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Ombudsman

Ombudsman – Regulators’ Culture in Question

Financial Ombudsman – It is a sign of the times when we have to record our telephone conversations with the Financial Ombudsman to protect ourselves and our clients.  Read the story in The Australian below:

Regulators’ culture in question – by Richard Gluyas

Poor culture in large corporations has never been under more intense scrutiny, with the damning review of Commonwealth Bank by an APRA panel and the extraordinary implosion of AMP in the wake of last month’s royal commission hearings on financial advice.

But what of the culture inside our regulators and powerful quasi-judicial bodies, such as the industry funded Financial Ombudsman Service?

As the Australian Financial Complaints Authority — the one-stop shop for all financial complaints and disputes — absorbs FOS and starts hearing complaints by November 1, there are serious, lingering concerns about the discovery of inaccurate file notes made in 2015 by a senior FOS official, Justi Tonti-Filippini.

While Tonti-Filippini had the title Ombudsman Decisions and was mentioned in the body’s 2017 annual report, a FOS staffer told Four Pillars she no longer worked there.

Despite this, the fallout continues from her controversial handling of the case brought by toy and kite maker Goldie Marketing against ANZ Bank.

Rex Patrick, a Centre Alliance (formerly Nick Xenophon Team) senator, says he’s been in discussions with Financial Services Minister Kelly O’Dwyer about expanding AFCA’s terms of reference to include procedural fairness, as well as other administrative tribunal standards.

“I hold concerns in relation to this and am continuing my discussions with the minister on this issue,” Patrick says.

The core issue is a series of telephone conversations in October 2014 between Tonti-Filippini and Goldie’s adviser Bruce Ford of Dispute Assist, in which the ombudsman told Ford she was ruling the case outside FOS’s terms of reference because of a staff shortage.

In particular, there was a lack of key staff with banking expertise.

Ford was stunned and Goldie decided to up the ante, arguing in the Victorian Supreme Court that a staff shortage was not a valid reason to decline jurisdiction.

When FOS lodged its documents with the court, the case took an unexpected turn.

Tonti-Filippini’s file notes suggested that she had provided a host of other reasons for declining to hear the case.

The problem for FOS was that Ford had recorded the conversations — for his own legal protection and that of his client.

While the court accepted the recordings were accurate, it nevertheless upheld FOS’s ruling that the Goldie case was outside its terms of reference. Importantly, however, the court didn’t rely on the file notes from Tonti-Filippini; it ruled instead that her later written reasons were sound.

The matter did not end there.

ASIC, which oversees FOS, was subsequently forced to correct the parliamentary record when it told a committee that the Supreme Court had considered the issue of the divergence between the tape recordings and the FOS file notes.

In a subsequent letter to Ford, ASIC deputy chairman Peter Kell accepted that this was not the case.

FOS said in a written response to questions from this column that it did not comment on staffing, and that the issues in the Goldie case had been “fully canvassed and addressed”.

“At the time the issue was raised — following the court’s decision upholding FOS’s decision making — FOS made clear it did not agree with the assertions or that there were any implications for the fair, efficient and independent operation of FOS’s dispute scheme,” the statement said.

FOS said it had dealt with 100,000 dispute cases since the Goldie matter, both in line with its terms of reference and as a fair, timely and impartial dispute resolution scheme.

The service might retain complete confidence in itself, but others are not so sure.

Word on the street

After his kind offer to help AMP renew its board, perhaps with a little more zeal than the company anticipated, financial services royal commissioner Ken Hayne now turns his attention to bank lending to the small and medium-sized business sector.

The show kicks off on Monday and continues until the close of business on Friday, June 1.

As with the previous round of hearings on financial advice, some initial scene-setting rules out the prospect of immediate fireworks.

The word on the street is that the first witness in the box on Monday morning will be Phil Khoury of the governance and accountability advisory group Cameron Ralph Khoury.

Khoury is best known for his review of the Code of Banking Practice for Anna Bligh’s Australian Banking Association.

The new code, which among other things requires banks to give at least three months’ notice to their small business customers if they’re planning to call in a loan facility, was sent to ASIC for approval in December.

Khoury is expected to be asked if the framework provides sufficient protection for small business borrowers, which have long argued that their legal rights have been diluted by lopsided loan contracts.

Since the 2008 financial crisis, various parliamentary committees have heard innumerable horror stories about interactions between SMEs and their lenders.

However, as with previous hearings, it’s the internal bank emails that tend to wreak unanticipated havoc.

There’s significant scope for the royal commission to locate unexploded ordnance.

Bank lending to small business, defined as loans of less than $2 million, was worth $261 billion in 2015 — about 28 per cent of total lending to the business sector.

https://www.theaustralian.com.au/business/opinion/richard-gluyas-banking/regulators-culture-in-question/news-story/36897470c0b0eca01c8f99a8e48efc50


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