Presentation to
FCAWA
Anna Mandoki
Case Manager, Financial Difficulty
29 September 2011
What we will cover
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Who is FOS?
What’s new at FOS?
FOS and its terms of reference (TOR)
Dispute resolution process
Financial difficulty and conciliations
Case studies
Resources
Who is FOS?
Financial Ombudsman Service
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FOS was created by the merger of the BFSO, FICS, IOS,
CUDRC and IBD
FOS is an ASIC approved External Dispute Resolution
Scheme operating across the financial services sector,
complying with ASIC RG 139, however we are not a
regulator
We handle up to 80% of banking, insurance and
investment disputes in Australia
We offer a free, fair and accessible service for
consumers, however we do not advocate for consumers
Membership is open to any financial services provider
operating in Australia
What’s new at FOS?
Chief Ombudsman
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Shane Tregillis
(replacing Colin Neave)
Former ASIC Commissioner
Before that, in a senior role at
the Monetary Authority of
Singapore where he was also Chair of the
Financial Education Steering Committee
Indigenous Liaison Team
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Aim to reduce barriers & improve access for
Indigenous Australians to our complaint process
A dispute process that is culturally sensitive
Dispute form amended to ask about ATSI origin
Disputes monitored by Indigenous Liaison Team
Progress matters over the phone where possible
Outreach to communities, build strong
relationships with FCs and other stakeholders
Help to identify issues with specific impact on
Indigenous communities (e.g. CBA ATM issue)
New Resources
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FOS Natural Disaster Hotline – 1800 337 444
Natural Disaster information on FOS website,
including summary of bank assistance and
contacts
Financial Counsellors’ Toolkit (online &
brochures)
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Responsible lending & credit cards
Insurance excesses
Account suitability
Feedback: amandoki@fos.org.au
FOS Terms of Reference
FOS Terms of Reference
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As part of the merger, FOS needed to develop
uniform Terms of Reference
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The Terms of References came into effect on 1
January 2010, and apply to disputes lodged from
that date
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The Terms of Reference were designed to
accommodate the increased profile of EDR
schemes in the new national credit regime
Jurisdiction
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FOS may consider a dispute between a financial services
provider (FSP)(who is a FOS member) and:
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Individuals
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A partnership comprised of individuals
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The corporate trustee of a self managed superannuation fund
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A small business (whether a sole trader or constituted as a company, partnership,
trust or otherwise)
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A club or incorporated association
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A body corporate of a strata title or company title building; or
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The policy holder of a group life or group general insurance policy
Small business
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if a manufacturing component, < 100 employees
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otherwise, < 20 employees
Jurisdiction
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We can consider disputes:
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where the value of the Applicant’s claim is $500,000 or less
if the FSP is a member of FOS at the time that the dispute is
lodged even if not a member at the time of the events giving rise
to the dispute
brought within 6 years of when the Applicant became aware (or
should reasonably have become aware) that they suffered a loss,
or within 2 years of receiving a final IDR response (note separate
time limit for credit contract variations)
Where the Applicant is seeking a variation to a consumer credit
contract on the grounds of financial difficulty
Where legal proceedings have commenced
Further collection/recovery action will be placed on hold, but
interest will usually continue to accrue under the contract
Compensation caps
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We can award up to $280,000 in compensation
for each claim
This excludes compensation for costs or interest
Non-financial loss is limited at $3,000
Consequential loss is limited at $3,000
Applicant’s costs are capped at $3,000 unless
exceptional circumstances apply
Applicants can abandon that part of their claim
over $280,000 provided their claim does not
exceed $500,000
Jurisdiction - Power to vary
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Where customer has made a reasonable request for a
variation to a regulated credit contract, and that request
has been declined by Financial Services Provider, FOS
can require that the contract be varied
Used as a last resort. FOS will consider:
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Financial Services Provider’s response
Whether customer has proposed a realistic repayment plan that
will result in repayment of the debt, including arrears, within a
reasonable timeframe
Customer’s current financial circumstances and whether they will
improve – does Applicant have capacity to meet payments if
variation is granted?
Centrelink recipients
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FOS Circular 2 (April 2010):
– Centrelink income, no assets – debtor can’t be
compelled to make payments
– Creditors are not obliged to waive the debt
– Creditor is still entitled to seek recovery e.g. by
obtaining judgment, but this may be a hollow exercise
particularly where circumstances are unlikely to
change
– FOS would not exercise its power to vary
Our dispute resolution process
Financial Difficulty and Conciliations
Jurisdiction
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Paragraph 5.1(c) of the Terms of Reference
preserves the ability to consider:
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maladministration in lending, loan management or
security matters; and
financial difficulty disputes
Applies to Consumers and Small Business
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25.2 of Code of Banking Practice sets the obligation
FSP must give genuine consideration to a customer in
financial difficulty
Genuine consideration reflects a process of
engagement
900
The last 2 years – trending up
2011 average
= 627
(3 month average = 743)
800
700
600
500
400
2009 average = 174
300
200
100
0
Financial Difficulty disputes received monthly by FOS
Information FOS needs
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We ask for information to:
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Identify the issues in dispute
Understand the actions of the parties
Assist in finding mutually agreeable outcomes
Decide on the dispute
Common information requests for financial
difficulty include:
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Current Statement of Financial Position
Are your client’s circumstances likely to change?
How does your client propose to repay the debt?
Telephone conciliation conferences
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Effective process to attempt to resolve
75% disputes resolve at conciliation
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Ideally all borrowers should attend
Be prepared
Be flexible
Outcomes owned by participants
Provide certainty
More flexible outcomes
25%
75%
Not resolved
Resolved
Telephone conciliation conferences
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45%
40%
35%
30%
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25%
Majority of
outcomes relate to
repayment
arrangements
Agreed timeframes
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20%
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15%
Sale of asset
Refinance of debt
10%
5%
0%
Repayment Timeframe Repayment Repayment
arrangement
for sale /
arrangement arrangement
with variation refinance of
with debt
and
asset
waiver
timeframe
Timeframe
for sale or
refinance
with partial
waiver
APRA
release
Debt waiver
Other
commercial
decision
Case Studies
Case Study 1: Credit Card Debt
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US Citizen (64), sole income
a US pension of $450 per month,
but has home with substantial equity
No repayments on credit card
for 18 months
FSP commenced legal action
Original debt $2,500, now $8,000
Conciliation conference held
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What were the issues?
What is FOS approach?
What was the outcome?
Case Study 2: Home Loan
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Home Loan, Applicant affected by GFC, then took
12 months Parental Leave
No repayments for 8 months, returns to work in 4 months
Loan (incl arrears) $360k, bank valuation $355-$370k,
monthly repayments $2,700
Conciliation conference:
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What were the issues?
FOS approach?
What was the outcome?
Resources
Relevant information
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A library of relevant information available
Old Terms of Reference publications:
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Bulletin 46
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Bulletin 53
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UCCC vs CoBP
Financial Difficulty Approach, Decisions and Loss
Information requests
Multiple debts and reduced repayment requests
Repeat requests for assistance
Dealing with one debtor about a joint debt
Bulletin 60 (financial difficulty, maladminstration secured
lending)
Relevant information
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New Terms of Reference publications
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The Circular 2
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The Circular 3
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Small business financial difficulty
Debt collection and social security recipients
Secured debts and shortfall issues
Lender’s mortgage insurance and financial difficulty
Debt recovery legal proceedings and financial difficulty
The Circular 5
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Information, varying a contract and responsible lending
Preserving assets
Repayment arrangements
Relevant information
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Fact sheets
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Other tools
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Information for consumers and representatives
Small business financial difficulty
Natural Disasters
Statement of financial position
Guide to conciliation conferences
Financial Counsellors Toolkit (in development)
E-learning sessions
All available at www.fos.org.au
How to contact the
Financial Ombudsman Service
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Telephone:
Internet:
E-mail:
Mail:
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Indigenous Liaison Team: ilt@fos.org.au
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1300 78 08 08
www.fos.org.au
info@fos.org.au
GPO Box 3
Melbourne Victoria 3001