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Last week the committee published its first report on the inquiry into the major banks, which included 10 recommendations, one of which was the establishment of a financial services tribunal.
“This recommendation is a political solution to the reputational problems of the big four banks,” The Credit and Investments Ombudsman (CIO) CEO and ombudsman Raj Venga said. “Unfortunately it is the innocent smaller players within the financial services sector who will pay the price. This is clearly a win for the big four banks.”
Mr Venga argues that the tribunal solution, or indeed one which involves a single ombudsman scheme, will force all small financial services providers to join a scheme which is set up to deal with the big four banks.
“This is all fine if we want our financial system to remain uncompetitive. Larger dominant providers can afford high costs and simply pass the inefficiency on to consumers in the form of high rates and charges,” he said.
“If we want efficiency for the benefit of all consumers and the economy, we need a system of dispute resolution which facilitates increased competitiveness in financial services.
Mr Venga believes only the discipline of comparison to an alternative scheme keeps costs down and maintains accountability.
“This is why 97 per cent of the industry outside the major banks, including leading fintechs looking to disrupt inefficient incumbents, favour the existing two ombudsman scheme model,” he said.
“It is hard to believe that the Coalition members made the recommendation favouring consolidation when the weight of evidence favours at least the maintenance of both CIO and the Financial Ombudsman Service.
“I would be interested to know if the Coalition members of the committee read the industry submissions to the Ramsay review urging them to recommend the maintenance of the current competitive environment,” Mr Venga added.
Over the years, the existing two ombudsman scheme model has forced significant changes on the EDR process and environment. In 2007, CIO extended its remit to include complaints about financial hardship.
The CIO says it has also forced changes which have included accepting complaints even when legal proceedings had commenced and requiring lenders to cease enforcement action while the complaint was being dealt with by CIO.
“Such innovation will not occur under a tribunal or single ombudsman scheme,” Mr Venga said.
“CIO calls on the government to target its response to the problems in the sector and to the organisations which have caused them.
“If a tribunal is politically necessary, we suggest that its scope is limited to the areas that the existing ombudsman schemes do not cover.”