Pleasingly, there have been no reportable incidents of non-compliance in the December 2016 quarter. As a result, between the commencement of the single Terms of Reference on 1 January 2010 and 31 December 2016, the figures remain constant with:
- 35 FSPs who are unwilling or unable to comply with 143 determinations, affecting 203 consumers.
- In 105 of these determinations, the consumer received no payments at all, despite the requirement on AFSL holders to have ‘adequate compensation arrangements’ in place.
- Of the remaining 38 determinations, partial payment to consumers was usually the proceeds of insolvency proceedings and represented a minimal return on the dollar.
- As a result of this non-compliance, $13,014,641.86 has not been returned to affected consumers.
- This figure does not include any interest awarded on the base award by the Ombudsman, nor does it include any adjustments for inflation over time.
Only a very small percentage of all FOS members are involved, and these figures represent only a small proportion of all the awards we issue across all our jurisdictions in banking, insurance, life insurance and investments.
However, despite the small number of FSPs involved, unpaid determinations represent 17.8% of all accepted determinations issued in favour of consumers by the Investments and Advice (I&A) team. As a proportion of total compensation awarded by the I&A team, the value of unpaid determinations is 23.3%.
The issue of non-compliance is not spread evenly throughout different sectors of the financial services industry. The top three categories of non-compliant financial services providers are:
- Financial planners and advisors: 57%
- Operators of managed investment schemes: 11%
- Credit providers: 9%
FOS is encouraged by the comments made by the independent expert panel reviewing EDR and the complaint framework for the financial system, in support of a compensation scheme of last resort for consumers of financial services.
While the panel has only made interim recommendations at this stage, support for such a compensation scheme is growing and it is hoped that this important gap in the current regulatory framework can be addressed. FOS believes that it is essential that consumers who get an award of compensation by FOS can be confident that this compensation will be paid, in order for EDR to be effective.