Response to the. Banking Ombudsman Scheme. on the. Consultation on proposed scheme rule changes

Transcription

1 Response to the Banking Ombudsman Scheme on the Consultation on proposed scheme rule changes 2 April 2015

2 1.0 INTRODUCTION 1.1 This submission has been prepared by Bank of New Zealand ( BNZ ) in response to the Banking Ombudsman Scheme s ( the scheme ) consultation document, Consultation on proposed scheme rule changes released on 16 March BNZ welcomes this opportunity to provide a response to the scheme s consultation document and acknowledges the industry consultation undertaken on this matter. 1.3 This submission contains commercially sensitive information and is provided on the basis of strict confidentiality. The contents may only be released by the scheme with BNZ s prior written permission. 2.0 EXECUTIVE SUMMARY 2.1 Overall, BNZ is supportive of most of the proposed changes set out in the consultation document. Where options are provided, BNZ has indicated its preferred option. 2.2 BNZ s view is that the scheme should not have the authority to make nonmonetary awards. BNZ considers that this would go against the simplicity in resolution of complaints rationale of the scheme. 2.3 BNZ also has concerns that formalising the scheme s role in investigating industry wide problems would effectively shift the scheme from a dispute resolution mechanism to a regulator. BNZ s view is that this would create more regulatory oversight, rather than remove the need for regulatory intervention. 2.4 BNZ s detailed submissions are set out below. 3.0 SUBMISSIONS Recommendation 2: Make clear that fairness is paramount in reaching decisions 3.1 Recommendation 2 proposes a clarification of the scheme s decisionmaking criteria to make fairness the prime consideration while having regard to the law, principles of good banking practice and codes of practice. 3.2 BNZ s view is that there is already a sufficient focus on fairness in the scheme s decision-making criteria. It is unlikely that the proposed amendment would have a practical impact to the way in which disputes are considered or resolved. BNZ prefers Option 1, to retain the current wording. Recommendation 3a: Make the claim limit higher than the compensation limit Proposed scheme rule changes submission 2

3 3.3 Recommendation 3(a) proposes accepting for investigation customer claims up to $300,000, but with the maximum compensation limit unchanged at $200, BNZ s view is that the compensation limit and the claim limit should be the same, to avoid confusion for customers. BNZ s preference is Option Two, and BNZ suggests the claim and compensation limits be set at $350,000. This figure is in line with the proposed compensation cap that schemes can award in relation to real property insurance disputes and the new proposed District Court compensation limit under the Judicature Modernisation Bill. It is important that the claim and compensation limits are aligned to real property insurance disputes and the new proposed District Court compensation limit under the Judicature Modernisation Bill. Recommendation 4: Allow the scheme to make non-monetary awards 3.5 Recommendation 4 proposes that the scheme has the power to make nonmonetary awards, provided that the combined value of the non-monetary award and any accompanying monetary award does not exceed the compensation limit, currently $200, BNZ considers that the remedies should not be extended in this way. Apologies, in particular, do not carry as much weight when forced. The inclusion of these additional remedies goes against the idea of the simplicity in resolution of complaints rationale for the scheme by unnecessarily widening the scope of the recommendation/award to cover parts of the customer s arrangements with the bank that may not be in dispute or are not part of the complaint. They add too much complexity to the dispute resolution system. For instance, an apology can be seen as an admission of liability by the bank where this may not strictly be the case at law, and hence create unintended rights to enable the customer to bring a civil claim. The dispute resolution system is designed to get the parties to an agreed remedy, not to an admission of liability. 3.7 BNZ is also concerned about how this recommendation would work in practice. For example, BNZ is concerned that a non-monetary award would have a potential impact on its legal obligations, particularly in relation to releasing a security and discontinuing with repossession of a secured asset. 3.8 BNZ also considers that the Bank is in the best position to determine a nonmonetary award. The scheme may not get the full picture of the customer s dealings with the Bank, only the matters subject to the complaint. For instance, a release of security may seem an appropriate remedy for the complaint, but not for the rest of the customer s banking arrangements. Proposed scheme rule changes submission 3

4 3.9 BNZ s preference is therefore Option One, for the scheme to continue to have the power to make a bank not pursue repayment of part or all of a debt. Recommendation 5: Extend the period for accepting complaints 3.10 Recommendation 5 proposes that the scheme extend the period for accepting complaints beyond the present two months after a dispute has reached deadlock BNZ is concerned that extending the deadline would raise practical difficulties, for example, staff and customers ability to recall key events, and locating files and records. BNZ already has the ability to reinvestigate late claims if there is a good reason, such as those discussed in the consultation paper (for example, an overseas trip or loss of a job), or if BNZ is at fault for the delay. BNZ s preferred option is Option Three, to continue to require the bank s consent before the scheme can consider the complaint outside the two-month deadline. Recommendation 6: Extend ability to decline complaints without a reasonable prospect of success 3.12 Recommendation 6 proposes that the scheme has more grounds on which to refuse to consider, or to continue considering, a complaint that lacks merit BNZ s preference is Option Two, to amend the frivolous or vexatious rule, for the reasons set out in the consultation paper. Recommendation 7: Make clear that bank policies and practices must meet principles of good banking practice 3.14 Recommendation 7 proposes the scheme amend its rules to make clear it has jurisdiction to consider a complaint about a bank policy or practice if that policy or practice fails to satisfy the principles of good banking practice BNZ s preference is Option 1, that paragraph 28 remain unaltered, for the reasons set out in the consultation paper. BNZ considers that good banking practice is too vague, and the Bank needs certainty in the way it goes about its business. Recommendation 8: Limit banks ability to take legal proceedings and recover debts while a complaint is under consideration 3.16 Recommendation 8 proposes imposing restrictions on the ability of banks to start or continue legal proceedings against a customer and seek to recover debts while the scheme is considering the customer s complaint BNZ is concerned to protect its ability to recover a debt, particularly as a customer s financial position may continue to deteriorate during the time that the complaint is under review, which could be over six months in some Proposed scheme rule changes submission 4

5 cases. There is also the potential for a customer to use the scheme as a means to further delay debt recovery action BNZ also agrees with the drawbacks outlined in the consultation paper. BNZ s preference is for Option One, to keep the present rules. Recommendation 9: Allow significant decisions by a majority vote of directors 3.19 Recommendation 9 proposes that changes to the scheme s terms of reference should be by approval of 75 per cent of directors, rather than by the current unanimous vote BNZ prefers Option Three, to require majority support to pass any resolution except specified matters, including amendments to constituent documents, which require 75 per cent support. It would be preferable if the quorum could consist of at least one bank member, one consumer representative and the Scheme Chair. Recommendation 10: Modernise the scheme s rules 3.21 Recommendation 10 proposes a comprehensive rewriting of the scheme s rules for two purposes: (a) to modernise the language and clarify drafting weaknesses and (b) to confer powers on the entity Banking Ombudsman Scheme Limited rather than, as at present, on the person of the Banking Ombudsman BNZ is supportive of the scheme s approach to make the rules more understandable to the public, as long as the general intent of the scheme remains unchanged. BNZ s preference is therefore Option 2, to amend the rules and layout as recommended by the review. Recommendation 12: Release to each side only that information supplied in writing by the other side 3.23 Recommendation 12 proposes that the scheme, when asked by one side of a dispute for any information it has on the case, limit its release to written material received in writing from the other side BNZ s preference is Option Two, to release to one side only that written material supplied by the other, subject to the scheme s confidentiality rules and the Privacy Act 1993, for the reasons given in the paper. Recommendation 14: Give investigators the power to make preliminary decisions 3.25 Recommendation 14 proposes a delegation of power to investigators as part of a streamlining of the way the scheme makes decisions BNZ prefers Option Two, to allow investigators to make initial decisions, reserving final decisions for the Banking Ombudsman if necessary. BNZ considers that allowing the Banking Ombudsman to delegate these powers Proposed scheme rule changes submission 5

6 would give more credibility to the investigator and the decisions he or she makes. Recommendation 16: Formalise the scheme s role in investigating industry wide problems 3.27 Recommendation 16 proposes that the scheme has an explicit power to investigate systemic issues in the banking sector and also a power to work with banks to ensure they take corrective action BNZ is of the view that this change would effectively shift the scheme from a dispute resolution mechanism to a regulator. This is not in line with the scheme s inherent purpose, and could lead to a duplication of effort of organisations such as the Reserve Bank, Commerce Commission and the Financial Markets Authority. It could also encroach on the jurisdiction of these regulators. BNZ agrees with the drawback listed in the consultation paper that the change would likely create more regulatory oversight, rather than remove the need for regulatory intervention BNZ is interested to know more about how this would work in practice, for example, how the scheme would communicate these issues to customers, or whether the scheme would publicly name individual banks in relation to issues. BNZ is concerned that a bank may be implicated where it has done nothing wrong. It could also interfere with the varying but lawful commercial practices of each member bank BNZ s preference is that the process continue to be informal and outside the terms of reference. BNZ s preference is Option One, to retain the existing voluntary arrangement. CONCLUSION 4.0 BNZ is pleased to provide this submission and the information it contains. BNZ is available to discuss any issues raised. 4.1 Should the scheme have any questions in relation to this submission, please contact: Shane Cuthbert National Manager Customer Complaint Resolution & Privacy DDI: (09) Mobile: (029) shane_cuthbert@bnz.co.nz Proposed scheme rule changes submission 6