Using a dispute resolution service

Dunedin Budget Advisory Service assistant manager Charlotte Whitaker says while clients can be reluctant to go through a financial dispute resolution service, the process can be supportive and rewarding.

Financial dispute resolution services are free, independent services for consumers to seek guidance or make a complaint about their bank, lender, insurer or other financial service. They act as an alternative to legal proceedings for resolving financial services disputes.

Here in Aotearoa, we have four dispute resolution services on offer – Financial Services Complaints Ltd (FSCL), Banking Ombudsman Scheme, Insurance and Financial Services Ombudsman and Financial Dispute Resolution Service.

You can contact any of the services, on your own or through a representative, and you’ll get put through to the right place.

Dunedin Budget Advisory Service has been through 15 dispute resolution processes since April 2019. From a client’s perspective, starting the resolution process can be daunting but they will be guided by experienced staff.

Charlotte says the role of a financial mentor is to advocate on behalf of their client and she and other financial mentors work with the dispute resolution teams to reach a resolution.

“But it’s more important than that. It’s that the client recognises someone on their side and there is an option to complain available to them.”

Charlotte says there are a handful of creditors in their region who have repeatedly been the focus of their clients’ complaints in the past.

Often these loans are unaffordable from the start and are accessed as they may be an essential need – like a vehicle for a new mum or to get to work.

In some cases, clients can be paying off multiple loans with the same lender at the same time.

These creditors are popping up less and less – a trend Charlotte credits to both the increase of buy now, pay later schemes (BNPL) and the upcoming changes to the Credit Contracts and Consumer Finance Act (CCCFA) Act.

Unfortunately, BNPL schemes aren’t included in the CCCFA.

“Basically, the credit providers have always gotten away with it in the past – they’ve continued to do so until they’ve been challenged,” she says.

One of their successful cases has included a company releasing the client’s vehicles as security, writing off a loan and writing off their credit card – with a value of $7600.

The release of the client’s security was the most significant aspect of this decision.

Charlotte says creditors are often operating in vulnerable communities, which can be a “David and Goliath” situation.  

“My ultimate goal is that the creditor is educated, and the client knows that they’ll have some rights,” she says.

Industry wide improvements

Financial Services Complaints Limited (FSCL) is one of the services available to Kiwis.

Case Manager Meryn Gates says they help people resolve complaints about financial service providers (providers), including lenders, insurers and credit unions.

They can investigate where a lender has loaned money to someone who cannot afford to repay the loan or someone’s car has been repossessed or the immobiliser has been turned on and you don’t think this should have happened.

In the 2020/2021 year they investigated a total of 286 cases, similar to the number (298) in the previous year. They looked into 52 complaints about lenders, compared with 87 in the previous year.

They also helped with more than 500 complaints referred back to the lender’s internal complaints process.

“This time last year we thought we would be seeing more complaints arising out of financial hardship caused by the effects of the COVID-19 pandemic on people’s jobs and businesses. However, so far, we have not seen such complaints in any great number,” says Meryn.

“We continue to see cases where the borrower says that the lender did not lend responsibly to them, and irresponsible lending makes up the most frequent issue in the complaints we investigate about lenders. 

“We have also seen a small increase in cases where a person, usually a family member, has been joined as a co-borrower on a loan, when they thought they were only guaranteeing a loan. 

“In these cases, it has appeared that the lender asked the family member to be a co-borrower, rather than a guarantor, in order to avoid the additional responsibilities a lender owes to guarantors, for example, the requirement to recommend a guarantor obtains independent advice before finding a guarantee.”

She encourages people to get in touch with FSCL if you think there has been a wrongdoing.

“If you think we might be able to help, please call us. We will refer the complaint for you to the right person at the provider’s internal complaints process and keep a watching brief over it,” she says.

“A complaint to FSCL can also be part of industry-wide improvement because we will report material breaches of financial markets legislation such as the Credit Contracts and Consumer Finance Act to the regulator – usually the Commerce Commission.”

The Banking Ombudsman Scheme provides a free and independent service to help fix banking problems. They resolve complaints, respond to enquiries, and provide guidance and information.

Of the 4812 cases received by the Banking Ombudsman Scheme last financial year, 32 percent were enquiries, 65 percent were complaints and 3 percent were investigated as disputes.

Problems with bank accounts were the most common complaint followed by lending, payment methods and credit cards.

Deputy Banking Ombudsman, prevention and stakeholder engagement Zoe Priestley says they focus equally on resolving and preventing complaints. This involves sharing insights and lessons from complaints to improve banking practice and consumer financial capability.

“Communication is often the underlying cause of complaints. When banks don’t communicate clearly and effectively, as they are required to, problems arise,” she says

Inadequate communication affects consumer choice and understanding, and it exacerbates complaints. When consumers are under stress, they need to be heard, understood, and responded to.”

While the Banking Ombudsman Scheme received approximately 1000 lending complaints last year, the banking industry received more than 20,000 lending complaints in 2020.

Lending complaints were mostly about the bank’s advice, information or decision, or about fees, charges and interest rates.

“While only a small portion of complaints are about irresponsible lending, we continue to share examples of poor practice to remind banks of their obligations. We welcome further consumer protection measures from the credit law changes later this year,” says Zoe.

“We value the important role of financial mentors, community budgeting services and Moneytalks in improving consumer outcomes.

“We appreciate referring consumers to FinCap services, and we encourage you to refer clients with banking concerns to us. We welcome your contact any time.”

And they’re not the only ones who are encouraging people to reach out.

The MoneyTalks helpline team encourages callers, with support from financial mentors, to go through the process to help address the underlying issues around irresponsible lending.

BFC champion Adrienne Gallie says framing the complaint is important and especially keeping the focus on the source of the problem.

“If the initial affordability assessment was inadequate look out for lenders trying to distract with evidence of actions they took after lending the money.

“The CCCFA protects people from irresponsible lending though the affordability assessment criteria and there is no reason why it can’t be argued that the whole debt be waived.”

Adrienne says lodging a complaint enquiry puts the power back in the borrower’s hands and encourages the lender to reconsider an unfair position.

In one instance from the helpline, negotiation for reducing a very old debt was rejected by the lender. 

“Through the initial process with the disputes resolution scheme the lender was given an opportunity to reconsider their final position before an official complaint was lodged. This alone resulted in a significant debt waiver with a small and manageable balance to repay,” says Adrienne. 

If you or anybody you know needs support with your finances, you can contact Dunedin Budget Advisory Service on 03 471 6158 or our MoneyTalks helpline team on 0800 345 123.