2016-17 at a glance Performance compared with last year Total disputes received 39,479 16% Financial difficulty disputes accepted 2,742 5% Number of members Licensees: 5,621 2% Authorised credit representatives: 7,801 3% Total disputes closed 39,481 20% Systemic issues resolved 66 Number of investigations of alleged breaches of industry codes of practice (with 133 confirmed breaches) 273 Phone calls handled by our contact team 235,372 10% Visits to our website 675,246 13%
‘Changes to current arrangements should be designed to simplify, strengthen and increase access to timely, cost-effective and efficient dispute resolution’ Complaints and feedback We include details of service complaints made about us in this Annual Review (see page 110). This is consistent with our efforts to enhance our accountability and transparency. Complaints and feedback about our own service are important because they help us continually review what we do. In 2016-17, we received 480 service complaints, with 87% of these from applicants. While this represents only 1.2% of disputes we received, every service complaint provides important information and feedback about our handling of disputes and where we might need to improve. As part of improvements we made to our internal service complaints process, the Board appointed John Warde as the Independent Assessor to deal with escalated complaints about FOS service issues. He will commence in this new role in September 2017. Board We welcomed Johanna Turner to the FOS Board. She has extensive experience in financial services, exchanges and regulatory bodies. I would like to thank all the FOS directors for their efforts, contributions and support in a year where there have been many and varied extra calls on Board members in dealing with our internal and external challenges. As a Board, our focus remains on ensuring that FOS continues to deliver on its purpose of providing a quality dispute service that the Australian community can trust. Meeting community expectations As we look to a new single dispute resolution body, it is important to reflect on our history of change, adaptation and innovation. As scrutiny of financial services has increased, so have community expectations of dispute resolution services. We have been able to innovate and adapt in response to these changing expectations and many other challenges, and we will continue to do so. We will work constructively with the Government and all our stakeholders to ensure a smooth transition to the new scheme, leveraging off our existing staffing, expertise and infrastructure to minimise disruption for consumers and industry. I would like to particularly recognise the efforts, expertise and commitment of our staff. Together with the support and feedback of our members, community and consumer organisations and other stakeholders, the commitment of FOS staff has been critical in us successfully meeting the demands we faced in 2016-17, and in preparing us to meet the challenges ahead. Professor the Honourable Michael Lavarch AO Chair of the Board
Our Strategic Plan Our Strategic Plan aims to meet the six external dispute resolution (EDR) benchmarks prescribed by the Australian Securities and Investments Commission (ASIC). Our focus continues to be on delivering a more efficient and effective dispute resolution service, enhancing our public role and stakeholder engagement, and building our organisational capability and sustainability. Our focus areas Delivering a more efficient and effective dispute resolution service Enhancing our public role and stakeholder engagement Building our organisational capability and sustainability What we want to be A customer-centric service An organisation that is adaptable, able to effectively deal with change and provided excellent dispute resolution to all users, including vulnerable consumers A trusted organisation The authority on financial services dispute resolution, shares its experience and insights and actively engages with all its stakeholders A smart, efficient and responsible organisation An organisation with passionate people, effective systems, clear plans and a conscience What we need to do Eliminate any dispute queues and sustainably prevent future queues emerging Continue to embed an accessible, flexible and responsive approach to dispute resolution Enhance user experience Maintain and enhance the quality of our dispute resolution service Provide clear and fair outcomes that ‘feel fair’ Promote our service, actively engage and maintain stakeholder support Share our knowledge, experience and insights Raise community awareness of FOS Routinely seek stakeholder feedback and act on it Attract, retain and develop highly skilled and engaged people Embed new ways of working as part of our desired behaviours and culture Develop and enhance physical and technical resources to future-proof the organisation We have extended our existing Strategic Plan by one year to focus on our key priorities (above) and any work that will need to be completed as part of any transitional arrangements to a new external dispute resolution scheme.
Recruitment, induction and demographics In 2016-17, we welcomed 98 new employees. Through an induction and orientation program, our newest team members were briefed on our culture and values, and our business goals and processes. Most staff recruited in 2016-17 were in the 21-30 and 31-40 age brackets. Recognising service excellence At FOS we acknowledge and celebrate staff who exemplify the idea of ‘building service excellence into everything we do’. In 2016-17, we presented awards to the following staff: Nareeza Ali – Case Manager, Financial Difficulty Sarah Cullen – Case Manager, Banking and Finance Mannie Edwards – Team Manager, Financial Difficulty John Fisher – Case Manager, Financial Difficulty Wes Pan – Legal Counsel, Early Advice Vinod Prabhakaran – IT Service and Systems Support Officer Kailey Ryan – Code Coordinator, Code Compliance and Monitoring Mitchell Turek – Graphic Designer, Community and Corporate Communications Age of staff as at 30 June 2017 Years of service as at 30 June 2017 Ombudsmen In 2016 -17, our full-time, part-time and sessional Ombudsmen were: Shane Tregillis – Chief Ombudsman Philip Field – Lead Ombudsman, Banking and Finance John Price – Lead Ombudsman, General Insurance June Smith – Lead Ombudsman, Investments and Advice Katy Adams Geoff Bant Sarah-Jane Christensen Evelyn Halls Alison Maynard Christine McCarthy Nicole McCutcheon Helen Moye Don O’Halloran Justi Tonti-Filippini Adjudicators Melinda Cavalieri Rachel Erlich Qasim Gilani Chris Liamos Debbi Lukman Alex Maslen Charlotte Murphy Wendi Nisbet Elizabeth O’Brien Ruth Talalla Teresa Willemsen Panel members Consumer Stephen Duffield Paul Holmes William Mitchell Anna Nightingale Paul O’Shea Joan Staples Catherine Wolthuizen Industry Bruce Beakey Tom Brennan Mike Britton Phil Campbell Jennifer Diggle Robert Emery Ian Enright Tim Griffiths Corin Jacka Alex Knipping Martin McIntosh Michael Miller Peter Roan Graham Slater Patrick Sweeney Terry Wakefield Tim Webber Richard WF King Matthew Wigzell Gavin Wright
Senior Leadership Group From left Philip Field Lead Ombudsman – Banking and Finance Jenny Peachey Executive General Manager – Strategic Review Shane Tregillis Chief Ombudsman June Smith Lead Ombudsman – Investments and Advice John Price Lead Ombudsman – General Insurance Michael Ridgway Executive General Manager – Corporate Strategy and Services Jamie Orchard Executive General Manager – Resolution
Stakeholder engagement 2016-17 at a glance Industry forums held in major cities 22 Community outreach events attended 34 Submissions to inquiries, reviews and consultations 11 LinkedIn followers 1,643 Twitter followers 230 YouTube views of ‘Sarah’s story’ in Auslan 670 Requests for translators 744 Accessible audio translations for existing web pages 13 Dispute forms translated 5 Information brochures and fact sheets published in a range of languages spoken in Australia 65 Requests for advice 1,468
Translators provide extra support When lodging disputes, applicants are given the opportunity to request the help of a translator. This can help the applicant explain the details of their dispute to us, possibly by translating correspondence. Not all applicants who indicate they might need a translator end up using one, but if one is required, we will arrange and pay for the service. In 2016-17, a total of 744 requests for a translator. This was a 19% increase from last year. The languages for which we received the most translator requests were Chinese (Cantonese, Mandarin or other dialect) (191) and Arabic (85). Received disputes by language requested Language Total Mandarin 98 Chinese 93 Arabic 85 Afrikaans 76 Cantonese 39 Vietnamese 37 Persian (Farsi) 34 Korean 26 Greek 17 Hindi 17 Italian 16 Turkish 16 Spanish 13 Punjabi 11 Serbian 10 Dari 9 French 9 Macedonian 9 Assyrian 7 Sinhalese 7 Thai 7 Tamil 6 Urdu 6 Language Total Burmese 5 Croatian 5 Japanese 5 Russian 5 Bengali 4 Czech 4 Estonian 4 Filipino (Tagalog) 4 Armenian 3 Bosnian 3 Deaf-Sign 3 Gujarati 3 Khmer 3 Pakistani 3 Polish 3 Portuguese 3 Samoan 3 Albanian 2 Ashanti 2 German 2 Indonesian (Bahasa) 2 Romanian 2 Tagalog 2 Language Total Tigrigna 2 Amharic 1 Bisaya 1 Creole 1 Dutch 1 Fijian 1 Hebrew 1 Hindi-Fijian 1 Hungarian 1 Kannada 1 Karen 1 Kurdish 1 Lao 1 Malay 1 Nepalese 1 Pashto 1 Pidgin English 1 Somali 1 Tongan 1 Wolof (African dialect) 1 Total 744
Representation The dispute resolution service FOS provides is a free and accessible alternative to court. Applicants do not need legal or financial advice or representation to come to us, nor do they need to pay anyone to represent them. But we recognise that some applicants may prefer to have someone lodge their dispute for them or act on their behalf during the dispute resolution process. In 2016-17, a total of 7,072 applicants used a representative to lodge a dispute with FOS. This was one-sixth (16%) more than last year. The type of representative applicants most commonly chose was a family member or friend (34%). The proportion of disputes lodged by representatives (18%) was the same as last year. Many people in financial difficulty seek the help of a consumer representative. This year, consumer representatives including financial counsellors, Legal Aid and community lawyers from 168 community-based organisations (134 last year) helped Australians lodge 586 disputes with FOS (484 last year). The number of applicants using a fee-for-service agent (who charge consumers a fee for providing representation) increased 9%, following similar increases in the past two years. Received disputes by type of representative Total Family member or friend 2,414 Business director/owner 1,255 Consumer advocate – private/paid 1,104 Solicitor – private 568 Financial counsellor* 345 Business employee 255 Insurance broker 210 Financial advisor 174 Solicitor – community/pro bono* 166 Power of Attorney 145 Accountant 125 Consumer advocate – community/unpaid* 75 Executor 58 Co-trustee 50 Trustee affected party 50 Legal guardian 37 Policyholder 29 Member of Parliament 12 Total 7,072 * Consumer representatives Geographic distribution of disputes lodged by consumer representatives Disputes lodged by consumer representatives by product line
Disputes lodged by consumer representatives Consumer advocates represent people who have a dispute with us and also provide a vital referral pathway for people who represent themselves. Disputes lodged with a representative Disputes referred by a representative 345 7% from 2015-16 Financial counsellor 855 33% from 2015-16 166 6% from 2015-16 Solicitor – community/pro bono 945 35% from 2015-16 75 19% from 2015-16 Consumer advocate – community/unpaid 358 22% from 2015-16 Disputes lodged by top 12 community organisations Four in ten of the disputes lodged by consumer representatives on behalf of applicants came from just 12 organisations in 2016-17. Organisation Total Legal Aid NSW 50 The Salvation Army Moneycare 33 Financial Rights Legal Centre 22 Anglicare Victoria 20 Child & Family Services (CAFS) 16 EACH 15 Organisation Total FMC Mediation and Counselling 15 Care Financial Counselling & Consumer Law Centre 14 Consumer Action Law Centre 13 Primary Care Connect 13 St Vincent de Paul Society (WA) Inc 12 Wesley Mission 11
How we classify financial products Percentages below are for disputes accepted in 2016-17. Credit 43% Business finance Business credit card Business loans Commercial bills Hire purchase/lease Letter of credit Line of credit/overdraft Non-FSP debt Consumer credit Construction loans Credit cards Equity release Hire purchase/lease Home loans Interest-free finance Investment property loans Line of credit/overdraft Non-FSP debt Personal loans Short-term finance Guarantees Bank guarantee Business guarantee Consumer guarantee Margin loans General insurance 35% Domestic insurance Consumer credit insurance Home building Home contents Motor vehicle – comprehensive Motor vehicle – third party fire and theft Motor vehicle – third party theft Motor vehicle – uninsured third party Personal and domestic property – caravan Personal and domestic property – domestic pet Personal and domestic property – horse Personal and domestic property – mobile phone Personal and domestic property – moveables Personal and domestic property – pleasure craft Personal and domestic property – trailer Personal and domestic property – valuables Residential strata title Sickness and accident insurance Ticket insurance Travel Extended warranty Browngoods Motor vehicles Whitegoods Professional indemnity insurance Medical indemnity Other professional indemnity Small business/farm insurance Commercial property Commercial vehicles Computer and electronic breakdown Contractors all risk Fire or accidental damage Glass Industrial special risk Land transit Livestock Loss of profits/business interruption Machinery breakdowns Money Public liability Theft Deposit taking 7% Current accounts Business transaction accounts Foreign currency accounts Mortgage offset accounts Passbook accounts Personal transaction accounts Safe custody Savings accounts Bank bills Cash management accounts First home buyer accounts Online accounts Term deposits Payment systems 5% Direct transfer ATM Bank drafts Cheques Counter transactions Direct debits EFTPOS Electronic banking Foreign currency transfers Merchant facilities Telegraphic transfers Non-cash Loyalty programs Non-cash systems Stored value cards Travellers’ cheques Investments and advice 5% Derivatives/hedging Contracts for difference Foreign exchange Forwards Futures Options Swaps Managed investments Australian equity funds Cash management accounts Charitable/educational schemes Film schemes Horse schemes International equity funds Investor direct portfolio services Managed discretionary accounts Managed strata title schemes Mixed asset funds Mortgage schemes Primary production schemes Property funds Timeshare schemes Trustee common funds Real property Securities Bills of exchange Bonds Debentures Exchange traded funds Promissory notes Shares Warrants Superannuation
Account-based pensions Approved deposit funds Corporate funds Industry funds Pooled trusts Retail funds Retirement savings accounts Self-managed funds Life insurance 4% Income stream risk Consumer credit insurance Income protection Non-income stream risk Annuities Endowments Funeral plans Scholarship funds Term life Total and permanent disability Trauma Whole of life Traditional trustee services <1% Estate management Estate planning Enduring powers of attorney Wills Trusts Beneficiary Specific purpose 1. Products We handle disputes across many areas of financial services. Our classification system divides these disputes into product types. There are seven main product types: credit, deposit taking, general insurance, investments and advice, life insurance, payment systems and traditional trustee services. There are 23 product categories within these product types and 133 individual products. As the diagram below demonstrates, we receive many disputes about some products, such as credit and general insurance, and only a very small number about other products, such as traditional trustee services. Accepted disputes by product line in 2016-17
3. Sales and service channels Disputes are classified by the FSP’s nominated sales/service channel when they complete their annual assessment for us. The table below shows a full list of our members’ sales and service channels. Sales and service channel Accountant Administration services provider Bank Building society Charity/community fund Clearing/settlement house Corporate advisor Coverholder Credit provider Credit reporting agency Credit representative Credit union Custodial and depository services Debt collector or buyer Derivatives dealer Finance broker Financial advisor/planner Foreign exchange dealer Friendly society General insurance broker General insurer Life insurance broker Life insurer Make a market Sales and service channel Managed discretionary account operator MIS operator/fund manager Mortgage aggregator Mortgage broker Mortgage manager Mortgage originator Non-cash payment system provider Pooled superannuation trust Private health insurer Product distributor Product issuer Professional indemnity insurer Provider of lender of record services Reinsurer/reinsurance agent Research house Securities dealer Stockbroker Superannuation fund trustee/advisor Timeshare scheme operators Travellers’ cheques/foreign currency transfer provider Trustee Underwriting agency Warranty provider
4. Outcomes We use the term ‘closed dispute’ to refer to a dispute we have finished handling. A dispute can be closed: through an agreement between the parties involved through a decision or assessment by FOS because the dispute is discontinued or outside our Terms of Reference. When we finish handling a dispute, we classify it according to its outcome and outcome type. The possible outcomes and outcome types are listed on the following pages. Resolved by agreement These outcomes are reached by agreement between the consumer and the FSP. They can reach agreement by communicating directly with each other (resolved by the FSP) or with the help of our service (conciliation or negotiation). Conciliation involves a telephone conference between the FSP, the applicant and us. This technique allows the parties to talk about the issues in an attempt to come up with a mutually agreeable outcome. Our conciliators bring the parties together to guide the conversation to make it easier for everyone to talk about the issues involved (see Conciliation conferences, page 107). Conciliation Apology Capitalisation of arrears Hardship superannuation release Monetary compensation in full Monetary compensation in part No compensation or action Not disclosed Other product, service or resolution provided Partial waiver of debt/interest/fees Policy/contract altered/voided/cancelled Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset Negotiation Apology Capitalisation of arrears Hardship superannuation release Monetary compensation in full Monetary compensation in part No compensation or action Not disclosed Other product, service or resolution provided Partial waiver of debt/interest/fees Policy/contract altered/voided/cancelled Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset Resolved by FSP Apology Capitalisation of arrears Hardship superannuation release Monetary compensation in full Monetary compensation in part No compensation or action Not disclosed Other product, service or commercial resolution provided Partial waiver of debt/interest/fees Policy/contract altered/voided/cancelled Repayment arrangement Resolved by FSP Timeframe for refinance Timeframe for sale/surrender of asset
Resolved by FOS decision or assessment These outcomes are reached following our recommendation or determination or other assessment about the merits of a dispute. A preliminary view, which may be provided through a recommendation, is an assessment provided by us following a detailed investigation into the dispute. If the consumer or FSP reject the preliminary view or the FSP fails to respond, the dispute proceeds to the final stage in our process. At that stage, an Ombudsman or panel reviews the dispute and makes a formal decision called a determination, by which the FSP is bound, if the consumer accepts it. Some disputes proceed directly to determination without a recommendation being made. These are known as expedited determinations. We apply criteria in deciding whether standard and complex disputes ought to be expedited. Where a dispute is expedited to determination, we usually provide the parties with a preliminary view through a telephone call, case conference or letter. Preliminary view in favour of applicant Capitalisation of arrears Monetary compensation in full Monetary compensation in part No compensation or action Other product, service or resolution provided Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset Preliminary view in favour of FSP Capitalisation of arrears Monetary compensation in full Monetary compensation in part No compensation or action Other product, service or resolution provided Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset Decision in favour of applicant Capitalisation of arrears Monetary compensation in full Monetary compensation in part Other product, service or resolution provided Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset Decision in favour of FSP Capitalisation of arrears Monetary compensation in part No compensation or action Not appropriate for FOS to reach any conclusion as to the merits of the dispute Other product, service or resolution provided Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset We may provide the parties with guidance on the merits of a dispute after we have investigated and considered the issues raised. Disputes resolved through such guidance are recorded with an ‘Assessment’ outcome. Assessment Apology Capitalisation of arrears Monetary compensation in full Monetary compensation in part No compensation or action Not disclosed Other product, service or resolution provided Policy/contract altered/voided/cancelled Repayment arrangement Timeframe for refinance Timeframe for sale/surrender of asset
Code team: 2016-17 at a glance 5 Codes of practice 5 Independent code compliance committees 30 Committee meetings 579 FSPs subscribing to the codes 4 Annual reports published 1 Industry data report published 466 Annual compliance statements, annual returns and desktop audits reviewed 15,236 Code breaches 95 Code breaches assessed as significant 76 Onsite visits and verification teleconferences 4 Own Motion Inquiries 273 New investigations of alleged breaches of industry codes of practice 231 Investigations cases closed 133 Breaches of codes identified through investigations 70 Meetings with regulators, industry associations, consumer advocates and other stakeholders 21 Information bulletins and other publications issued 10 Presentations and training sessions conducted 16 Conferences and forums attended