Financial Services Complaints Ltd (FSCL) has almost doubled its maximum compensation limits ahead of looming regulations for the sector.
Under the changes announced last week, FSCL lifted the highest payout award for complaints against its members to $350,000 from the previous $200,000.
The service, one of the four authorised financial complaints bodies, now matches the Banking Ombudsman, which “increased their limit to $350,000 some time ago”, according to FSCL chief, Susan Taylor.
Taylor said the remaining two dispute resolution organisations – the Insurance and Financial Services Ombudsman, and the Financial Dispute Resolution Service – still set a compensation limit of $200,000.
“But it is expected that there will be regulations by the end of 2022, requiring all schemes to set their financial limit at $350,000,” she said. “All schemes are able to change their rules, subject to consultation with scheme members and consumer organisations and subject to approval by the Minister of Commerce and Consumer Affairs.”
FSCL also increased the amount it can award for ‘non-financial loss’ (covering factors such as “stress, inconvenience, and lost opportunity”) to $5,000 from the previous $2,000.
“These changes are in line with issues the Ministry of Business, Innovation and Employment (MBIE) consulted on in their review of approved financial dispute resolution scheme rules last year,” the complaints body said in a statement.
MBIE says its 2021 review of the independent financial services complaint system, established in 2008 under the Financial Services Providers Act, was designed to apply “consistent jurisdictional rules” to the sector.
“This is to ensure all consumers can reliably access resolution services, and to prevent potential consumer harm and confusion caused by consumers being governed by different rules depending on provider membership,” the 2021 MBIE report says. “There are also natural justice implications from consumers having different access to redress, and potentially different treatment or outcomes depending on what scheme a provider may happen to belong to.”
The MBIE review says a unified $350,000 limit across all four complaints bodies could be more appropriate given changes to District Court financial cap limits (set at $200,000 20 years ago) adjusted for inflation.
“If the financial cap is too low, it may limit access to redress for those with disputes valued over this amount who cannot afford court proceedings,” MBIE says. “If the cap is too high, it could pressure schemes to become more like the courts – slower and more formal.”
Government has yet to formally report back on the proposed dispute resolution scheme changes.
Taylor said FSCL has also “re-written our rules in plain language to make it easier for consumers to understand our rules and processes”.
Over the last reporting period, FSCL dealt with 286 formal dispute resolution cases, according to the group’s 2021 annual report, while processing 931 complaints.
Most of the dispute resolution hearings revolved around insurance and lenders: financial advisers accounted for about 15 cases while less than 10 related to fund managers or superannuation schemes.
“Complaints around financial advice remain steady but low numbers,” Taylor said. “We have not yet seen any increase.”
The not-for-profit FSCL reported an annual loss of almost $118,000 on revenue (mostly member fees) of $1.8 million.
She said member fees remain as is.