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New system for complaints about financial institutions

 

By Bruce Cameron
Co-author to The Ultimate Guide to Retirement in South Africa

Complain about bad financial services

One of the most important consumer protection functions of the financial services system is the complaints system. The financial sector has been and is still riddled with consumers being exploited.

One of the problems has also been the effectiveness of the alternative dispute resolution framework system, which, although much improved, is now a major focus of the National Treasury and the financial service regulator, Financial Sector Conduct Authority (FSCA) and the regulator of the financial ombud system, the Ombud Council.

But even if not totally reformed as yet, it is still worth complaining about financial services when you have a legitimate complaint. At the very least it will add to the statistics. Last year R540 million was returned to complainants.

It is no good sitting there complaining about your problems to friends and neighbours. If you have a justified complaint that your financial institution is not resolving, you should take it to a financial ombud.

And government and the regulator are now firmly behind you in making justified complaints.

Many advances in the complaints system have been made, particularly on the side of the state. The Pension Funds Adjudicator and the Financial Advisory and Intermediary Services (FAIS) ombud were appointed, with the FAIS Ombuds being awarded another legal ‘hat’ to cover any complaints not covered by another scheme.

The most recent change is the appointment of an Ombuds Council, whose aim is to oversee the effectiveness of the financial services system. In line with a drive by the National Treasury to strengthen and simplify the ombud system, the Ombud Council is facilitating a process to unify financial ombuds under one umbrella and with all operating by much the same rules. And the rules must be based on the six newish guidelines of Treating Customers Fairly.

 

Big improvements

At one stage the private sector industry was awash with poor voluntary industry ombuds: from those who were not given proper powers, to one banking ombud who was suffering from dementia. The appointment of Judge Jan Steyn as the ombud for long term assurance in the nineties, started setting a far more secure process for consumers among the industry ombuds.

In 2020 Finance Minister, Enoch Godongwana, appointed an Ombud Council mandated to ensure that financial customers have access to and are able to use affordable, effective, independent and fair alternative dispute resolution processes for complaints about financial institutions.

In effect, the Ombud Council is a regulatory body overseeing the various financial sector ombud schemes. The Ombud Council started operating on a limited basis in 2021 under interim leadership, with a permanent head appointed in late 2022.

The first appointed Chief Ombud (CEO) of the Ombud Council is Leanne Jackson – a remarkable person who started off as a legal advisor to the Liberty Group. She often dealt (very fairly) with complaints about Liberty. By the time she left Liberty she was executive: legal and regulatory affairs in charge of the legal division.

In February 2011 she was appointed to the former Financial Services Board, which later became the FSCA. Her initial brief was to put in place the new consumer regulatory system of Treating Customers Fairly (TFC). (The TFC is based on outcomes for consumers and not on allowing or banning certain practices by law). In 2014 Jackson was appointed Head: Market Conduct Strategy and then as a FSCA market conduct strategy advisor.

She has also contributed the market conduct elements of the Twin Peaks regulatory legislation, including the Conduct of Financial Institutions Bill (COFI), the Financial Sector Regulation (FSR) Act and the Policyholder Protection Rules of the long- and short-term insurance industry.

In January 2020 she became an independent financial sector regulation consultant.

Since her 2022 appointment to the Ombud Council she has spent much of her time supporting National Treasury-led reforms to the ombud system.

 

Jackson Interview

In an interview Jackson says that in March this year the Ombud Council granted recognition to a single over-arching industry ombud, the National Financial Ombud Scheme (NFO).

Until March there were five industry ombuds - they were long- and short-term insurance, banks, credit and an arrangement with the Johannesburg Stock Exchange; and, two statutory ombuds - Pension Funds and Financial Service Providers (FAIS).

Jackson says it is important to note that the Ombud Council is not an ombud itself. In effect, the Ombud Council is the regulatory authority over the financial sector ombud system.

 

The Council tasks are:

• Monitoring performance of all financial ombud schemes (statutory and industry);

• recognising industry ombud schemes and approving their governing rules;

• promoting co-operation and co-ordination between ombud schemes, and resolving jurisdictional overlaps;

• promoting awareness of and publicising ombud schemes and what they do;

• facilitating access to schemes and supporting financial inclusion;

• protecting the independence of ombud schemes;

• keeping the Minister of Finance informed about complaint and conduct trends; and,

• anything else reasonably necessary to achieve its objective

Jackson says to perform our functions, the Ombud Council has a full suite of regulatory, supervisory and enforcement powers over ombuds and ombud schemes: rather than over the financial institutions themselves.

• Making Ombud Council Rules (binding subordinate legislation);

• on-site inspections and information gathering;

• designating schemes to deal with certain complaints where there is a jurisdiction gap; and,

• enforcement tools: directives, suspending/revoking recognition, enforceable undertakings, administrative penalties (fines), and debarment (of ombuds if they seriously breach the law).

 

Your rights

Jackson says one of the important functions of her Council is to ensure that you, as a consumer, understand that you have the ‘right to fair treatment by financial institutions, including the right to complain about unfair treatment (TCF). The Ombud Council’s responsibilities include making you aware of the existence of the financial ombud system as a free, accessible, informal ADR option; and, what ombud schemes do, how they work, and how to access and use them effectively.

‘The evidence of how ombud schemes are successful can be seen in the complaints in the 2023/24 financial year which totaled about 40 000 formal complaints resulting in R540 million being returned to financial customers.’

She says that the success of the ombud system will be further improved when the overarching Conduct of Financial Institutions (COFI) Bill, which will broaden and streamline the scope of financial consumer protection, becomes an Act. This is also the bill that will be used to enforce TCF in a more comprehensive way than through the current patchwork of financial sector laws.

If you feel you have not been treated fairly you can and should complain to an ombud.

The TCF framework is based on six outcomes. They are:

• Customers can be confident they are dealing with firms where TCF is central to the corporate culture.

• Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.

• Customers are provided with clear information and kept appropriately informed before, during and after point of sale.

• Where advice is given, it is suitable and takes account of customer circumstance.

• Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect.

• Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.

 

Changes

From March this year the number of financial industry ombud schemes has been reduced from seven to four, namely the National Financial Ombud (NFO), the FAIS Ombud, the Pensions Fund Adjudicator and the JSE scheme. (This list excludes complaints about medical care. Complaints about medical aids must be sent to the Council for Medical Schemes).

The separate rules and recognition of the four former industry ombud schemes were revoked by the Ombud Council on merging to form the NFO. The NFO, like the four former schemes, is a ‘recognised’ industry ombud scheme in terms of the Financial Sector Regulation Act (FSR), having been granted recognition by the Ombud Council in March 2024.

Jackson says the next step in the reform of the ombud system is to absorb the FAIS Ombud. This will further simplify the complaints process for customers, as they will no longer have to refer complaints about financial advice (dealt with by the FAIS Ombud) and complaints about financial product providers (mostly dealt with by the NFO), to two different schemes.

In the interim, the Ombud Council has made new Ombud Council Rules (binding legislative instruments) for the FAIS Ombud. These Rules include a long-awaited increase in the maximum compensation the FAIS Ombud can award for losses caused by bad advice, from R800,000 to R3.5 million; and a requirement for the FAIS Ombud to report material or persistent non-cooperation by financial service providers to the FSCA.

She says financial services companies must insert a culture of compliance to implement TCF in relation to complaint handling.

This includes; ‘establishing clear and simple complaints procedures and making sure your customers know about them; and, informing customers about the ombud schemes.’

 

How to complain

If you are not happy with your financial provider’s response to your complaint, you should complaint directly to one of the following financial ombud schemes:

• The National Financial Ombud Scheme (NFO). All complaints about an insurer, bank, or credit provider must go to the NFO, which will then allocate it to the correct NFO division. Contact details for the NFO are:

Addresses:

Contact Details:

• 110 Oxford Rd, Houghton Estate, Johannesburg, Gauteng 2198

• Claremont Central Building, 6th Floor, 6 Vineyard Road, Claremont, Western Province 7700

Telephone: 0860 800 900

Email: info@nfosa.co.za

Website: https://nfosa.co.za/

• The FAIS Ombud: This is for complaints about poor financial advice.

Contact Details:

Address: Sussex Office Park, 473 Lynnwood Road, Lynnwood 0083

Telephone: 012 470 9080

Fax: 012 348 3447

Email: info@faisombud.co.za

Website: www.faisombud.co.za

 

• The Pension Funds Adjudicator. This for complaints about your pension or retirement benefits.

Contact Details:

Address: PO Box 580, Menlyn 0063

Telephone: 012 748 4000

Fax: 086 693 7472

Email: enquiries@pfa.org.za

Website: www.pfa.org.za

 

There is a lot more detail on this in the book, The Ultimate Guide to Retirement in South Africa. For more information on how to purchase the book go to Buy Now on the website  www.retirementplanning.co.za

 

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