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Col 5 of 7

Ombuds Council promoting special rules for vulnerable consumers

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

Pensioners among others to get extra protection from financial services companies.

The ombuds system is a key element in protecting all financial product consumers, including vulnerable consumers, from the excesses of the financial services industry.

This column will however concentrate on vulnerable customers.

The Chief Ombud of the Ombud Council, Leanne Jackson, says that even before the publication of the Financial Sector Conduct Authority’s (FSCA) ‘Statement on Consumer Vulnerability’, the ombuds system was already putting structures in place to protect vulnerable individuals.

But, she warns, the Ombud Council does not have jurisdiction over financial institutions and it cannot enforce any decisions against them. This is the FSCA's role but ‘the Ombud Council and the FSCA have a strong mutual interest in the effectiveness of complaint handling frameworks generally.

What ombuds will do for you

Jackson says: ‘The Ombud Council ‘s strategic plan includes a focus on promoting customer awareness on the right to fair treatment by financial institutions, the right to complain if you don't get fair treatment, and how to access and use the ombud system to do so’.

She says that the six outcomes of Treating Customers Fairly include provision for appropriate information to be made available at all stages of a relationship with a customer. Financial services companies must also provide an acceptable service that is in line with expectations created, and to avoid unreasonable barriers to claiming benefits, making changes or lodging complaints.

‘To underpin these obligations, the FSCA has developed a range of more granular requirements that financial institutions must meet. In the case of insurers, for example, the Policyholder Protection Rules have dedicated chapters on Disclosure and Complaint Handling.

‘This requires insurers to provide clear and transparent information about the insurer's complaint handling processes and contact details, including its internal escalation process (which it is obliged to have), and the availability and contact details of relevant ombud schemes. Similar rules apply to banks and FAIS-regulated FSPs (which includes investment managers).’

So Jackson says, if you are having difficulty accessing this information from financial institutions you deal with, ‘it is likely that they may be in contravention of some of these provisions, aside from more general TCF commitments.’

Part of the team

Although the Ombud Council is a separate entity from the FSCA, the Council is part of the FSCA's task team working on more streamlined cross-sectoral conduct provisions in readiness for the Conduct of Financial Institutions (COFI) Bill, which will result in the full application of TCF. The focus is particularly on conduct standards around TCF generally and on complaint handling and redress mechanisms.

‘The process will entail reviewing existing conduct standards to see whether any updates are required and to ensure consistency across all FSCA-regulated sectors’.

This will also include the introducing a framework for the fair treatment of vulnerable consumers, commencing with the FSCA recently published ‘Statement on Consumer Vulnerability’ paper.

‘The Ombud Council is tracking these developments closely and collaborating with the FSCA to ensure the ombud system plays its part in offering appropriate recourse to vulnerable customers.’

The Ombud Council has in the interim encouraged ombud schemes to introduce vulnerable complainant policies, aimed at identifying vulnerable complainants and ensuring their complaints are prioritised and that appropriate practical processes are in place to meet the needs of these complainants. They have done so, but the implementation of these policies is still at an early stage and will be monitored by the Ombud Council to align with the evolving FSCA regulatory framework.

Consideration

Jackson says ‘one of the key take-outs from the vulnerable customer work, for me, is the appreciation that vulnerability does not arise from a fixed set of attributes for a fixed group of people but is a much more fluid concept.

‘Traditionally, discussion around vulnerability in South Africa has tended to focus on mitigating risks for consumers with basic and financial literacy challenges, particularly in lower income segments.

‘Proposed interventions have focused on matters such as mother tongue oral communication, walk-in access, simplified documentation, and even simplified product design.

‘This must remain a key focus. But there are other examples of obstacles to complaints access that need a much more nuanced and flexible approach. For example, that a financial customer can have excellent language skills, be very financially sophisticated, and nevertheless be affected by life or health events that create specific needs.

‘But it becomes even more critical where a customer has both a speech and/or hearing impediment, as well as financial or basic literacy challenges. Then add digital literacy, particularly when financial institutions use technology such as the frustrating "bots" to answer questions.’

This means that, for a vulnerable customer framework to be optimal, financial institutions will need to have sufficiently flexible processes in place to firstly identify different vulnerability situations and then to respond appropriately.

A Gradual Approach

Jackson says the implementation of specific vulnerability-focused frameworks, and possible explicit conduct standards for financial institutions to underpin such frameworks, is still going to take some time.

She says from an ‘ombud system perspective, the Ombud Council, which oversees the financial ombud system we will be doing the following in the interim’:

Consider how best to include messaging around the rights of customers with specific vulnerabilities/impediments in planned consumer education campaigns.
Include appropriate data around complaints related to such issues in the complaint statistics and trend information we collect from the ombud schemes. This will help to understand the nature and extent of these cases and to feed this back to the FSCA to inform their regulatory frameworks.
Continue to require the adoption, implementation and improvement of vulnerable complainant policies by the ombud schemes themselves, to ensure fit-for-purpose processes to support these complainants in resolving their complaints.
In consultation with the FSCA, review the existing FSCA complaint handling standards for financial institutions to identify possible improvements so that these are ready to feed into the COFI workstreams as and when these standards are addressed.

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

https://retirementplanning.co.za/col-4-of-7-vulnerable-consumers-to-be-better-protected/

https://retirementplanning.co.za/new-system-for-complaints-about-financial-institutions

https://retirementplanning.co.za/column-2-of-7-economically-vulnerable-consumers

https://retirementplanning.co.za/column-3-of-7-economically-vulnerable-consumers-part-2/

https://retirementplanning.co.za/be-careful-about-how-you-invest-in-your-two-pots/

https://retirementplanning.co.za/col-13-name-and-check-your-beneficiaries/

https://retirementplanning.co.za/col-12-a-better-complaints-system/

Share this post

Col 5 of 7

Ombuds Council promoting special rules for vulnerable consumers

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

Pensioners among others to get extra protection from financial services companies.

The ombuds system is a key element in protecting all financial product consumers, including vulnerable consumers, from the excesses of the financial services industry.

This column will however concentrate on vulnerable customers.

The Chief Ombud of the Ombud Council, Leanne Jackson, says that even before the publication of the Financial Sector Conduct Authority’s (FSCA) ‘Statement on Consumer Vulnerability’, the ombuds system was already putting structures in place to protect vulnerable individuals.

But, she warns, the Ombud Council does not have jurisdiction over financial institutions and it cannot enforce any decisions against them. This is the FSCA's role but ‘the Ombud Council and the FSCA have a strong mutual interest in the effectiveness of complaint handling frameworks generally.

What ombuds will do for you

Jackson says: ‘The Ombud Council ‘s strategic plan includes a focus on promoting customer awareness on the right to fair treatment by financial institutions, the right to complain if you don't get fair treatment, and how to access and use the ombud system to do so’.

‘To underpin these obligations, the FSCA has developed a range of more granular requirements that financial institutions must meet. In the case of insurers, for example, the Policyholder Protection Rules have dedicated chapters on Disclosure and Complaint Handling.

So Jackson says, if you are having difficulty accessing this information from financial institutions you deal with, ‘it is likely that they may be in contravention of some of these provisions, aside from more general TCF commitments.’

Part of the team

‘The process will entail reviewing existing conduct standards to see whether any updates are required and to ensure consistency across all FSCA-regulated sectors’.

This will also include the introducing a framework for the fair treatment of vulnerable consumers, commencing with the FSCA recently published ‘Statement on Consumer Vulnerability’ paper.

‘The Ombud Council is tracking these developments closely and collaborating with the FSCA to ensure the ombud system plays its part in offering appropriate recourse to vulnerable customers.’

Consideration

Jackson says ‘one of the key take-outs from the vulnerable customer work, for me, is the appreciation that vulnerability does not arise from a fixed set of attributes for a fixed group of people but is a much more fluid concept.

‘Traditionally, discussion around vulnerability in South Africa has tended to focus on mitigating risks for consumers with basic and financial literacy challenges, particularly in lower income segments.

‘Proposed interventions have focused on matters such as mother tongue oral communication, walk-in access, simplified documentation, and even simplified product design.

‘But it becomes even more critical where a customer has both a speech and/or hearing impediment, as well as financial or basic literacy challenges. Then add digital literacy, particularly when financial institutions use technology such as the frustrating "bots" to answer questions.’

This means that, for a vulnerable customer framework to be optimal, financial institutions will need to have sufficiently flexible processes in place to firstly identify different vulnerability situations and then to respond appropriately.

A Gradual Approach

Jackson says the implementation of specific vulnerability-focused frameworks, and possible explicit conduct standards for financial institutions to underpin such frameworks, is still going to take some time.

She says from an ‘ombud system perspective, the Ombud Council, which oversees the financial ombud system we will be doing the following in the interim’:

Consider how best to include messaging around the rights of customers with specific vulnerabilities/impediments in planned consumer education campaigns.

Include appropriate data around complaints related to such issues in the complaint statistics and trend information we collect from the ombud schemes. This will help to understand the nature and extent of these cases and to feed this back to the FSCA to inform their regulatory frameworks.

Continue to require the adoption, implementation and improvement of vulnerable complainant policies by the ombud schemes themselves, to ensure fit-for-purpose processes to support these complainants in resolving their complaints.

In consultation with the FSCA, review the existing FSCA complaint handling standards for financial institutions to identify possible improvements so that these are ready to feed into the COFI workstreams as and when these standards are addressed.

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

Related topics:

https://retirementplanning.co.za/col-4-of-7-vulnerable-consumers-to-be-better-protected/

https://retirementplanning.co.za/new-system-for-complaints-about-financial-institutions

https://retirementplanning.co.za/column-2-of-7-economically-vulnerable-consumers

https://retirementplanning.co.za/column-3-of-7-economically-vulnerable-consumers-part-2/

https://retirementplanning.co.za/be-careful-about-how-you-invest-in-your-two-pots/

https://retirementplanning.co.za/col-13-name-and-check-your-beneficiaries/

https://retirementplanning.co.za/col-12-a-better-complaints-system/

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