Ramsay Report set to shake up financial services
With every federal budget, there are inevitably winners and losers. This year, MLS Professor Ian Ramsay was among the clear winners, with all 11 of the recommendations of a panel chaired by Professor Ramsay adopted by Treasurer Scott Morrison.
The Ramsay Report, known officially as Review of the Financial System External Dispute Resolution Framework, was tasked with looking at how consumer disputes are handled in the Australian financial services industries, as well as assessing the relative merits of any alternatives to the current system.
One of the report’s main recommendations was the streamlining and consolidation of Australia’s various financial industry dispute resolution services. A new body, the Australian Financial Complaints Authority (AFCA), will replace the existing Financial Ombudsman Service, the Credits and Investments Ombudsman, and the Superannuation Complaints Tribunal. In 2015-2016 the three services together received a total of 41,223 disputes.
The AFCA will act as a ‘one-stop-shop’ for the handling of disputes between banks and other financial services organisations and their end consumers. Where the current system is bloated with a large degree of unnecessary duplication of process, the report argues, the proposed model will work to give consumers greater access to redress where they dispute the work of a financial service provider. This includes increasing the quantum over which consumers can lodge disputes compared with the previous bodies, and providing clarity as to the correct avenue for pursuing disputes.
‘‘Consumers in the financial system can be disengaged, have low financial literacy and find it difficult to understand complex financial products,’’ Professor Ramsay reflected in an interim report.
In conjunction with the AFCA, the Australian Securities and Investments Commission (ASIC) is to be given broader powers to require financial services players to report to the Commission on their own internal dispute resolution activities. The AFCA will be up and running from July of 2018 and will comprise an independent board and directors drawn from relevant finance and consumer-focused backgrounds.
‘‘When these measures are enacted more consumers and small businesses will be able to have their dispute heard, and will also be able to access fair compensation if they have wrongfully suffered,’’ acting Finance Minister Mathias Cormann said last month.
The establishment of the AFCA has been received positively by industry and consumer groups. Chairman of the Financial Ombudsman Service Professor Michael Lavarch AO said that the initiative “will simplify, strengthen and increase access to free external dispute resolution for consumers and small business”. Eight leading consumer groups had called for a single-body solution in a joint report submitted to the Panel.
Small business representatives have also welcomed the adoption of the Report’s recommendations, with Council of Small Business Australia CEO Peter Strong commenting that “too often, small business owners are shafted by the actions of big banks and these business owners have little option but to take their medicine in the face of the overwhelming power of the big banks”.
Professor Ramsay was joined on the Review by Ms Julie Abramson and Mr Alan Kirkland. Ms Abramson has been a Commissioner with both the Productivity Commission and the Essential Services Commission, while Mr Kirkland is the Chief Executive Officer of CHOICE, Australia’s largest consumer organisation.
By Scott Colvin