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The financial industry has mechanisms for dispute resolution that some consumers are not aware of. These are the financial sector ombud schemes. Since late 2020, the Financial Sector Regulation Act has made it compulsory for a financial institution to belong to the relevant industry ombud scheme if there is one for its sector.
Some of the schemes are voluntary, which means these are formed by industry. Voluntary ombud schemes have historically been organised in South Africa to serve a specific financial industry segment – for example, there has been an ombud set up by long-term insurers to deal with long-term insurance customer disputes. Other voluntary schemes existed for short-term insurance, banking, credit and the JSE.
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Then there are statutory ombud schemes which are created by law.
The third statutory ombud is the Pension Funds Adjudicator.
While these schemes are all effective at dispute resolution, it has been very confusing for consumers to understand which ombud scheme to direct their complaint to.
For example, if you take out a home loan from a bank, you usually purchase a bundle of services which includes life insurance as well as homeowners’ insurance that insures your building.
Although you are dealing with a single bank, until now the products offered fell under three different ombud schemes – namely, the Ombud for Banking Services, the Ombud for Short-Term Insurance and the Ombud for Long-Term Insurance.
Most credit products include credit life insurance, which fell under the Ombud for Long-Term Insurance and, even more confusing, if the credit provider is a bank, it would have fallen under the banking ombud while a non-bank credit provider fell under the Credit Ombud.
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To simply the process and provide consumers with a single point of entry, the National Financial Ombud (NFO) Scheme was created with effect from 1 March 2024. The four main industry ombud schemes have merged into a single, overarching industry ombud scheme. The NFO will be made up of four divisions, covering each of the four sectors covered by the previous schemes. From a consumer’s perspective, they would experience this as a seamless process and the various industry-based divisions would work together to resolve the complaint where it cuts across product sectors.
This excludes the FAIS Ombud which remains a challenge as there are many complaints against product providers related to poor advice. For example, a consumer may be mis-sold an insurance product which was not appropriate for their needs. The issue would not necessarily be with the product itself, but with the advice given.
Leanne Jackson, chief ombud (CEO) of the Ombud Council explains that the next step will be to include the FAIS Ombud into the NFO, however because the FAIS Ombud is a statutory ombud, it requires a change in the law. This is part of a longer process of consolidating ombud schemes, which is set out in National Treasury policy documents.
The NFO will work closely with the FAIS Ombud and refer relevant cases to it, and vice versa.
The Ombud Council is the regulatory body that oversees the NFO and various ombud schemes, including the statutory schemes, and is responsible for the governance and accountability requirements. Its role is to create a framework for effective alternative dispute resolution mechanisms across the financial sector. It also has the powers to allocate a case to the most suitable ombud where no other ombud is available.
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It does not provide dispute resolution for consumers unless the complaint relates to poor service delivery by the relevant ombud scheme. It is important for consumers to note that the Ombud Council cannot adjudicate or overrule a finding by an ombud scheme.
COMPLAINT PROCESS
Always start by lodging your complaint with the financial institution. All companies have an internal dispute resolution process.
. If you are unhappy with the outcome, you can lodge a complaint through the website of the National Financial Ombud Scheme www.nfosa.co.za, email info@nfosa.co.za or call 0860 800 900.
. You will receive a letter of acknowledgment. The service provider has 21 working days to respond to the complaint.
. Further information may be required and, once the investigation is complete, the ombud will issue a ruling or recommendation.
. If the consumer is dissatisfied with the ruling, they can lodge an appeal with the Appeal Tribunal.
. If a service provider does not comply with the NFO ruling, this would be referred to the Financial Services Conduct Authority (FSCA).
