Money Finance News The reform that could save your money (hint: it’s not a bank tribunal)

The reform that could save your money (hint: it’s not a bank tribunal)

Bill Shorten has vowed to keep pushing for a bank royal commission. Photo: AAP
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Consumer advocates have clashed with Prime Minister Malcolm Turnbull over his government’s latest attempt to neutralise Labor’s bank royal commission.

The government should abandon the idea of creating a bank tribunal and focus instead on strengthening the Financial Ombudsman, according to the advocates.

Prime Minister Turnbull’s response to the bank scandal was back in the spotlight this week after he wrote to Opposition Leader Bill Shorten imploring him to drop his push for a public inquiry because it would “delay justice”.

It was the government’s latest effort to dampen the popularity of a royal commission. Other attempts have included Mr Turnbull’s promise to grill bank bosses once a year before a parliamentary committee; and his reversal of the Abbott-era funding cuts to corporate regulator ASIC.

Only a day before, consumer advocates sent a letter of their own to Mr Turnbull, warning him that a bank tribunal (the government’s apparent alternative to a royal commission) could result in delays, be overly legalistic and end up “exacerbating consumer confusion”.

Consumers’ Federation of Australia chair Gerard Brody said the government should focus instead on bolstering the Financial Ombudsman and other “well-developed and effective” dispute resolution services.

“There is scant detail about this tribunal,” Mr Brody told The New Daily. “Our counsel to the government is to build on what we have rather than build new bodies.”

Mr Brody also said a royal commission “could be a really useful vehicle” for exposing problems in the financial sector, including whether the banks are too big and vertically integrated. But he said other reforms should not be delayed.

Calls for the creation of a bank tribunal have been led by Nationals senator John Williams and Liberal backbench MP Warren Entsch. Treasurer Scott Morrison seemed receptive to the idea during a Sky News interview on 18 August.

Financial Services Minister Kelly O’Dwyer told The New Daily that the Ramsay review, which is considering reforms to the Financial Ombudsman and other financial dispute resolution services, will also consider a tribunal.

“The government announced the terms of reference for the Ramsay review earlier this month,” Ms O’Dwyer said. “A potential banking tribunal will be considered as part of this review.”

‘Call us: we’re an alternative to the courts’

Shane Tregillis. Photo: Getty
Chief Ombudsman Shane Tregillis says any reforms should increase simplicity. Photo: Getty

Financial Ombudsman Service chief ombudsman Shane Tregillis told The New Daily he welcomed the Ramsay review, and would support any reform “that reduces complexity for consumers”.

He urged consumers with complaints about the “whole gamut” of financial services — including life insurance, term deposits and financial advice — to contact the Ombudsman for help because it is a free and simple alternative to the courts.

“Our priority is really ensuring that small business and consumers can get expedient access to dispute resolutions. And in my view, that’s all about it being fair, very accessible, simple to use, and non-legalistic. So that’s what we continue to push for in any reforms,” Mr Tregillis said.

The Financial Ombudsman currently cannot assist with personal claims above $500,000 and small business claims above $2 million. It has proposed that the small business threshold be lifted to $10 million.

Mr Tregillis also reiterated his nine-year long campaign for the creation of a “last resort” scheme that would compensate victims when wrongdoers refuse to comply.

“We have something like $15 million of unpaid determinations, typically at the smaller end. It’s a small number, but it has a large impact on individual consumers. That’s why we think there’s a real regulatory gap and a need for a compensation scheme of last resort. We think that should receive focus from the government and all of the industry stakeholders.”

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