Understanding the Insurance & Financial Services Ombudsman (IFSO) Scheme
The Insurance & Financial Services Ombudsman (IFSO) Scheme is one of the independent dispute resolution schemes approved by the Minister of Consumer Affairs in New Zealand [Source: Financial Service Providers (Registration and Dispute Resolution) Act 2008, s 48]. Its purpose is to provide a free and accessible service for consumers to resolve complaints against financial service providers, including banks, insurers, financial advisers, and lenders, without needing to go to court [Source: Financial Service Providers (Registration and Dispute Resolution) Act 2008, s 48(2)]. The IFSO considers relevant New Zealand law, including consumer protection legislation, when investigating and resolving complaints.
Key Consumer Protection Legislation
When a consumer has a complaint regarding financial services, the IFSO Scheme may consider whether the financial service provider has complied with relevant consumer protection legislation, such as the Consumer Guarantees Act 1993 and the Fair Trading Act 1986.
Consumer Guarantees Act 1993 (CGA)
The Consumer Guarantees Act 1993 (CGA) sets out guarantees that apply to goods and services ordinarily acquired for personal, domestic, or household use or consumption [Source: Consumer Guarantees Act 1993, s 2(1)]. Financial services generally fall under the definition of 'services' provided in trade [Source: Consumer Guarantees Act 1993, s 2(1)].
Key guarantees for services include:
- Reasonable Care and Skill: Services must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28]. This means the service provider must meet the standard of a reasonably competent provider in that field.
- Fitness for Purpose: Services must be fit for any particular purpose that the consumer makes known to the service provider, either expressly or by implication [Source: Consumer Guarantees Act 1993, s 29].
- Reasonable Time: Services must be completed within a reasonable time if no specific time for completion has been agreed upon [Source: Consumer Guarantees Act 1993, s 30].
- Reasonable Price: If the price for the service is not agreed upon in advance, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 32].
If a financial service fails to meet one of these guarantees, a consumer may have remedies under the CGA. Depending on whether the failure is of a substantial character, remedies can include requiring the service provider to remedy the failure, or in some cases, the consumer may cancel the service and obtain damages for any loss or damage resulting from the failure [Source: Consumer Guarantees Act 1993, s 33, s 34].
Fair Trading Act 1986 (FTA)
The Fair Trading Act 1986 (FTA) protects consumers from misleading and deceptive conduct and unfair trading practices by businesses. It applies broadly to all aspects of trade, including the provision of financial services.
Key prohibitions under the FTA include:
- Misleading and Deceptive Conduct: A person in trade must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This applies to advertisements, representations, and general business practices.
- False or Misleading Representations: It is illegal to make false or misleading representations about goods or services, their nature, quality, price, or existence [Source: Fair Trading Act 1986, s 13]. For financial services, this could include misrepresenting the terms of a loan, the benefits of an insurance policy, or the returns on an investment product.
- Unsubstantiated Representations: A person in trade must not make a representation about a good or service if they do not have reasonable grounds for making that representation [Source: Fair Trading Act 1986, s 12A]. This means claims about financial products or services must be backed by evidence.
Breaches of the FTA can result in various remedies, including court orders to pay damages, vary contracts, or issue corrective advertising. The Commerce Commission is responsible for enforcing the FTA [Source: Fair Trading Act 1986, s 40, s 43, s 47]. While the IFSO Scheme does not enforce the FTA, it considers whether financial service providers have acted fairly and consistently with the principles of the FTA when resolving disputes.
How the IFSO Scheme Utilises These Laws
The IFSO Scheme operates by investigating complaints, mediating between parties, and making decisions based on the law, good industry practice, and what is fair and reasonable in the circumstances. When a consumer makes a complaint, the IFSO will assess whether the financial service provider has met its obligations under relevant legislation, including the guarantees of the CGA and the prohibitions against misleading conduct in the FTA. For example, if an insurer delays a claim unreasonably, the IFSO might consider whether they exercised reasonable care and skill under the CGA. If a financial adviser made unsubstantiated claims, the IFSO would consider the FTA.
Making a Complaint to the IFSO Scheme
Before lodging a complaint with the IFSO Scheme, a consumer is generally required to attempt to resolve the issue directly with their financial service provider through their internal complaints process [Source: Financial Service Providers (Registration and Dispute Resolution) Act 2008, s 51]. If the complaint remains unresolved after the provider has had a reasonable opportunity to address it, or if the consumer is dissatisfied with the outcome, they can then approach the IFSO Scheme. The IFSO Scheme's decisions are binding on the financial service provider, up to a certain financial limit, if the consumer accepts the decision.
When to Seek Independent Legal Advice
For complex disputes, specific interpretations of legislation, or situations where a dispute resolution scheme's findings are contested, individuals may benefit from seeking independent legal advice. This includes guidance on court proceedings or appeals. Free legal assistance may be available through Community Law Centres.