Banking complexity enhances importance of Ombudsman

Liz Brown

Wellington, July 22, 2018

The Banking Ombudsman has become a structurally independent part of the finance sector.

Ombudsmen help address imbalances of power when an individual has a grievance against a large and powerful organisation.

They originally dealt with grievances between individuals and government departments and agencies. While not an advocate for the individual, an ombudsman has experience, expertise and rights of access to information to make independent and authoritative assessments of  grievances.

Potential recognised

The potential for a Banking Ombudsman was recognised in the late 1980s after deregulation of the finance sector, as a recourse for resolution of consumer problems (issues and complaints).The banking industry established this scheme in 1991.

Nadja Tollemache, New Zealand’s first Banking Ombudsman, brought her prior experience as a parliamentary ombudsman. She introduced the techniques and practices of that office into the new organisation.

Although independent of government and of the banks, in practice, the scheme could have been disestablished by the industry at any time in its first 15 years of operation when participation of individual banks was voluntary.

Increasing compliance

Law changes in 2008 provided for finance sector dispute resolution schemes meeting set standards, to become approved schemes. All financial services providers were required to belong to an approved scheme.

The Banking Ombudsman was among the first to achieve approval. Many of the criteria for becoming an approved scheme were based on its structure and practices. All New Zealand registered banks providing services to the public are members of the Banking Ombudsman, as are some credit unions and building societies.

GFC lessons

The Global Financial Crisis severely tested the Banking Ombudsman who dealt with a wave of complaints between 2008 and 2012 about the selling of investments in two ING investment funds.

When the last of over 650 investigations was closed, nearly $26.5 million had been paid in compensation. The Banking Ombudsman can make formal awards of compensation of up to $200,000 for financial loss and up to $9000 for inconvenience, which banks must comply with.

The office has a strong focus on speed and informality and complaints are settled quickly. Alongside dealing with complaints, the Banking Ombudsman also works to prevent complaints and resolve systemic issues.

Its website, www.bankomb.org.nz provides useful information and advice about banking practices as well information about how to make a complaint and what to expect.

Liz Brown is a Member with Delegated Authority, Financial Integrity System Assessment, Local Government, National Integrity Assessment Programme.

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