Dispute Resolution
41. The Task Force recommended that there should be a disputes resolution body which is independent of industry and with jurisdiction over all financial intermediaries, to consider complaints about breaches of statutory standards or APB rules relating to that standard. The disputes resolution body would be able to award compensation to consumers up to a certain level, with failure to pay compensation being grounds for removal from an APB.
Why Should Financial Intermediaries Be Subject to Dispute Resolution?
42. Dispute resolution processes are required as part of the co-regulatory framework to help address the following limits of the existing self regulatory organisations:
- generally, consumers do not have access to dispute resolution if the financial intermediary is not a voluntary member of an industry body (although consumers have access to the courts, including the Disputes Tribunal, the Task Force suggested that these processes may not sufficient to ensure universal access to timely, cost efficient and effective resolution of disputes);15
- there are a number of dispute resolution processes operating in the industry and multiple membership by some intermediaries so that consumers have difficulty determining where and how to lay a complaint;
- compensation is not always available under the rules of dispute resolution schemes, or is limited to a certain level; and
- there may be procedural barriers to consumers accessing dispute resolution
Cabinet Approval Sought Dispute Resolution Process
43. I am seeking in-principle Cabinet approval that financial intermediaries would be subject to dispute resolution procedures. This would allow the Ministry to undertake design work on dispute resolution functions and processes to which financial intermediaries would be subject (this work would include consideration about the form and nature of possible compensation). The Ministry can synchronise this design work on dispute resolution processes for financial intermediaries with the existing Ministry work on dispute resolution processes in the non bank financial sector under the Review of Financial Products and Providers that the Ministry is already carrying out in conjunction with the Ministry of Consumer Affairs. By combining the work in these two reviews, the Ministries should produce a comprehensive dispute resolution scheme to govern financial intermediaries, financial product providers and financial product generators.
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