Knowledge is power, and when it comes to binding contracts such as those you enter into with financial institutions, it really does pay to read the small print. This becomes even more relevant when you begin to consider the implications of a home loan – typically the most significant financial commitment most of us will make. Surprisingly, many of us sign on the dotted line without having full knowledge of the conditions contained in a contract. Disputes arise, for example, when the financial service provider changes the terms of the contract, even though it may be allowed under the terms.  So what is the right procedure for handling a dispute with a financial insitution? hipages spoke to Claire Beattie from the Financial Ombudsman Service (FOS), to help answer this question and find out more about their role.

What is the primary objective of the Financial Ombudsman Service (FOS)?

“We fairly and independently resolve disputes between consumers and financial service providers. We are an accessible alternative to the courts. It is important for consumers to be aware that we do not regulate financial services providers, but we are an unbiased dispute resolution service.”

Do I have to pay to lodge a dispute with your service?

“No, our service is free to consumers.”

How is your service funded?

“Our service is funded by our members, who are financial services providers that have chosen FOS as their ‘external dispute resolution (EDR) scheme’. An EDR scheme is an organisation that acts as an independent third party in disputes and facilitates fair resolutions to disputes. Every business with an Australian financial services licence must be a member of an ASIC-approved EDR scheme like FOS.”

What disputes are you able to deal with?

“We are limited by our Terms of Reference to dealing with disputes arising from contracts and obligations arising from Australian law. The range of products and services about which we can handle disputes fall into six broad product lines: credit, general insurance, life insurance, investments, payment systems and deposit taking. We can only consider disputes involving businesses that are members of FOS.”

Can you give us a practical example?

“The leading issue in credit disputes is financial difficulty. Individuals, families and small businesses can unexpectedly find themselves in a situation where they are unable to meet their payments under a credit facility (such as a home loan). FOS calls this situation financial difficulty. A person or business in financial difficulty can ask their financial services provider (FSP) for assistance. They can, for example, ask their FSP to temporarily change the repayment plan under their mortgage contract. If an FSP will not agree to a reasonable request for assistance, then FOS has the power to review that decision. In some cases we can require an FSP to change the terms of a consumer credit contract.

What disputes are you unable to deal with?

“Products and services that are outside our jurisdiction include builders’ warranty insurance, business interruption insurance, compulsory third party insurance, private health insurance, professional indemnity insurance, public liability insurance and workers' compensation insurance.”

What advice do you have for consumers researching products such as a home loan?

“Knowledge is security. When you are shopping for a financial product or service, the more options you are aware of and the more you know about each option, the more confident and secure you will feel in the decision you ultimately make. Read the fine print, ask lots of questions, and seek further advice from an independent source if you are confused.”

What is the first thing I should do if a problem arises?

“If you have a concern or complaint about a financial product or service, the first thing to do is raise the matter with the business that provided it to you. They must be given an opportunity to resolve it with you before we can consider the matter. Many problems boil down to a simple misunderstanding or error that can be quickly sorted out. If you and the business can’t resolve the problem, then FOS can help. You can lodge a dispute at FOS on our website, over the phone, or by letter or email.”

What will FOS do?

“After you lodge a dispute with us, we will first give the financial services provider a chance to work with you to resolve the problem. If this fails, we will use conciliation or negotiation or make an initial assessment of the dispute. If these methods don’t resolve the dispute, we will investigate the case further and make a formal recommendation, based on the facts of the case and what we consider fair. A recommendation is not in any way binding on you or your provider unless it is accepted by both parties. If both parties accept the recommendation, the dispute is resolved and we will then close your file.”

What happens if a recommendation is rejected?

“Recommendations that are not accepted by one or both parties are referred to an ombudsman or expert panel, who will make a final determination. This is a formal decision that is binding on the provider if you accept it. You are not obliged to accept a determination.”

What if I reject the determination?

“If you reject a determination, we are unable to consider your dispute any further and your file will be closed. This does not prevent you from pursuing the matter in other forums.”

How can I find out more about the Financial Ombudsman Service?

“We recommend that you visit our website for comprehensive information about our service. Alternatively, you can call us on 1300 78 08 08.”