Unravelled: Improving external dispute resolution schemes – some rather odd recommendations
7 February 2017
Other articles in this edition of Unravelled:
- English High Court provides important guidance on approach to LIBOR mis-selling claims
- Retail banking remuneration review
- Mandatory margining
Written by Senior Regulatory Counsel Michael Mathieson
It is difficult to describe the interim recommendations of the Expert Panel reviewing the 'financial system external dispute resolution and complaints framework' as anything other than odd. Chief amongst the oddities is that the Panel recommended, in its interim report, the merger of two ombudsman schemes – FOS and CIO – and the abolition of the SCT after the House of Representatives Standing Committee on Economics had already specifically recommended that the Government 'establish a Banking and Financial Sector Tribunal by 1 July 2017' to replace FOS, CIO and the SCT.
Clearly, the Expert Panel was entitled, indeed duty-bound, to form its own opinion. But its review was commissioned by the Government and the Government was able to control what the House of Representatives Standing Committee on Economics recommended. Indeed, the Panel might consider that it has received rather mixed messages from the Government. Those who remember the minor frisson late last year as to whether the Banking and Financial Sector Tribunal would be a big 'T' tribunal or a small 't' tribunal or, perhaps, not a tribunal at all (according to the ordinary meaning of the term 'tribunal'), might also consider that some of the messages have been a little mixed.
No less perplexing is the interim recommendation to abolish the SCT. Having noted the delays besetting the SCT's handling of complaints, the Panel said that 'the problems cannot be fully addressed while a tribunal structure is retained', even with 'substantial reforms to funding, governance or other aspects of the legislative regime'. This is because 'the rigidity of the statutory model will continue to hamper flexibility and innovation'. Now, you can be as red hot as you like on flexibility and innovation, but there is nothing in the Panel's interim report which demonstrates that the SCT's statutory model has hampered 'flexibility' or 'innovation'.
Even if the SCT's legislative foundation did, somehow, unnecessarily restrict what the SCT can do, the appropriate response would seem to be for Parliament to amend the legislation to relax or remove the restriction in question. But it is difficult for the Parliament to do so when no relevant restriction has been identified.
And then we come to the nub of the matter. The Panel refers to the 'increasingly legalistic approach adopted by SCT'. We are not told what 'legalistic' means, although it appears to be a criticism (shocking, I know). One might think that 'legalistic' means one or more of 'thorough' and 'impartial' and 'high quality' but evidently the Panel is not using it in any of those senses.
Let's remember that the decisions of superannuation trustees may involve the exercise of discretion. There can be numerous stakeholders in respect of a particular member's benefit. The circumstances relevant to that benefit can be complex. The considerations relevant to a dispute in respect of that benefit can be numerous. In some cases, careful consideration by the EDR scheme, not a 'fast track' process, is likely to be the right kind of process.
I recently went to FOS over a dispute with my pet insurer (and, in case you are wondering, I tasted that sweetest of sweet wine – vindication). The determination issued by FOS was well-reasoned and involved careful consideration and application of law and principle to the facts of my pooch's case. The determination could fairly be described as 'legalistic' – but, in contrast to the SCT, FOS has not been criticised for being legalistic.
Despite my win at FOS, I happen to think that a statutory tribunal model is inherently superior to a contractual ombudsman model. This is primarily because a tribunal established by legislation is more independent and also because users of a tribunal typically have appeal rights. I also happen to think that abolishing a body would be an odd way to deal with delays, when the delays seem to be primarily due to funding limitations.
As the Panel ultimately observes: 'The recommendations of the Committee are a matter for the Government'. Quite so. But this makes another interim recommendation of the Panel most peculiar. The Panel says that the superannuation industry should develop a superannuation code of practice. One might think that whether the superannuation industry should develop a superannuation code of practice is a matter for the superannuation industry. It is not clear why it should be the subject of a final recommendation by the Panel.
It will be most interesting to see how different, if at all, the Panel's final report is to its interim report. And whether we end up with a tribunal – with a 'T' or a 't' – or something else.
Other articles in this edition of Unravelled
- Michael MathiesonSenior Regulatory Counsel,
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