Treasury seeks to simplify ombuds

• Existing system of ombuds is complex for consumers to navigate and proposals aim to lift consumer confidence

The Treasury has recommended reforms to the financial ombud system which, if implemented, would result in a simpler, consolidated system with only two ombuds instead of seven. Ombud schemes are intended to offer consumers redress if they are treated unfairly, but consumers find the multiplicity of schemes difficult to navigate.

The National Treasury has recommended reforms to the financial ombud system which, if implemented, would result in a simpler, consolidated system with only two instead of seven ombuds in the sector.

Ombud schemes are intended to offer consumers redress if they are treated unfairly by financial institutions, but the multiplicity of schemes are inefficient, complex and difficult to navigate for consumers.

The Treasury published its policy position statement on the reforms, titled A simpler, stronger financial sector ombud system together with a media statement on Thursday. It said an effective financial ombud system helped to underpin consumer confidence in financial services and to enhance financial inclusion for vulnerable and disadvantaged customers.

The proposed system would incorporate a new, independent body, the national financial ombud, which would replace six of the seven current schemes. These would be the credit ombud, the ombud for shortterm insurance, the ombud for banking services, the ombud for long-term insurance, the JSE ombud and the ombud for financial services providers.

A renamed and reformed pension funds adjudicator would become a separate and independent retirement funds ombud with its own board. The Ombud Council and ombud schemes would implement the proposed reforms which would require legislative amendments.

The Treasury noted that there had already been the voluntary amalgamation in consultation with the Ombud Council of four of the industry schemes, namely the credit, banking, long-term insurance and short-term insurance schemes to form a new, streamlined industry scheme, the National Financial Ombud Scheme SA. This amalgamated body was to begin operations on Friday after recognition by the Ombud Council.

The Treasury said it would be too complex for the consolidated national finance ombud to absorb the work of the retirement fund ombud at this stage, though this was likely in the medium term once the finance ombud was up and running. Also proposed is a modified Ombud Council.

The Treasury said the simplification and consolidation of the ombud schemes would result in consistency in terms of visibility and accessibility, the eligibility of complainants, processes, powers and enforceability of decisions. It would also result in improved coverage to reduce jurisdictional gaps and overlaps.

The policy document emphasised that the ombud schemes must be independent from the industry and the government “to guarantee that when ombuds decide individual cases they can be as visibly objective, impartial, and unbiased as a judge would be in court”. In line with international best practice, it is intended that the reformed financial ombud system should be effective, independent, accessible, fair, efficient and open.

The Treasury’s policy position statement came in the wake of the publication of a World Bank diagnostic study in 2021 on SA’s financial ombud regime. Public consultations were held on the bank’s findings and recommendations and there was broad consensus about them.

“The study provided an independent review of SA’s financial ombud system and recommended reforms to enhance consumer protection and encourage good quality outcomes in the financial services sector,” the Treasury said.

The World Bank study identified potential overlaps, gaps and inconsistencies in the overall financial ombud system and individual ombud schemes and recommended reforms.

“The study’s analysis and recommendations as well as the public comments received have shaped and informed the National Treasury’s policy approach to reforming the financial ombud system towards a stronger market conduct framework for SA,” the Treasury said.