26th November 2012 – Financial difficulty disputes have increased by 42% according to the recent annual report from the Financial Ombudsman Service.
This comes on top of an increase of 130% in the previous financial year.
“The continuing increase in financial difficulty disputes is something that is a cause of concern not just for financial counsellors – who each year help thousands of Australians struggling to pay their bills – but also for financial institutions and FOS”, said Fiona Guthrie, Executive Director of FCA.
There is a cost for everyone involved: clearly for FOS and the industry as they devote additional resources to these disputes, but there is also a human cost. Behind every case number is a real person who wants to pay what they owe, but for some reason, cannot. Financial hardship for many people means they don’t have enough money to pay for food, housing and utilities as well as meeting their financial obligations. It is an incredibly stressful experience for people in these situations.
All of us agree that we must find better ways of addressing this problem – “hardship” has been in the too hard basket for too long.
Recent discussions with the industry have been promising and we are beginning to see a roadmap emerge. As a sector, financial counsellors need to document areas of inconsistency in hardship practices and to be clearer about solutions.
For the industry, we look to the development of clear, consistent standards for example in relation to identifying hardship and to move beyond only offering short-term three month arrangements.
FOS also has a role to play, both in bringing its considerable expertise to the table and in engaging in the vexed issue of how to assist customers experiencing long-term payment difficulties.
The FOS annual report includes useful advice for both consumers and financial institutions. Consumers experiencing payment difficulties need to contact their financial services provider early and be open and frank in explaining their situation. Financial service providers need to provide more flexible solutions, that move beyond short-term arrangements. FOS sensibly suggests “providing direction on the steps that can be taken if the financial difficulty becomes longer term, which helps manage the expectations of all parties if regular payments cannot resume”.
Contact: Fiona Guthrie, 0402 426 835