Governance issues

The consultation asks for submission on Governance issues

Here are the relevant sections of the Ombudsman's legislation

57BD.—(1) The functions of the Council are—

(a) to prescribe guidelines under which the Financial Services Ombuds- man is to operate, and

(b) to determine the levies and charges payable for the performance of services provided by the Financial Services Ombudsman, and

(c) to appoint the Financial Services Ombudsman and all Deputy Fin- ancial Services Ombudsmen, and

(d) to keep under review the efficiency and effectiveness of the Bureau and to advise the Minister, either at the Minister’s request or on its own initiative, on any matter rel- evant to the operation of the Bureau, and

(e) to advise the Ombudsman on any matter on which the Ombudsman seeks advice, and

(f) to carry out such other activities as are prescribed by this Part.

(2) The Council has no role with respect to how the Financial Services Ombudsman deals with a particular complaint.

(3) The Council has such powers as are necessary to enable it to perform its functions.


57BF.—(1) The Council shall make regulations for or with respect to matters—
(a) that are, by this Part, required or permitted to be prescribed, or

(b) that are necessary or convenient to be prescribed for the purpose of enabling the Financial Services Ombudsman to perform the functions imposed, and to exercise the powers conferred, on that Ombudsman by this Part.

(2) In particular, a regulation under subsection (1) may do any of the following:

(a) prescribe matters that the Financial Services Ombudsman must take into account when investigating or adjudicating a complaint;

(b) prescribe procedures to be followed in processing a complaint;

(c) specify circumstances in which the Financial Services Ombudsman can dismiss a complaint without considering its merits;

(d) specify the place or places at which the Financial Services Ombudsman is required to make available copies of any report that that Ombudsman is, by a provision of this Part, required to prepare or publish.

It's clear that the Council should have no role in how the FSO deals with an individual complaint.

But should the Council have a role where there is severe criticism of the Ombudsman's decisions or approaches to complaints?

There is concern that the Ombudsman upholds only 7% of complaints. That needs to be investigated. I would certainly be happier if the Council investigated and stood over it.

Bill Prasifka's term of office is coming to an end. Let's say his successor upholds 93% of complaints made. Should the council have no role in reviewing this?

What about the Ombudsman's interpretation of the law?

In my view, the Ombudsman is clearly incorrect in cases of the following types:

1) 2005 Mortgage taken out

2) 2007 Verbal agreement to switch mortgage to interest only

3) 2011 Lender switches mortgage to capital and interest

4) 2014 Borrower complains to Ombudsman about decision to switch to capital and interest

5) Ombudsman says complaint is time barred as the “behaviour complained about” happened in 2007

The borrower is complaining about what happened in 2011, not what happened in 2007. But the FSO refused to hear the complaint.

I have seen this on a number of occasions where the Ombudsman refuses to hear complaints where there is a dispute over something which happened over 6 years ago. But that is not what the legislation says.

When an issue like this occurs on a few occasions, either
1) The council should be able to give the Ombudsman guidance on how to interpret the law
or
2) The council should be able to direct the Ombudsman to apply to the High Court for such guidance

I would suggest revising this section as follows

57BD.—(1) The functions of the Council are—

(a) to prescribe and periodically update guidelines under which the Financial Services Ombudsman is to operate, subject to an annual review by the Council of the compliance of the Ombudsman with those guidelines, and

(b) to determine the levies and charges payable for the performance of services provided by the Financial Services Ombudsman, and

(c) to appoint the Financial Services Ombudsman and each Deputy Financial Services Ombudsman, and

(d) to keep under review the efficiency and effectiveness of the Bureau and to advise the Minister, either at the Minister’s request or on its own initiative, on any matter relevant to the operation of the Bureau, and

(e) to advise the Ombudsman on any matter on which the Ombudsman seeks advice, or on any policy matter relative to the operation of the Bureau on which the Council, on its own initiative, considers that it is in the interests of the efficiency and effectiveness to so advise the Ombudsman, and


(f) to issue policy directives to the Ombudsman on any matter that is covered by the Council’s guidelines under which the Financial Services Ombudsman, as promulgated under sub-section (a) above, including policy directives concerning the interpretation by the Ombudsman of general principles relating to applicable legislation, regulation and administrative protocols and directives, where appropriate, that the Ombudsman apply to the High Court for guidance on any such matter, and

( g) to carry out such other activities as are prescribed by this Part.