Consultation on proposed rule changes
The Banking Ombudsman Scheme wants your ideas about suggested amendments to the
way it works.
Last year, consultancy firm Cameron Ralph reviewed the scheme to meet a requirement of
the Financial Service Providers (Registration and Dispute Resolution) Act 2008 that
approved external dispute resolution schemes conduct regular evaluations of their
operations.
The independent review’s report made 21 recommendations. Twelve, if implemented, would
require changes to the scheme’s terms of reference (“rules”).1 The scheme would like your
views on the 12 recommendations, which are listed in the appendix.
In this discussion document you will find a brief explanation of each, relevant background, a
summary of how comparable schemes deal with the particular point raised, potential
advantages and disadvantages, and possible alternatives.
Using feedback from stakeholders and members of the public, the scheme’s board will
decide which rules to change. Following that decision, expected in late April, new rules will
be drafted and sent out for further consultation.
Broadly, Cameron Ralph was asked to look at whether the scheme was meeting
international standards of best practice, and to identify opportunities for improving the
scheme’s effectiveness and efficiency.
It found that the scheme was effective and professionally run, and met the legal
requirements of an approved scheme. It found no areas in need of significant improvement.
Many of the suggestions involve what the review called “incremental improvement”.
The recommendations requiring no rule changes deal mainly with administrative, training
and staff development, communications and office structure matters.
The deadline for comment is 27 March 2015. Submissions will be published on the scheme’s
website. If you don’t want your submission published, mark it “confidential”.
Email submissions to Nicola.Sladden@bankomb.org.nz
For questions, call Nicola Sladden on (04) 282 0173.
See also:
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1
The board’s response to the independent review
Issues paper, June 2014.
These set out the powers and duties of the Banking Ombudsman, along with the limits to those powers.
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Contents
Recommendation 2:
Make clear that fairness is paramount in reaching decisions
Recommendation 3a:
Make the claim limit higher than the compensation limit
Recommendation 4:
Allow the scheme to make non-monetary awards
Recommendation 5:
Extend the period for accepting complaints
Recommendation 6:
Extend the ability to decline complaints without a reasonable
prospect of success
Recommendation 7:
Make clear that bank policies and practices must meet
principles of good banking practice
Recommendation 8:
Limit banks’ ability to take legal proceedings and recover debts
while a complaint is under consideration
Recommendation 9:
Allow significant decisions by a majority vote of directors
Recommendation 10:
Modernise the scheme’s rules
Recommendation 12:
Release to each side only that information supplied in writing
by the other side
Recommendation 14:
Give investigators the power to make preliminary decisions
Recommendation 16:
Formalise the scheme’s role in investigating industry-wide
problems
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Recommendations
Make clear that fairness is paramount in reaching decisions
Recommendation 2 proposes a clarification of the scheme’s decision-making criteria to
make fairness the prime consideration while having regard to the law, principles of good
banking practice and codes of practice.
The scheme’s current terms of reference (“the rules”) require it to do three things when
making a decision: (a) be fair by considering all the circumstances of each case, (b) observe
the law, including any judicial authority, and (c) take into account principles of good banking
practice and any code of practice relevant to the matter in dispute (paragraph 23).
The review noted that the first of these, the fairness obligation, ranked equal alongside the
other two. In its view, the more proper relationship should be one of “primacy”.
The main requirement – and expectation – of any ombudsman scheme is that it reaches
decisions based on an overall consideration of what is fair. Generally, ombudsman schemes
base their approach on what the courts would be likely to do in similar circumstances. But
this is not always the case because they are not limited solely to applying the rule of law.
Sometimes other considerations weigh on a decision. There may, for example, be situations
in which a bank complies with the law but breaches an industry code or good banking
practice. (Such codes usually set a higher standard of behaviour than the law demands.)
The scheme is required by paragraph 23 of its rules to reach a decision by taking into
account a broader range of considerations than the law provides for. In practice, the scheme
seldom departs in any significant way from the law, and when it does, it makes the reasons
clear.
Implications
The review concluded that the scheme should clarify that fairness is the prime consideration
in making decisions, although it believed the change would make little, if any, practical
difference because there was already sufficient focus on fairness.
Earlier change
The scheme’s decision-making criteria were amended in 2010 as part of a more general
updating and simplifying of its rules. At the time, fairness appeared to be the overriding
consideration, but lost that status as a result of the amendments. The Banking Ombudsman
had been required to make a decision “by reference to what is, in his or her opinion, fair in all
the circumstances and [observing any applicable laws or relevant judicial authorities, and
having regard to principles of banking practice and codes of practice]”.2 The change appears
unintentional and has had no effect on the way disputes have subsequently been considered
or resolved.
Comparable schemes
Other external dispute resolution schemes, both in New Zealand and overseas, make
fairness the overriding consideration. They make plain that they will do what is, in their
2
“In making any recommendation or award under these Terms of Reference the Banking Ombudsman shall do
so by reference to what is, in his or her opinion, fair in all the circumstances, and:
(a) shall observe any applicable rule of law or relevant judicial authority (including but limited to any such
rule or authority concerning the legal effect of the express or implied terms of any contract between the
complainant and any Participating Bank named in the complaint); and
(b) shall have regard to general principles of good banking practice and any relevant code of practice
applicable to the subject matter of the complaint….” (paragraph 16).
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opinion, fair in all the circumstances of each case, having regard, typically, to considerations
such as legal principles, applicable codes and industry practice.
For example, New Zealand’s Insurance and Savings Ombudsman, in deciding what is fair
and reasonable, will look at any applicable law and the rules of natural justice, but also:

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The complainant’s relevant educational, cultural and personal circumstances
How the scheme participant and complainant behaved towards one another
How much the participant was in control of any systems or procedures connected
with the complaint
Anything else the scheme deems relevant.
The courts in Australia and Britain have recognised that financial dispute resolution schemes
in their respective countries have a primary obligation to fairness in reaching decisions.3
Advantages and disadvantages
Clarifying that fairness is the prime consideration in the scheme’s decision-making would:

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Acknowledge that the fundamental task of an ombudsman scheme is to consider
what is fair
Align decision-making rules with those of comparable schemes
Leave unaltered the way decisions are made.
Reflect the original intent of the paragraph
Recognise that an ombudsman scheme is not a court, and may consider not just
applicable laws but also broader matters such as industry standards and relevant
codes of practice
Possible drawbacks:

Such a clarification might create unnecessary uncertainty about the way decisions
are made.
Options
One: Retain the wording of the scheme’s present decision-making criteria.
Two: Amend the wording of the scheme’s decision-making criteria to make clear that
fairness is the primary consideration in arriving at a decision, having regard to the law,
principles of good banking practice and any applicable code of practice.
3
Wealthcare Financial Planning PTY v Financial Industry Complaints Services Ltd and Ors (2009] VSC 7, R(IFG
Financial Services Ltd) v Financial Ombudsman Service Ltd (2005) EWHC 1153 (Admin) and R (Moor and
Edgecomb Ltd) v Financial Ombudsman Service Ltd [2008] EWCA Civ 642.
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Make the claim limit higher than the compensation limit
Recommendation 3(a) proposes accepting for investigation customer claims up to $300,000,
but with the maximum compensation limit unchanged at $200,000. This would require
complainants to agree to waive their right to recover any difference between the two
amounts through the courts if they accept the scheme’s decision.
Currently, the scheme cannot consider a complaint if it decides a complainant’s claim is, or
is likely to be, more than $200,000, or is part of a larger claim that exceeds or could exceed
the limit (paragraph 25). There is one exception. The scheme can look into a complaint
involving a sum above $200,000 if the bank gives its consent (paragraph 26). But this
discretion rests with banks alone. Without such consent, the scheme must refuse to consider
the matter.
The review considered the compensation limit to be out of step with that of comparable
schemes overseas (see below), although it did not regard it as “manifestly inadequate”.
Nonetheless, the review suggested the current limit remain, but with complainants able to
make claims for up to $300,000 provided they agreed to waive that part of their claims above
$200,000.
This recommendation was, in part, a response to submissions from farmers, for whom the
scheme is the only alternative to costly court action and who are more likely to have claims
exceeding the limit. But it was also recognition of the respective roles of the scheme and the
courts: a limit set too low would deny customers access to the scheme and a source of
justice; a limit set too high would lead to the scheme replacing the courts, the proper place
for large claims.
The scheme’s $200,000 limit affects only a tiny proportion of cases. Statistics for the 201314 financial year show:
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The average compensation payment was $1,867.

Only four payments exceeded $10,000 (the highest being $120,000).

The scheme declined just one case because it exceeded $200,000.
These figures may not provide an entirely accurate picture, however. The publicised limit
must inevitably deter some individuals with claims around $200,000 from approaching the
scheme. How many is unknown, but one submitter to the review, Federated Farmers of New
Zealand, suggested the current limit potentially prevents many of its members from making
complaints.
The Government has indicated that, as part of its review of the Financial Service Providers
(Registration and Dispute Resolution) Act 2008, it will seek public comment on whether
dispute resolution schemes have adequate jurisdiction, especially as it relates to their
compensation limits.
Comparable schemes
All banking ombudsman schemes in Australia, Britain and Canada can investigate claims
above their compensation limit. All allow complainants to reduce their claims to that limit, and
all require complainants who accept a settlement to waive their right to sue for the
remainder. Only Australia’s Financial Ombudsman Service imposes a ceiling on the size of
claims it will consider ($A500,000). Its compensation limit is $A280,000.
In New Zealand, all approved dispute resolution schemes have the same $200,000 financial
limit, and all allow scheme participants to waive this limit. The Insurance and Savings
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Ombudsman and Financial Services Complaints Limited are like the Banking Ombudsman
Scheme in that they do not allow a complainant to reduce a claim to $200,000 in order to
avoid needing a participant’s waiver. By contrast, the Financial Dispute Resolution Service
will investigate a claim above $200,000 if the complainant agrees to forgo any difference.
A final relevant point is the district court limit, currently set at $200,000, but which will rise to
$350,000 if the Judicature Modernisation Bill is passed (probably in 2015). This new amount
is based on Treasury calculations of the compounding effect of Consumer Price Index rises
between 1992, when the $200,000 limit was set, and 2017. District court plaintiffs may bring
action for amounts above $200,000, but must “abandon the excess”, that is, waive the
difference.
Advantages and disadvantages
Increasing the claim limit without raising the compensation limit would:

Open the scheme to more people

Settle bigger claims without the need for court action

Widen bank customers’ scope for justice without increasing banks’ potential liability

Remove what is essentially a power of veto available to banks only through their
ability to reject claims above the limit

Improve satisfaction with the scheme (the most dissatisfied complainants are those
whose cases are ruled outside jurisdiction)

Anticipate any potential increase imposed by legislation as a result of a review of the
Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Possible drawbacks:

The scheme’s claim limit would be out of step with that of New Zealand’s other
dispute resolution schemes in the financial services sector.

Complainants would have to relinquish as much as $100,000 if the claim limit were
raised to $300,000 and a waiver requirement introduced – a potential shortfall they
might not have had to face under existing rules (if banks consented to consideration
of the claim).

There could be an increase in large claims (although New Zealand is likely to mirror
Australia’s experience after the Financial Ombudsman Service raised its claim limit in
2010 – barely more than five per cent of claims exceeded the cap, little changed from
before).

Complainants could be confused by different claim and compensation limits.
Options
One: Make no change, that is, keep the claim and compensation limits at $200,000 and
allow larger claims at the bank’s discretion.
Two: Make no change, except to raise the $200,000 to a higher amount (If this option is
preferred, please specify the amount.)
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Three: Keep the compensation limit at $200,000, but raise the claim limit to $300,000 (which
cannot be extended at the bank’s discretion) and require complainants to waive any excess.
Four: Keep the claim and compensation limits at $200,000, but allow larger claims up to a
specified amount if the complainant agrees to waive any excess (and allow still larger claims
at the bank’s discretion). (If this option is preferred, please specify the amount if the
complainant agrees to waive any excess.)
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Allow the scheme to make non-monetary awards
Recommendation 4 proposes that the scheme has the power to make non-monetary
awards, provided that the combined value of the non-monetary award and any
accompanying monetary award does not exceed the compensation limit, currently $200,000.
At present, the scheme’s rules allow it to recommend that a bank does either or both of the
following: (a) pay a customer a sum of money up to that limit or (b) not pursue repayment of
part or all of a debt up to the same limit (strictly speaking, this second course of action is
non-monetary).
Some cases the scheme resolves have non-monetary outcomes, but these are always the
result of agreements struck by the two sides. The scheme cannot compel a non-monetary
award from a bank through its formal dispute resolution process (beyond (b) just described).
In the 2013-14 financial year, 24 of the 237 disputes resolved by the scheme involved a nonmonetary settlement. Of these, six involved a bank apology, five a reduction in debt, five a
preferential interest rate and five a waiving of fees.4
The review’s recommendation would allow the scheme to consider such awards when a
complaint is partially or fully upheld by the Banking Ombudsman.5 The recommendation also
mentions the release of a security for debt and reinstating, rectifying or varying a contract.
Another possible remedy – and one raised by the review – would require a bank not to
repossess a secured asset. Still another might require a bank to undertake a review of
internal practices or to boost staff training in an aspect of its operations.
The review’s recommendation is based on two arguments: that it would be consistent with
the scheme’s world-class aspirations, and that it would help bolster the country’s overall
consumer protection framework.
Possible legislative changes may also have a bearing on this recommendation. The
Government has indicated it may consult on a requirement that schemes have rules allowing
for a wide range of non-monetary awards – a range broader than is currently available to the
scheme. This would have particular relevance to financial hardship applications and
repossession action.
Comparable schemes
Finance-related schemes in New Zealand, Australia, Britain and Canada all have the ability
to recommend a variety of non-monetary remedies. Australia’s Financial Ombudsman
Service and New Zealand’s Insurance and Savings Ombudsman both set out remedies that
include those specifically mentioned in the review recommendation (forgiving or varying a
debt, release of a security for debt, and contract variations and reinstatements). Some
remedies involve no payment of monetary compensation but still have financial value.
Examples include the discharge of a guarantee considered unenforceable and the
reinstatement of an insurance policy voided for alleged non-disclosure.
Advantages and disadvantages
The ability to recommend non-monetary awards would:
4
5
Some cases involved more than one of these measures.
This would affect about 20 cases a year.
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Give the scheme greater flexibility in tailoring solutions to individual circumstances
Recognise the wide range of redress options available
Anticipate possible regulations requiring non-monetary remedies
Align the scheme’s rules with those of other external dispute resolution schemes.
Possible drawbacks:

Banks might consider that the scheme already has an adequate range of redress
options.
Options
One: Continue to have the power to make a bank not pursue repayment of part or all of a
debt.
Two: Allow the scheme to make those non-monetary awards it considers necessary.
Three: Allow the scheme to make specified non-monetary awards. (If this option is preferred,
please specify type of awards.)
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Extend the period for accepting complaints
Recommendation 5 proposes that the scheme extend the period for accepting complaints
beyond the present two months after a dispute has reached deadlock. It suggests six
months, but says stakeholders should consider this idea only after the scheme has gathered
detailed information about such cases. In the meantime, the recommendation proposes that
the scheme has the discretion to accept complaints beyond the present limit in exceptional
circumstances.
Understanding this recommendation requires an explanation of when a deadlock is reached
and when the two-month countdown begins.
The scheme will consider a complaint only if the customer and the bank have tried without
success to resolve the problem themselves using the bank’s internal complaints process. A
deadlock arises if the process produces no solution, or, in the rule’s words, if “the [customer]
has not accepted any observations the [bank] has made or any conditions of settlement or
resolution the [bank] has offered”.
At this point, the bank can notify the customer of the deadlock and advise that he or she has
the right to take the complaint to the scheme, but must do so within two months – otherwise,
the scheme will be unable to investigate. The two-month countdown begins with this
notification.
In practice, the scheme rejected only four complaints in the 2013-14 financial year because
the customer failed to make contact within two months of receiving a deadlock notification
(although all would have met a six-month deadline). This amounted to nine per cent of the
44 cases rejected on jurisdiction grounds during the year.
The review noted that banks preferred no change, arguing that people’s memories were “still
fresh”, aiding quick resolution of complaints. However, the review observed that complaints
were frequently related to events that disrupted complainants’ lives or in some other way
dominated their attention to the point that the matter in dispute was often overlooked.
Examples cited included an overseas trip, loss of a job, a relationship breakdown, an urgent
need for credit, or buying or selling a property. When such situations resulted in late claims,
the scheme could seek – and was generally given – consent from banks to investigate, but
could not compel it.
More data, in the review’s view, should be gathered about late cases, such as how far
outside the limit they fall and how often banks agree to allow the scheme to consider late
cases. This would enable a more informed discussion about whether to adopt a six-month
limit. Even with more data, however, it may not be possible to obtain an entirely accurate
picture because the publicised time period must inevitably deter some individuals with late
cases from approaching the scheme. In any event, the scheme does not consider that more
information is necessary for stakeholders to consider the proposal to adopt a six-month limit.
Comparable schemes
The equivalent schemes in Australia, Britain and Canada have considerably longer
deadlines within which a deadlocked dispute must reach them – two years, six months and
six months respectively. In New Zealand, the Insurance and Savings Ombudsman and
Financial Services Complaints Limited have the same limit as that of the scheme – two
months. All but one (Financial Services Complaints Limited) will accept late cases in
exceptional circumstances.
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Advantages and disadvantages
Extending the period for accepting cases from two to six months would:


Bring the scheme into line with overseas schemes
Recognise that banks have more resources to deal with complaints than customers.
Possible drawbacks:


The scheme would be out of step with comparable New Zealand schemes.
An extension would delay resolution of cases without good reason.
Allowing the scheme discretion to accept late complaints in exceptional circumstances
would:



Allow flexibility to accommodate complainants delayed or distracted by disruptive
personal situations
Bolster the scheme’s standing as an independent voice by deciding itself whether the
circumstances of a late complaint warrant an exemption
Bring the scheme into line with overseas schemes.
Possible drawbacks of allowing the scheme discretion to accept late complaints in
exceptional circumstances:



The change might encourage a rise in complaints (although only one of the four
cases excluded last year could have been considered on grounds of exceptional
circumstances).
It might discourage prompt pursuit of complaints (although the scheme would
examine reasons for the delay, and already has scope to exclude a complaint if not
pursued in a reasonable way).
It might result in practical investigative difficulties because information was lost or
memories had faded (although the scheme can already exclude such complaints if a
satisfactory investigation is considered unlikely). 6
Options
One: Keep the current two-month deadline.
Two: Extend the deadline from two to six months.
Three: Continue to require a bank’s consent before the scheme can consider a complaint
outside the two-month deadline.
Four: Give the scheme discretion to consider cases outside the two-month deadline in
exceptional circumstances.
6
The scheme has scope to exclude a complaint if the complainant was aware of it for more than 12 months
before approaching the scheme (paragraph 27.4).
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Extend ability to decline complaints without a reasonable prospect of success
Recommendation 6 proposes that the scheme has more grounds on which to refuse to
consider, or to continue considering, a complaint that lacks merit.
At present, the scheme relies on two rules to deal with such complaints. One requires it to
conclude that “on the basis of the facts presented by the [complainant], the [bank] has made
a reasonable offer to settle the complaint” (paragraph 25.6). The other requires it to
consider, or to continue considering, a case only if the complainant “is pursuing the
complaint in a reasonable way, and not in a frivolous or vexatious way” (paragraph 27.8).
The review noted banks’ concerns about whether the scheme was able to deal sufficiently
early on with cases clearly lacking merit, in particular cases where there “[is] no remedy, a
remedy is not appropriate or the [bank] has made a fair offer”.
Their concern springs from two sources. First, paragraph 25.6 requires the scheme to
consider only the complainant’s arguments, and not the bank’s as well, in deciding whether a
reasonable offer is already on the table; and secondly, the usefulness of paragraph 27.8 is
severely constrained by the courts’ narrow interpretation of the words frivolous and
vexatious.
The review accepted the concern that the scheme lacked sufficient means to deal speedily
enough with unmeritorious cases. Review members cited their own experience reviewing
other similar schemes. They said about five per cent of complaints were rejected early on
because either the complainant had received a reasonable offer, the scheme had no power
to provide a remedy, or the complaint had little substance.
In the 2013-14 financial year, the scheme rejected 12 complaints on the grounds of an
existing reasonable offer and just one for failing the frivolous or vexatious test – compared
with 237 complaints pursued all the way to resolution in the same period. However, existing
rules compelled the scheme to consider some complaints that lacked any prospect of
success for the customer. Such cases, though small in number, take up a disproportionate
amount of staff time and still leave complainants dissatisfied.
The review also echoed the commonly expressed view that it was in the best interests of
such complainants to receive a rejection at the outset rather than the same inevitable
answer much later.
Comparable schemes
The review noted that Britain’s Financial Services Ombudsman scheme had four grounds on
which to dismiss a complaint without fully investigating its merits:

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

The complainant had suffered no actual loss, distress or inconvenience and was
not likely to.
The complaint was frivolous or vexatious.
The complaint lacked any reasonable prospect of success.
The complainant already had a reasonable offer.
The review recommended adopting this scheme’s wording. This would amend existing rules
and provide two new grounds for closing cases early. Under the amendment to the frivolous
or vexatious rule, these words would refer to the case itself, rather than, as at present, to the
manner in which the case is brought. On its own, however, such wording could potentially
restrict the scheme’s ability to exclude complaints pursued in an unreasonable manner. An
example would be a complainant who threatened or abused staff.
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However, the suggested amendment to the reasonable offer rule would not alter the existing
meaning or effect.7 The proposed wording would still restrict the scheme to considering
whether the bank’s offer was reasonable based solely on the complainant’s account of what
happened – a sound limitation if the scheme considers the bank has already offered a fair
remedy. The proposed wording would make explicit that the offer remained open, but the
present text addresses this point by stating that a reasonable offer “has been made” (not had
been made). Banks seldom withdraw an offer because a customer has sought the scheme’s
help
Australia’s Financial Ombudsman Service may refuse to consider a dispute because it is
without substance. The threshold for the test for “lacking a reasonable prospect of success”
or for “lacking substance” is lower than that for a frivolous or vexatious case.
Advantage and disadvantages
Giving the scheme greater scope to reject cases that lack merit would:



Avoid needlessly drawing out cases that have no chance of success
Speed up case resolution times generally
Enable better use of resource.
Possible drawbacks:

Banks could pressure the scheme to dismiss cases early, arguing they resolve
meritorious cases through their internal dispute processes.
Options
One: Keep the existing two rules for dismissing cases that lack merit.
Two: Amend the frivolous or vexatious rule, as follows, and add two more rules, as follows:



The scheme is satisfied that the complaint is not frivolous or vexatious, or that the
complainant is not pursuing it in an unreasonable way.8
The scheme is satisfied that the complainant has not suffered, or is unlikely to
suffer, financial loss, material distress or material inconvenience.
The scheme is satisfied that the complaint does not have any reasonable
prospect of success.
7
The fourth ground available to Britain’s Financial Services Ombudsman Service is: “The firm has already made
an offer which is fair and reasonable in relation to the circumstances alleged by the complainant and that is still
open for acceptance.”
8
The customer service charter, which is sent to all customers, sets out the scheme’s expectations of a customer
when pursuing a complaint. The scheme reserves the right to stop considering a complaint if the customer does
not pursue it in a reasonable way by not meeting these expectations.
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Make clear that bank policies and practices must meet principles of good
banking practice
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.
It should be noted that the scheme is required to consult the industry to determine the
principles of good banking practice (paragraph 23).
Paragraph 28 places an apparently wide-ranging limitation on the scheme’s consideration of
complaints related to bank policy and practice, saying it may do so only if it involves a
breach of obligation or duty to the complainant. One case of this type dealt with by the
scheme concerned a bank that offered fee exemptions to superannuitants and wealthy
customers but not to invalid beneficiaries. The scheme found no breach of obligation under
paragraph 28 and rejected the case.
The view underlying this limitation is that banks should be free to set and apply standard
practices and policies as they see fit, provided they comply with their obligations to
customers in the process.
Banks frequently make submissions to the scheme to reject complaints on the grounds of
paragraph 28, believing that a complaint related to policy or practice is necessarily out of
jurisdiction. It is not. Paragraph 28 prevents the scheme from considering complaints about
the content of a policy or practice, but not the application or administration of a policy or
practice. Of course, it is worth noting there is hardly a decision or action a bank makes or
takes that does not have its justification or origin somewhere in a policy or procedure.
The difficulty, as noted by the review, is that it is perfectly possible for a bank to adopt a
policy or practice that does not breach any obligation or duty to customers, but nonetheless
fails to comply with the principles of good banking practice it has agreed to meet. Paragraph
23 says the scheme, in making decisions, must “take into account the general principles of
good banking practice and any relevant code of practice that applies to the subject matter of
the complaint”.9 Thus, it is not sufficient for a bank simply to assert that the action or decision
in dispute was taken or made in accordance with its usual practice or policy. Nor is it
sufficient for the bank to say it was not in breach of any legal obligation or duty to the
customer.
In the 2013-14 financial year, the scheme rejected only four cases on the basis of paragraph
28, although banks argued for more to be dealt with in this way. One, relating to payWave
technology, was ruled outside jurisdiction because the scheme could not review the bank’s
policy regarding the issuing of credit cards encoded with the technology. The scheme has
also rejected complaints about the closure of accounts (unless they were about the manner
of their closure).
A case accepted by the scheme involved a change to the way a bank processed telegraphic
transfers. The complainant had previously initiated transfers using incomplete account
details. The bank would insert the missing details and carry out the transfer. But then the
bank changed its policy: incomplete transfer applications would be rejected. The
complainant was not told of this and suffered an exchange rate loss. The bank had no
obligation to advise the customer of the internal policy change or to insert missing
information. On the face of it, the complaint fell outside the scheme’s jurisdiction. But the
bank, even under its new policy, should have been able to identify the correct account and
9
The scheme is required to consult the industry to determine the principles of good banking practice.
Page | 14
complete the transfer. The bank compensated the customer accordingly.
The review’s recommended clarification would not limit paragraph 25.2, which provides a
clear exclusion for lending, security or insurance decisions that involve commercial
judgement (and, implicitly, practices and policies that guide those decisions). Nor is the
clarification intended to enable scrutiny of what is properly a bank’s internal management
decisions. Rather, its intention is to emphasise the connection between paragraphs 23 and
28.
Comparable schemes
In Australia, the Financial Ombudsman Service may reject a complaint about a policy or
practice that does not involve allegations of inappropriate application or maladministration.
It will not reject a complaint if the alleged conduct is contrary to law or good industry practice.
Complaints about cheque clearance times, unavailability of ATMs during servicing and
branch closures are examples that would not be considered.
Similarly, New Zealand’s Financial Services Complaints Limited and Finance Dispute
Resolution Service may also reject complaints about policy and practice that do not involve
allegations of maladministration, inappropriate application of policy or practice, or breach of
the law or any relevant code of practice. The Insurance and Savings Ombudsman has no
exclusions relating to policy or practice, but its exclusion on commercial judgement grounds
is broad.
Advantages and disadvantages
Clarifying paragraph 28 would:




Improve understanding of the scope of the scheme’s jurisdiction
Increase customer satisfaction when cases are rejected on their merits, rather
than on technical grounds
Avoid needlessly considering the application of this rule
Align this rule with other schemes.
Possible drawbacks:
Such a change might be regarded as interfering in banks’ commercial judgement (although
security or insurance – matters central to their commercial judgement).
Options
One: Leave paragraph 28 unaltered.
Two: Amend paragraph 28 to make clear the scheme can consider complaints about policy
and practice involving allegations of maladministration, inappropriate application of policy or
practice, or a breach of the law, any relevant code of practice or obligations to good banking
practice.
Page | 15
Limit banks’ ability to take legal proceedings and recover debts while a
complaint is under consideration
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.
Current scheme rules prevent any consideration of a complaint if either the bank or the
customer initiates legal proceedings. The rules do not prevent a bank from taking debt
recovery action while an investigation is under way – so long as it does not involve legal
proceedings. (Permissible action includes issuing demands and property law notices and
undertaking mortgagee sales.)
The rules are elaborated in different ways for customers and banks. Paragraph 13 states
that if the customer initiates legal proceedings related to the complaint, the scheme will stop
considering the complaint and will advise both sides in writing. The same outcome arises if
the investigation has reached the point of making a preliminary decision and the customer
begins legal action: the preliminary decision is deemed to have been withdrawn, and the
scheme will not consider the matter further (paragraph 15).
A bank is equally free to initiate legal proceedings, although two pre-conditions apply: the
chief executive must give his or her approval, and the scheme must be notified at least five
days before such action begins (paragraph 14). There is no explicit reference to
consequences for the bank. This is inferred in paragraph 27.6, which states that the scheme
will not consider, or will cease to consider, any complaint that is before a court, tribunal,
arbitrator or other independent body.
A concern raised in the course of the review was that a bank’s initiation of legal proceedings
automatically removes a complaint from consideration by the scheme. It shifts the matter
from the scrutiny of a body whose work is, for the complainant, free to a court whose
processes can be costly and lengthy. This was considered to be an unfair discretion enjoyed
by banks. It is considered poor practice for a bank to start legal proceedings over a matter
the scheme is investigating.
In practice, banks hardly ever initiate legal proceedings while a complaint is before the
scheme. However, they may continue debt recovery action. The review found that banks
were anxious to protect their ability to recover a debt, if they deemed it necessary, while the
scheme was considering a complaint, and expressed concern that imposing restrictions on
this ability might delay, and potentially harm, the ultimate recovery of that money.
The scheme recognises that continuing debt recovery action is a commercial decision and
may be in the interests of all concerned. However, the scheme sometimes asks banks to
suspend debt recovery action while it is investigating a complaint. Banks are under no
compulsion to do so, although they usually agree because the scheme makes such requests
only when the complaint appears to have merit and would not require recovery action if it
went in the customer’s favour. The scheme does not make such requests if debt recovery
action will occur regardless of the outcome.
Comparable schemes
Restrictions on legal and debt collection action vary among schemes in Australia, Britain and
Canada. In two of the three, there are constraints on legal action, and in two of the three
there are none on debt recovery action.
Australia’s Financial Ombudsman Service does not allow legal action or debt recovery
without its agreement and only in conformity with specific conditions.
Page | 16
In New Zealand, the Insurance and Savings Ombudsman and Financial Services Complaints
Limited impose restrictions on debt recovery and legal action. The former prohibits
participants from taking any action to recover a debt while it considers a complaint, and
allows legal action only if a prescribed process is followed. The latter allows debt recovery
action with the consent of the scheme’s chief executive. No legal proceedings are permitted,
except to the minimum extent necessary to preserve a participant’s legal rights.
Forthcoming credit law reforms concerning repossession of consumer goods suggest a
move by Parliament towards greater protection for customers and consumers while a
dispute is under consideration. The changes to the Credit Contracts and Consumer Finance
Act 2014, which take effect in June 2015, prohibit companies from repossessing consumer
goods until the complaint is resolved. An exception applies if the goods are “at risk”. For
example, if the creditor believes the goods will be damaged or sold.
The review advocated neither a blanket ban nor a complete relaxation of the rules,
recognising there may be circumstances in which a bank needs to take action while a
complaint is under consideration. It recommended some restrictions, but did not specify what
they should be.
Advantages and disadvantages
Limiting banks’ ability to initiate legal proceedings and begin debt recovery while the scheme
is considering a complaint would:




Preserve the customer’s position in the event the complaint is upheld
Improve consumer confidence in the scheme by having an independent party decide
what is fair in the circumstances
Move the scheme into line with dispute resolution services in the financial services
sector
Anticipate any potential change imposed by regulation as a result of the review of the
Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Possible drawbacks:




Customers could use a complaint as a tactic to delay debt recovery action (although
excluding complaints that lack any merit would counteract this).
Delays could harm debt recovery action.
Debt would increase in some cases while a complaint was under consideration.
Customers’ financial position might deteriorate, causing banks potentially greater
losses.
Options
One: Keep the present rules, which have no power to restrict debt recovery action or legal
proceedings while a complaint is under consideration.
Two: Impose some restrictions on a bank’s ability to take legal proceedings and/or debt
recovery action while a complaint is under consideration. (If this option is favoured, please detail
preferred type of restrictions and in what circumstances.)
Page | 17
Allow significant decisions by a majority vote of directors
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.
The scheme is a legally incorporated company, Banking Ombudsman Scheme Limited. The
company has five directors, who are also the scheme’s board members. The five consist of
two banking representatives, two consumer representatives and an independent chair.
The company’s constitution requires only a simple majority for day-to-day decisions, that is,
the approval of at least three of the five members – if all are present (paragraph 10.13).
Significant decisions, namely, admitting a participant to the scheme and changing
constituent documents (the terms of reference, constitution and participation agreement),
need a unanimous vote (paragraph 10.15 and also paragraph 17.1 of the participation
agreement).
The review uncovered no obvious governance problems, noting that decisions were almost
always unanimous and that there was arguably no pressing need to amend voting
procedures. However, it also noted that the unanimous rule left open the possibility that a
single director could, in effect, veto any proposal to amend the scheme’s constituent
documents. This would make it impossible to update the documents in line with
developments in the banking sector or in governance practices generally. Requiring 75 per
cent support would allow for the dissent of one director without preventing the approval of a
resolution.
The review further noted that amending the unanimous rule could conveniently be carried
out in conjunction with implementing any other recommendations arising from its evaluation
of the scheme.
Comparable schemes
The three comparable ombudsman schemes in Australia, Britain and Canada require only a
simple majority vote for changes to their terms of reference. In New Zealand, Financial
Services Complaints Limited requires a unanimous vote, while the Insurance and Savings
Ombudsman requires two-thirds approval by both industry members and consumer
members, as well as the vote of the independent chair.
Advantages and disadvantages
Requiring the approval of only 75 per cent of directors for changes to constituent documents
would:




Allow the scheme to keep pace more easily with external developments
Be consistent with modern board practice and the arrangements of similar schemes
Ensure no single director could obstruct change
Still leave a final safeguard in the form of approval by the Minister of Consumer
Affairs, in accordance with the Financial Service Providers (Registration and Dispute
Resolution) Act 2008.
Possible drawbacks:


It might suggest directors are representing their constituents’ interests above the
scheme’s when they vote against a rule change
It might discourage the current ideal practice of striving for consensus in decisionmaking by the board.
Page | 18
Options
One: Require majority support to pass any resolution except specified matters, including
amendments to constituent documents, which require unanimous support.
Two: Require 75 per cent support to pass any resolution.
Three: Require majority support to pass any resolution except specified matters, including
amendments to constituent documents, which require 75 per cent support.
Page | 19
Modernise the scheme’s rules
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.
The review said rule changes likely to arise out of its other recommendations, together with
the correction of various outstanding defects, made it a convenient time to update and
reorganize the document as a whole.
The drafting modifications were technical and not material matters, it said. Examples
included the definition of financial services, the relationship between paragraphs 4 and 25.4,
and inconsistencies between sub-headings and the content to which they related.
Recommended editing changes were intended to make the rules more understandable to
the public.
Delegation powers
The most pressing amendment, it said, was the transfer of legal responsibility for powers
exercised by the Banking Ombudsman to the legally incorporated company, Banking
Ombudsman Scheme Limited. The scheme would then delegate those powers back to the
Banking Ombudsman, who could in turn delegate further, as he or she saw fit. (See
recommendation 14 and the delegation of power to investigators to make preliminary
decisions.) Such a transfer would make the scheme “more consistent with the realities of
modern organisations”.
At present, the rules are silent about any delegation of power by the Banking Ombudsman.
In theory, no delegation is possible, except to the Deputy Ombudsman.10 In practice, staff
are involved in almost every aspect of the scheme’s operation.
Comparable schemes
New Zealand’s Insurance and Savings Ombudsman scheme confers powers on the
ombudsman and permits him or her to delegate any power – other than to make final
decisions – to staff. Similarly, the company Financial Services Complaints Limited confers
powers on the chief executive, who may delegate any power – again, other than to make
final decisions – to staff.
In Australia, the Chief Ombudsman of the Financial Ombudsman Service may delegate the
power to make certain final decisions to ombudsmen, panels as well as adjudicators, a
newly created role.11 The Chief Ombudsman decides on the most suitable of the three to
make a decision in a particular dispute.
Other changes
Among the overdue technical changes are the following:
10
The rules state that a reference to the Banking Ombudsman always implies a reference to the Deputy Banking
Ombudsman as well – but not to any other staff.
11
Adjudicator cases typically involve straightforward disputes and small amounts of money. Panel cases deal
with complex or important questions.
Page | 20
Paragraph 27.2
This sets out four apparently independent but actually overlapping circumstances that can
trigger referral of a complaint from a bank to the scheme. Clarification of the referral process
is needed.
Paragraph 3
This gives the scheme the power to help customers make a complaint yet simultaneously
prevents it from advising on the merits of the complaint. Removal of this prohibition is
probably in everyone’s interests because it is better that the scheme provides early
assistance and gives some general guidance on the merits of a complaint.
Paragraph 39
This is an example of where recent legislative changes have overtaken the rules. Paragraph
39 requires the scheme to report a series of material complaints to the relevant licensing
authority. It duplicates the scheme’s statutory reporting requirement, which has recently
been expanded.12
Confidentiality waiver
Banks require a signed confidentiality waiver from customers before releasing customer
information to the scheme. This step can sometimes delay the progress of a complaint and
is often argued as unnecessary because customers who approach the scheme by definition
wish their financial circumstances to be made available to the scheme. Other dispute
resolution schemes do not require a signed waiver.
Some of the proposed changes will, in turn affect other rules, depending on which, if any, of
the recommendations the scheme adopts. Any changes will be subject to consultation with
the New Zealand Bankers’ Association and approval by the Minister of Consumer Affairs.
Advantages and disadvantages
A comprehensive rewriting of the scheme’s rules would:




Bring them up to date with existing practices and ensure they remain relevant for the
foreseeable future
Clarify but leave untouched well-established procedures
Promote a better understanding of what the scheme can and cannot do
Increase confidence in the scheme by having easily understood procedures.
Possible drawbacks:

The plain English language might require some adjustment by long-standing users.
Options
One: Continue with the current wording and layout of the rules.
Two: Amend the rules and layout as recommended by the review.
12
Section 67 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Page | 21
Release to each side only that information supplied in writing by the other side
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.
At present, the scheme must, when it receives such a request, supply all information it holds
on file (paragraph 9). The exception is information supplied on a confidential basis, although
this, too, can be given if the supplier of it agrees.
The effect of this all-encompassing requirement is that the scheme must provide copies of its
working papers, drafts, file reviews, internal emails and phone records.
The effect of the recommendation would be to exclude such internally generated material.
The review singled out telephone transcriptions for special mention, saying they took a lot of
time and effort and gave an unnecessary level of insight into the other side’s position.
Furthermore, they were unlikely to contain anything of real value. All pertinent information is
in key documents the scheme exchanges between the two sides for comment. Review
members also noted that, in their experience, no other scheme supplied records of phone
calls.
The review found that the scheme’s information-sharing practices were fair, and certainly
satisfied its natural justice obligations to give adequate notice of important steps and
decisions, give both sides an opportunity to express their views, consider these views before
making a decision and advise both sides of the reasons for the decision within a reasonable
time.
The scheme routinely provides documents to each party during investigations and also tells
complainants as a matter of course that they have a right to request copies of any
information on file.
Comparable schemes
The review did not look at other schemes. However, it is worth noting that New Zealand’s
Insurance and Savings Ombudsman may, on receiving a request for information from one
side to a dispute, respond as it considers appropriate, subject to the Privacy Act 1993 and
any other applicable legal obligations. Similarly, Financial Services Complaints Limited may
make information available on request, subject to its terms of reference and any procedural
standard approved by the chief executive.
Advantages and disadvantages
Restricting information releases to written material supplied by each side would:



Foster a frank exchange of advice within the scheme (such as between
investigators and the Banking Ombudsman during the review of files)
Protect feedback to staff about their draft decisions and correspondence
Lower the administrative workload resulting from information requests.
Page | 22
Possible drawbacks:

Such a restriction might lessen each side’s understanding of some of the
scheme’s internal processes.
Options
One: Retain the existing arrangement.
Two: Release to one side only that written material supplied by the other, subject to the
scheme’s confidentiality rules and the Privacy Act 1993.
Page | 23
Give investigators the power to make preliminary decisions
Recommendation 14 proposes a delegation of power to investigators as part of a
streamlining of the way the scheme makes decisions.
Paragraphs 7 and 17 of the rules set out how this process should happen. One lays out the
natural justice framework; the other fills in the details.
Paragraph 7 says the scheme must reach decisions about complaints following the rules of
natural justice. These include giving both sides (a) adequate notice of important steps and
decisions, and (b) an opportunity to express, and have considered, their views before
decisions.
Paragraph 17 says the Banking Ombudsman must give both sides at least a month’s notice
before making his or her final decision, or recommendation. (It must be in writing, with
reasons.) In that time, either side can supply more information or make further arguments.
To comply with these provisions, the scheme has evolved the following process:





An investigator gives both sides a preliminary view (either verbally or in writing) of the
merits of the case and a suggested outcome, to which their comments are invited.
If they don’t accept this view, the Banking Ombudsman gives them an initial
assessment, or decision. Usually in writing, it sets out the facts, analyses the
complaint and proposes a solution. Again, responses are invited.
If acceptable to both sides, the complaint is settled on that basis.
If not, the assessment constitutes the required month’s notice of a final decision; any
objections are considered and the Banking Ombudsman makes a final decision.
The two sides have a month to decide whether to accept or reject it. If the
complainant accepts, the decision is binding on the bank regardless of its view. If not
acceptable to the customer, he or she is free to take legal or other action.
The review found that this process more than satisfactorily met the scheme’s obligations to
comply with paragraphs 7 and 17. In fact, it concluded that the process had, to use its words,
“become overly extended”. It said the scheme was providing two provisional assessments –
an investigator’s preliminary view and the Banking Ombudsman’s initial assessment – when
only one was necessary before a final decision.
One solution would be simply to dispense with the investigator’s preliminary view, which
does not meet the notice requirement of paragraph 17. This stipulates that it must be the
Banking Ombudsman who gives his or her personal assessment of the case. The rules
contain no provision to delegate the task to investigators. The drawback of such a solution is
that it would miss an opportunity to resolve a complaint informally at an early stage. Most
other schemes assign this role to their staff.
The solution recommended by the review is to amend the rules so the Banking Ombudsman
can delegate the power to prepare preliminary decisions to investigators. Only a single
preliminary decision would then be necessary. This would satisfy the natural justice
requirement to give both sides notice of a final decision, as well as provide the opportunity,
in most cases, to respond beforehand. In those cases where the Banking Ombudsman’s
decision was materially different from the initial decision, natural justice would require notice
of the decision.
Page | 24
Comparable schemes
Ombudsman schemes of all types generally make a preliminary and final decision. The
difference is in how they carry out this two-step process. Most schemes allow the
ombudsman to delegate preliminary decisions to staff, but reserve final decisions for the
ombudsman.
Banking schemes in Australia and Britain allow either side, if unhappy with an investigator’s
initial decision, to go to the ombudsman. The Canadian scheme is different. The
ombudsman can delegate the power to make initial and final decisions to investigators.
In New Zealand, the Insurance and Savings Ombudsman can delegate initial decisions to
staff, but it requires the ombudsman to make final decisions. Financial Services Complaints
Limited has the same process as the scheme in that only its chief executive can make initial
and final decisions.
Some researchers into alternative dispute resolution models suggest this two-step process
makes for well-reasoned decision-making and provides complainants with procedural
safeguards against a failure to be heard fully or to have all relevant information considered.13
But they also point out that it can lead to unnecessary and time-consuming appeals that
seldom reverse the original decision.
Advantages and disadvantages
Giving investigators the power to make initial decisions would:





Enable the Banking Ombudsman to focus on complex cases
Lower costs by shortening the dispute resolution process
Speed up the resolution of disputes
Improve satisfaction with the scheme through faster outcomes
Bring the scheme into line with the practice of most other schemes.
Possible drawbacks:



Such a delegation of power might result in inconsistent decision-making unless
quality controls were maintained.
Customers might feel short-changed if the Banking Ombudsman is not involved in
the initial stage of decision-making.
A less visible role for the Banking Ombudsman might diminish the standing of the
scheme, which, like all ombudsmen’s schemes, is traditionally regarded as a
personal office.
Options
One: Continue to require the Banking Ombudsman to make initial and final decisions.
Two: Allow investigators to make initial decisions, reserving final decisions for the Banking
Ombudsman.
13
Gill et al (Models of Alternative Dispute Resolution, Queen Margaret University, 2014)
Page | 25
Formalise the scheme’s role in investigating industry-wide problems
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.
A systemic issue is a problem that is widespread or has the potential to become widespread.
The scheme has investigated many of both types. An example of the latter noted by the
review is the withdrawal of KiwiSaver funds to help pay for a first home in Australia.
Enquiries with government agencies following an investigation by the scheme into a single
complaint revealed the problem was more common than anticipated. Another example
concerned a bank that sent bankcards to customers unsolicited and 12 months later
charged, quite unintentionally, an annual card fee despite customers having never activated
the cards. The scheme’s proactive approach towards systemic issues may avoid complaints
and regulatory involvement.
At present, the scheme relies on banks’ goodwill. That goodwill, the review found, was
always forthcoming. It noted excellent co-operation by banks whenever the scheme made
enquiries about problems with potentially broader implications. The question arises,
however, about what to do should this co-operation not always be forthcoming. Should the
scheme be able to rely on an explicit power rather than persuasion? The recommendation
proposes that the present voluntary arrangement should be put on a formal footing by giving
the scheme the power to look into and help resolve problems affecting or potentially affecting
the wider public.
The current arrangement is embodied in a voluntary protocol for investigating systemic
problems.14 In addition, paragraph 39 of the scheme rules requires the scheme to report any
“series of material complaints” to the relevant licensing authority.15 An amendment in mid2014 to the Financial Service Providers (Registration and Dispute Resolution) Act 2008
refers to a duty to co-operate with, and communicate information to, the Commerce
Commission if a “series of material complaints” arises about a particular creditor or class of
creditors under a consumer credit contract.16
The reference to “a series of material complaints” does not, however, always easily
encompass systemic issues. This is both because a single complaint may raise a wider
issue and because a systemic issue may become apparent only as the number of customers
and consequent financial losses are revealed.
Nonetheless, when the scheme concludes that such complaints have wider implications, it
will raise the matter with the bank or banks concerned. Later it will ask what steps have been
taken to put things right.
The review considered that the scheme needed explicit powers in such situations. It needed
to “play its part in ensuring that [banks] rectify the root causes of issues and thereby avoid
future complaints”. As reasons, it cited the need to keep up with world-class external dispute
resolution practice, and also the need to meet consumer expectations that an ombudsman
14
The protocol was developed in 2011 after consultation with the banking industry.
This amendment was inserted in 2009 after the introduction of the Financial Service Providers (Registration
and Dispute Resolution) Act 2008.
16
The scheme will update its rules to incorporate this obligation.
15
Page | 26
would ensure a problem affecting one individual would be dealt with in the interests of other
consumers in the same or a similar position.
Comparable schemes
Of the three comparable schemes in Australia, Britain and Canada, two have rules requiring
them to identify and either remedy the problem or have it remedied by the institution in
question. In New Zealand, the Insurance and Savings Ombudsman can take such action as
it considers appropriate. Financial Services Complaints Limited must refer a systemic
problem to the participant for corrective action and must monitor that action until there is an
outcome it considers acceptable.
The Australia New Zealand Ombudsman Association has argued that in addition to
investigating individual complaints, an ombudsman “must have the right to deal with
systemic issues or commence [its own] investigation”.17
Similarly, the British and Irish Ombudsman Association noted that ombudsman schemes aim
to achieve “redress for the individual, but also, where they identify systemic failings, to seek
changes in the work of the bodies in their jurisdiction, both individually and collectively”.18
It has become clear that the success of schemes in addressing systemic issues has created
a public expectation that they will act decisively and effectively when such problems arise.
Advantages and disadvantages
An explicit power to investigate and correct systemic problems in the banking industry would:

Provide a formal mechanism in case existing arrangements proved insufficient

Meet consumers’ expectations that the scheme would act in their wider interests

Formally signal the scheme’s commitment to tackling any systemic problems

Help achieve the scheme’s goal of providing a world-class ombudsman service

Bring the scheme into line with other financial sector dispute resolution schemes in
New Zealand

Remove the need for regulatory intervention and reinforce the industry’s ability to
regulate itself.
Possible drawbacks:
17
18

An explicit power might create the perception the scheme is a regulator rather than a
dispute resolution scheme.

It might duplicate the effort of organisations such as the Commerce Commission and
Financial Markets Authority.

It might create an unwarranted layer of regulatory oversight.
ANZOA – Policy Statement, February 2010.
Submission to the Leveson Inquiry, 2012.
Page | 27
Options
One: Retain the existing voluntary arrangement.
Two: Amend the scheme’s rules to give it the power to investigate systemic problems.
Page | 28
Appendix: Your comments on the recommendations and options
The scheme is keen to hear your views. Please complete any or all of the comment boxes,
save this document and send to Nicola.Sladden@bankomb.org.nz. Alternatively, send a
submission in your own format.
Review recommendation 2
Make clear that fairness is paramount in reaching decisions
Options
One: Retain the wording of the scheme’s present decision-making criteria.
Two: Amend the wording of the scheme’s decision-making criteria to make clear that
fairness is the primary consideration in arriving at a decision, having regard to the law,
principles of good banking practice and any applicable code of practice.
Your comments
Review recommendation 3a
Make the claim limit higher than the compensation limit
Options
One: Make no change, that is, keep the claim and compensation limits at $200,000 and
allow larger claims at the bank’s discretion.
Two: Make no change, except to raise the $2000,000 to a higher amount. (If this option is
preferred, please specify the amount.)
Three: Keep the compensation limit at $200,000, but raise the claim limit to $300,000 (which
cannot be extended at the bank’s discretion) and require complainants to waive any
difference.
Four: Keep the claim and compensation limits at $200,000, but allow larger claims up to a
specified amount if the complainant agrees to waive any excess (and allow still larger claims
at the bank’s discretion). (If this option is preferred, please specify the amount if the
complainant agrees to waive any excess.)
Your comments
Page | 29
Review recommendation 4
Allow the scheme to make non-monetary awards
Options
One: Continue to have the power to make a bank not pursue repayment of part or all of a
debt.
Two: Allow the scheme to make those non-monetary awards it considers necessary.
Three: Allow the scheme to make specified non-monetary awards. (If this option is preferred,
please specify type of awards.)
Your comments
Review recommendation 5
Extend the period for accepting complaints
Options
One: Keep the current two-month deadline.
Two: Extend the deadline from two to six months.
Three: Continue to require a bank’s consent before the scheme can consider a complaint
outside the two-month deadline.
Four: Give the scheme discretion to consider cases outside the two-month deadline in
exceptional circumstances.
Your comments
Page | 30
Review recommendation 6
Extend the ability to decline complaints without a reasonable prospect of success
Options
One: Keep the existing two rules for dismissing cases that lack merit.
Two: Amend the frivolous or vexatious rule, as follows, and add two more rules, as follows:
The scheme is satisfied that the complaint is not frivolous or vexatious, or that the
complainant is not pursuing it in an unreasonable way.
The scheme is satisfied that the complainant has not suffered, or is unlikely to suffer,
financial loss, material distress or material inconvenience.
The scheme is satisfied that the complaint does not have any reasonable prospect of
success.
Your comments
Review recommendation 7
Make clear that bank policies and practices must meet principles of good banking practice
Options
One: Leave paragraph 28 unaltered.
Two: Amend paragraph 28 to make clear the scheme can consider complaints about policy
and practice involving allegations of maladministration, inappropriate application of policy or
practice, or a breach of the law, any relevant code of practice or obligations to good banking
practice.
Your comments
Page | 31
Review recommendation 8
Limit banks’ ability to take legal proceedings and recover debts while a complaint is under
consideration
Options
One: Keep the present rules, which have no power to restrict debt recovery action or legal
proceedings while a complaint is under consideration.
Two: Impose some restrictions on a bank’s ability to take legal proceedings and/or debt
recovery action while a complaint is under consideration. (If this option is favoured, please detail
preferred type of restrictions and in what circumstances.)
Your comments
Review recommendation 9
Allow significant decisions by a majority vote of directors
Options
One: Require majority support to pass any resolution except specified matters, including
amendments to constituent documents, which require unanimous support.
Two: Require 75 per cent support to pass any resolution.
Three: Require majority support to pass any resolution except specified matters, including
amendments to constituent documents, which require 75 per cent support.
Your comments
Page | 32
Review recommendation 10
Modernise the scheme’s rules
Options
One: Continue with the current wording and layout of the rules.
Two: Amend the rules and layout as recommended by the review.
Your comments
Review recommendation 12
Release to each side only that information supplied in writing by the other side
Options
One: Retain the existing arrangement.
Two: Release to one side only that written material supplied by the other, subject to the
scheme’s confidentiality rules and the Privacy Act 1993.
Your comments
Page | 33
Review recommendation 14
Give investigators the power to make preliminary decisions
Options
One: Continue to require the Banking Ombudsman to make initial and final decisions.
Two: Allow investigators to make initial decisions, reserving final decisions for the Banking
Ombudsman.
Your comments
Review recommendation 16
Formalise the scheme’s role in investigating industry-wide problems
Options
One: Retain the existing voluntary arrangement.
Two: Amend the scheme’s rules to give it the power to investigate systemic problems.
Your comments
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