The maximum amount that can be awarded by the country’s four dispute resolutions schemes should be streamlined and consumers shouldn’t be able to double-dip across multiple schemes. These are just two of the suggestions from those who responded to an MBIE survey.
Its review of the country’s dispute resolution schemes found each has their own rules, meaning consumers with a complaint could be treated differently depending on the scheme their provider is a member of.
The review also found consumers could lose access to a dispute resolution scheme if a financial adviser or service provider switched from one scheme to another, because a dispute resolution scheme wouldn’t help the consumer if the financial adviser was not a member.
These, and other issues, led to MBIE launching a public consultation exercise and among the 20 respondents were Financial Advice NZ and the Financial Services Council.
Financial Advice NZ has around 1600 members and the organisation’s CEO Katrina Shanks is concerned advisers are – as of 15 March 2021 – “…generally exempt from the requirement to be members of a dispute resolution scheme”.
…no scheme has jurisdiction for a claim raised about an adviser prior to March 15, 2021…
Referring to section 48a of Financial Service Providers Act, Shanks says: “If, going forward, dispute schemes can only consider claims about current members, then as the adviser is no longer a member of any scheme, no scheme has jurisdiction for a claim raised about an adviser prior to March 15, 2021.
“Similarly, the adviser is now no longer obligated to comply with the rules of the schemes or to comply with a binding order.”
Do you think there should be a single dispute resolution scheme to hear all retail advice complaints?
- Yes (61%)
- No (39%)
- Not sure (0%)
Loading ...Shanks says the issue of who can and should be held liable for the adviser’s advice or actions prior to 15 March does not appear to have an easy solution, “…yet it is very important someone can have an award made to ensure consumers and advisers aren’t forced into expensive court proceedings.
“Scheme providers, advisers, and consumers need this issue resolved with some urgency.”
Shanks suggests MBIE consults with advisers, dispute resolution schemes, and indemnity insurance providers to ensure a solution is found.
Richard Klipin, CEO, Financial Services Council, says consumers could double-dip the dispute resolution process when two or more companies are involved in a product.
“In some cases, for example when financial products are manufactured by one financial institution but distributed by another, consumers may have access to more than one scheme in respect of the same or similar complaint,” he says.
“A consumer may first approach scheme A, receive an outcome, and then approach scheme B with an overlapping or similar complaint.
“This may result in the same complaint being considered by different schemes, potentially with different outcomes or the risk that the complainant may be compensated twice.”
Klipin suggests scheme operators decide between themselves which one will have sole jurisdiction over a particular complaint or area of a complaint on a case-by-case basis.
…a consumer may first approach scheme A, receive an outcome, and then approach scheme B with an overlapping or similar complaint…
As for the financial cap scheme providers have adopted when making an award to a consumer, Shanks says these need to be streamlined as three have a $200,000 limit while the Banking Ombudsman’s cap is $350,000 – the same as the district court for these types of disputes.
Shanks supports the maximum award being the same as the District Court “…as we recognise this was how the original levels were set”.
“We also support the ongoing tethering of the cap to the District Court limit,” she says. “This would see the cap moving dynamically and without delay in line with the District Court limit.”
However, Klipin says the caps have been breached now and again, and would prefer MBIE review the award limit saying the District Court cap is rarely reviewed.
“This will give MBIE the flexibility to decide whether or not to align with the court limit as it considers appropriate from time to time,” he says.
The option of weekly payments for certain claims was also addressed by Klipin. MBIE is suggesting a cap of $1,500 a week for such awards (typically linked to policies offering a weekly benefit).
Klipin says further discussion between MBIE and the industry would be needed when drafting the valuation criteria for a weekly alternative to clarify how and when the weekly payment alternative will be used.
Shanks says MBIE’s suggested cap, which has a maximum of $78,000 a year, is too low as it “…excludes consumers with higher than average incomes”.
“To ensure more consumers can access the scheme, we support an increase of the weekly cap to a level which better reflects the income of those consumers who purchase these weekly payment products,” says Shanks.
MBIE is currently reviewing all submissions and will make an announcement on its findings in the New Year.
An MBIE spokesperson says: “MBIE officials are in the process of developing our findings and recommendations for the review of the approved financial dispute resolution schemes work.
“Following this, we expect to make recommendations to the Minister of Commerce and Consumer Affairs in the first half of 2022.”
See our story: Dispute Resolutions Schemes Under Review