance Broker General Insurer Life Insurance Broker Life Insurer Make a Market Managed Investments Scheme Operator Managed Discretionary Account Operator Mortgage Broker Non-Cash Payment System Provider Mortgage Aggregator Mortgage Manager Mortgage Originator Pooled Superannuation Trust Private Health Insurer Product Distributor Product Issuer Professional Indemnity Insurer Reinsurer/ Reinsurance Agent Research House Securities Dealer Stockbroker Superannuation Fund Trustee/Advisor Travellers' Cheques/Foreign Currency Transfer Provider Trustee Underwriter/Underwriting Agency 5

6 Eligible applicants 4.1 Individuals Partnerships of individuals Corporate trustees of self managed super funds or family trusts Small businesses (as defined in Corporations Act) Clubs and incorporated associations Subject of dispute 4.2 Dispute must arise under Australian law Dispute must be between FSP and Applicant Dispute must be about financial service that FSP provided to Applicant or a matter specified in para 4.2b)(ii) to (vii) e.g. Applicant s benefit under insurance policy claim for damage to uninsured vehicle caused by driver of comprehensively insured vehicle guarantee provided by Applicant interest in investment or risk management facility service provided by third party on behalf of credit union 6

7 Products in FOS jurisdiction Time limits 6.2 Dispute must be lodged with FOS: within 6 years of date when Applicant first became aware (or should reasonably have become aware) they suffered the loss where Applicant received IDR response as defined in TOR, within 2 years of the date of that IDR response In exceptional circumstances, FOS may consider dispute lodged d outside these time limitsit 7

8 Jurisdiction 5 Some disputes are excluded from FOS s jurisdiction, there are: - non-discretionary exclusions and - discretionary exclusions There are some important exceptions to these exclusions FOS may exclude a dispute at any stage Non-discretionary exclusions 5.1 Include: Commercial decision such as a credit risk assessment Refusal to insure Investment performance Levels of fees, premiums, charges or interest rates Where claim is for more than $500,000 Where dispute has already been dealt with or is being dealt with by a court or EDR scheme 8

9 Discretionary exclusions 5.2 Other forum is more appropriate to deal with dispute Applicant not a retail client Dispute about practice or policy Dispute is frivolous, vexatious or lacking substance Applicant commences legal proceedings after dispute lodged with FOS Exceptions 5 Include: Confidentiality or privacy where part of broader dispute or relates to credit or banker-customer matters Credit risk assessment (maladministration in lending, loan management or variation of credit contract where financial hardship) Where legal proceedings discontinued 9

10 Jurisdictional objections 5.3 If FOS decides dispute is excluded, an Applicant may object to decision An Applicant has 30 days to object to the decision FOS will only review a decision if satisfied that the Applicant s objection may have substance In review, all parties may provide submissions Compensation caps 9.7 A cap is the maximum value of the remedy FOS may award for a claim (excluding costs and interest) award for a claim (excluding costs and interest) Monetary limit for a claim is now $500,000 Different caps apply for different types of claims Some caps will increase on 1 January 2012 Caps will be indexed 10

11 Amount of caps 1 January January 2012 Banking & Finance $280,000 $280,000 General Insurance $280,000, but $3,000 for TP motor vehicle claim Insurance Broking $100,000 $150,000 $280,000, but $3,000 for TP motor vehicle claim Lump Sum insurance - Lump Sum insurance - $280,000 $280,000 Investments, Life Income stream Income stream Insurance & insurance - $6,700 per insurance - $6,700 per Superannuation month month Investment - $150,000 Investment - $150,000 Mutuals $280,000 $280,000 Compensation 9 Direct financial loss Consequential ( indirect ) financial loss capped at $3,000 per claim Non-financial loss capped at $3,000 per claim No compensation for consequential or non-financial loss in dispute about general insurance policy that expressly excludes liability for such loss Legal or other professional costs or travel costs incurred by Applicant capped at $3,000 (unless exceptional circumstances apply) Can require an FSP to take course of action eg an apology 11

12 Meaning of claim Claim refers to the set of facts that, put together, give an Applicant the right to ask for a remedy FOS does not aggregate a number of claims into one claim just because the claims all arose from an ongoing relationship between an FSP and an Applicant One claim or multiple claims may be raised by Applicant Where FOS deals with a number of claims together as a single dispute, the caps apply to each claim within the dispute Dispute Resolution Process 12

13 Process Lodging a dispute 6 Online dispute form, , letter, telephone Registration occurs where an Applicant lodges a dispute before first complaining to the FSP or within 45 days of first requesting the FSP remedy the matter FOS registers the dispute by notifying the FSP that a dispute has been lodged and it has up to 45 days (or the balance) to resolve the dispute directly with the Applicant FOS may extend the 45 day period in special circumstances FOS may deal with an urgent dispute immediately or reduce the 45 day timeframe (financial difficulty 30 days) Registration Dispute received from Applicant and FSP notified FSP has up to 45 days to resolve dispute 13

14 IDR Response Characteristics of an IDR Response include that it: Is a written response Explains the FSP s IDR process has concluded Identifies it is the FSP s final decision about the complaint/claim Explains what the FSP s final decision is, with the word final given prominence Advises the Applicant has the right to take the complaint to FOS Provides the time limits that apply if the Applicant wishes to take the complaint to FOS and Provides FOS s contact details Where FSP has not resolved dispute A dispute will proceed and jurisdiction will be assessed where: An Applicant has previously complained to the FSP and has received a response which does not resolve the dispute, or More than 45 days has passed since the Applicant contacted the FSP and the dispute remains unresolved. at the time the dispute is lodged with FOS Acceptance Applicant contacts FOS to progress dispute if registered Applicant lodges dispute when unable to resolve dispute directly with FSP Jurisdictional assessment of dispute 14

15 Case management Dispute is referred to FSP We request all parties to provide relevant information so we can review the issues raised by the dispute FSP has up to 21 days to provide response Upon receipt of information and documentation, we review the dispute to assess appropriate dispute resolution methods such as assessment on merits, conciliation and/or negotiation Case Management Initial referral of dispute to FSP Exchange of relevant information Dispute resolution methods negotiation, conciliation, assessment on merits Investigation Dispute handling 7 & 8 To assist in consideration of dispute, FOS can require a party to: - take action - provide necessary information - attend interview FOS can require FSP to investigate dispute further FOS can appoint independent expert to report to FOS If FOS obtains expert advice, it can require FSP to pay or contribute to expert s reasonable fees limited to $3,000 per dispute unless circumstances are exceptional 15

16 Information 7 & 8 FOS cannot use information withheld from any party to make a decision adverse to that party Narrow exception in special circumstances where compelling reason to depart from rule Where FSP or Applicant fails to provide information, FOS may proceed on basis an adverse inference may be drawn from failure to comply with request Decision making criteria 8.2 When making decisions, FOS must do what is fair in the circumstances having regard to: circumstances having regard to: Legal principles Industry codes Good industry practice, and Previous FOS decisions (not binding) 16

17 Outcomes Resolution FOS is focused on assisting FSPs and Applicants resolve disputes by agreement New TOR and dispute process provide for a variety of dispute resolution methods including: negotiation conciliation initial assessment of merits FOS has been increasing its use of conciliation and negotiation to resolve disputes and this will continue to expand in next 12 months Outcome Settlement Recommendation Determination 17

18 What is conciliation? Conciliation is a process by which the parties to a dispute, together with the assistance of a neutral FOS conciliator, attempt to find a resolution to the dispute Conciliation helps resolve disputes by: - sharing information - identifying issues in dispute - discussing them and - trying to reach an agreement What is expected of parties? Approach the conciliation with an open mind Be prepared to be open in the discussion of the issues Be prepared to be open in the discussion of the issues Be at the meeting place or telephone contact point, as arranged, to ensure the conference starts on time FSP representative has the authority to agree to settlement If settlement is reached, then the parties may sign a deed of release or have the settlement recorded in a terms of settlement document 18

19 Decision making process 8 FOS has a new two step decision making process: Recommendation Determination Decision making process 8 Recommendation is made by FOS caseworker after investigation of information provided by the parties Recommendation can be accepted or rejected within 30 days If both parties accept decision, it is binding and the dispute resolved If either party rejects the Recommendation, a Determination will be made Determination is final decision and if accepted by Applicant within 30 days is binding on FSP In certain circumstances a Determination may be expedited without a Recommendation being made 19

20 Ombudsman or Panel? 8.5 Chief Ombudsman (or delegate) decides whether to allocate a Determination to Ombudsman or Panel Factors which are taken into account include: type of dispute expertise required significance of dispute submissions by parties Guidelines on allocation to be developed over time Systemic issues 11 Defined as: an issue that will have an effect on other persons beyond the parties to the Dispute Identification of systemic issues and serious misconduct from information received by FOS Obligation to refer these issues to the FSP for remedial action FOS must report systemic issues and serious misconduct to ASIC We work with the FSP to ensure: - all customers affected by the problem are identified and compensated for financial loss (if any) - prevention strategies are put into place 20

21 Legal Proceedings Legal proceedings 13 FSP must not issue legal proceedings against Applicant relating to dispute after lodgement of dispute FSP must not pursue legal proceedings relating to debt recovery after dispute lodged, this means FSP must not enter judgement FSP must not pursue any collection activity or recovery action including assignment of the debt, credit listing, serving of notices In limited circumstances, FOS may consent to FSP issuing legal proceedings where limitation period about to expire or where FSP seeks to preserve assets the subject of dispute 21

22 Legal proceedings 13.1(a) We have jurisdiction where legal proceedings relating to debt recovery are on foot at time the dispute is lodged This is defined as a proceeding commenced in a court by an FSP to obtain judgment for a debt, or for recovery of possession of an asset provided by a debtor or guarantor as security for a credit facility These cases are dealt with under a new expedited dispute resolution process FOS approach to be outlined in OGs after consultation process Expedited process where legal proceedings Identification of dispute as urgent where possible notification to FSP of lodgement of dispute Dispute expedited to case management and a senior FOS staff member will consider TOR issues where necessary Financial difficulty team is dealing with these disputes as a priority 22

23 Expedited process where legal proceedings (2) Mandatory telephone conciliation conference If not resolved within 7 days of conciliation conference, investigation of dispute as a matter of priority Shorter response timeframes for both FSP and Applicant will apply May be expedited to Determination Applicant s obligations where legal proceedings Inform us if legal proceedings have been issued and served at time dispute is lodged Not have taken a step in proceedings beyond lodging a defence or defence and counterclaim. Attending directions hearing or agreeing to consent orders of a procedural nature only are not a step Attend conciliation conference Provide requested information. If information is not provided after receiving a final warning, FOS file will be closed and legal proceedings can be reinstated 23

24 elearning and resources Online training modules will be available in April. These provide support for learning about the TOR and OGs. There are three modules providing an overview, our process and our jurisdiction All materials including TOR and OGs are available on our website Member line is Consumer line is Questions? 24