A one-stop shop to resolve financial disputes is a welcome step for aggrieved consumers, but protections to ensure a level playing field for legal representation when navigating complaints is still urgently needed, Maurice Blackburn Lawyers said today.
The Federal Government last night formally responded to the interim report of the Ramsay Review of the financial system external dispute resolution framework (EDR), including accepting the recommendation of a single EDR body for all financial disputes.
The new framework will replace the current Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal, and will be known as the Australian Financial Complaints Authority.
“Any measure to help simplify and speed-up the financial dispute complaint process is a win for consumers, and we welcome a one-stop shop to more efficiently resolve disputes with banks and financial groups,” Maurice Blackburn Principal Kim Shaw said.
“However, what is missing is any detail on ensuring that consumers have the right to legal representation in navigating financial disputes against banks and financial groups through the new framework.
“Banks absolutely will be represented by lawyers in challenging disputes raised by consumers, but unlike the banks and financial service providers, consumers essentially have one hand tied behind their backs because they do not have the benefit of a team of lawyers on the payroll to assist them in a dispute.
“Consumers should have the same right to legal representation as the banks they are up against, and to facilitate this, it is essential that legal costs for consumers are factored in to any new dispute resolution framework,” she said.
Ms Shaw said tougher fines for misconduct within the banking industry, as well as the announcement of a Productivity Commission review into banking competition to look closely at vertical integration or the cross-selling of products were also important steps for consumers.
“Vertical integration or cross-selling of banking and financial products is a major issue facing consumers in Australia, and in our view, the cause of many disputes,” Ms Shaw said.
“Too often consumers are sold a product that is not right for them, but is right for a bank’s bottom line and this imbalance must be addressed to ensure consumer interests are put first.
“We would also continue to urge the Federal Government to actively pursue an enforceable code of conduct for the finance and insurance industry and a scheme of last resort – both of which were referenced in the interim report from the Ramsay Review but are yet to be acted on.
“Maurice Blackburn has long been a vocal advocate for an enforceable code that sets standards of behaviour and has proper oversight from ASIC and other regulators.
“Unfortunately to date, the industry is continuing to push a weak and self-regulated code which is entirely inadequate, not approved by ASIC and ignores the scale of problems that need to be addressed.
“We also continue to advocate for an industry-funded scheme of last resort, as recoverability remains a major issue for consumers, particularly when an advisor or group is insolvent.
“We urge the Federal Government to act on both of these measures, including ensuring that any scheme of last resort is delivered retrospectively to compensate consumers who suffered significant losses during the Global Financial Crisis,” she said.