Campaign mounts to create super-complaints agency

Friday, 10 September 2021

Bank, insurer, lender, broker or adviser done you wrong? Complain to one of the four official financial services complaints services. First published in 2019.

A push is on from consumer budget mentors to have the four financial services disputes schemes merged to create a single complaints-handling agency.

Frustrated by the barriers poorer households faced in taking complaints to the schemes, the Salvation Army, Consumer NZ, Fincap, Citizens Advice Bureau Ngā Pou Whakawhiriinaki o Aotearoa (CAB) and Christians Against Poverty have called for them to be rolled into a single agency.

The schemes are the Banking Ombudsman, the Insurance and Financial Services Ombudsman (IFSO), Financial Services Complaints Limited (FSCL), and Fairway Dispute Resolution Service.

Too few people are complaining to the four financial services disputes schemes, leading for calls for them to be merged to create a single, easy-to-access super scheme.

All banks, lenders, insurers and other financial service providers must belong to one of the schemes.

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“Navigating through the complexities of these schemes is difficult for most New Zealanders, let alone for those facing extreme financial hardship,” the Salvation Army said in a submission on a review of the schemes being carried out by the Ministry of Business, Innovation and Employment Hīkina Whakautiki.

The Salvation Army said the rhetoric from the schemes was that they wanted to serve “hard-to-reach” groups, or groups like Māori and Pasifika, who were statistically unlikely to complain.

But even with the help of budget mentors, many found it hard.

The financial services disputes schemes are the Banking Ombudsman, the Insurance and Financial Services Ombudsman (IFSO), Financial Services Complaints Limited (FSCL), and Fairway Dispute Resolution Service.

“The current schemes are too complex, complicated, and burdensome for our financial mentors and budgeters to navigate for themselves, and difficult for them to help clients navigate,” it said.

Sometimes people in financial trouble might face having to complain to more than one of the schemes.

In the case of a young Auckland couple in too much debt handled by Salvation Army budget mentor Andrew Mitchell, that meant complaining to all four schemes, as each of the four lenders the couple was in debt to was a member of a different scheme.

The lenders were Westpac, Harmoney, Finance Now and Aotea Finance.

The case showed “irresponsible lending combined with naive borrowing can harm both borrowers and responsible lenders”, the Salvation Army said.

The four financial services disputes schemes exist as an alternative to ordinary people having to take on banks, lenders and insurers in the courts.

Fincap, which operates a nationwide network of budget mentors, said the barriers to complain were very high for the people most likely to need to complain.

“Vulnerabilities like experiencing mental health issues, family violence, difficulty finding work, imprisonment, the death of someone close, difficulty reading and writing or with maths, injury or illness or a multitude of other issues can make ongoing engagement with organisations difficult,” its submission read.

Having a single scheme would help cut through the complexity.

Christians Against Poverty said lenders often deliberately avoided drawing attention to the existence of the four schemes to avoid people complaining to them.

And, it said lower-tier lenders signed up for the schemes they thought would be most lenient to them, which was another argument for merging the four schemes into one.

Insurance and financial services ombudsman Karen Stevens says her scheme’s $200,000 cap on complaint size is too low.

Consumer NZ said a single scheme would end the current situation where different schemes had different financial limits on complaints.

It said there was a real need for a single complaints body, telling the story of a complaint in which a bank customer secured pre-purchase home loan approval only to find their personal banker, who knew their maximum bidding power, bidding against them in an auction for a house.

CAB said very few people in financial difficulties made complaints to the schemes, and the existence of four schemes was confusing.

The heads of the four existing disputes schemes all made submissions.

All called for greater harmonisation of scheme rules and financial caps.

Insurance Ombudsman Karen Stevens said the $200,000 cap on complaints to IFSO was too low.

The cap at the Banking Ombudsman is $350,000.

“There are many situations where consumers have restricted access to justice because their claim is for more than the financial cap. In particular, life insurance is commonly for amounts over $200,000, as is house insurance in a total loss situation,” Stevens said.

But even MBIE’s proposal to set the cap at $350,000 for all the schemes was considered too low by FSCL’s chief executive, Susan Taylor.

She also called for the amount of compensation that could be awarded for inconvenience and stress to complainants to be lifted to $10,000.

“We have investigated complaints where the upper $2000 limit is not adequate to compensate for the extreme stress and inconvenience caused,” Taylor said.

The New Zealand Bankers’ Association supported lifting the cap to $350,000.

The Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) supported “in principle” lifting the cap, but had concerns.

It said fraud was a big problem.

“Where there are indicators of fraud, particularly in relation to a large claim, it is important that decision makers have the opportunity to assess a complainant in person. Increasing the cap to $350,000 would allow more claims where fraud is suspected to be heard by a financial dispute resolution scheme without there being an opportunity to hold a hearing and cross-examine the complainant about the circumstances giving rise to the claim.”