There have been three reportable incidents of non-compliance since the last update and as a result, between the commencement of the single Terms of Reference on 1 January 2010 and 30 June 2017, the figures have increased to:
- 39 FSPs who are unwilling or unable to comply with 154 determinations, affecting 218 consumers;
- In 116 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, $14,146,094.22 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 17.27% 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 23.9%.
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: 51%
- Operators of Managed Investment Schemes: 13%
- Credit Providers: 10%
Possible actions to address uncompensated losses
FOS continues to assist in informing the independent expert panel reviewing external dispute resolution and complaint framework for the financial system in support of a compensation scheme of last resort for consumers of financial services.
We have noted the submissions of other organisations and are pleased that support for such a compensation scheme is growing. It is hoped that this important gap in the current regulatory framework can be addressed.
FOS believes that it is essential for the effective operation of external dispute resolution that consumers who get an award of compensation by FOS can be confident that this compensation will be paid.