Financial Ombudsman Scheme

Financial Ombudsman Schemes are not novel in countries such as Australia, Ireland, the United Kingdom, and Singapore. On October 29, 2015, the Central Bank of Malaysia, or Bank Negara Malaysia (BNM), announced that the very first Financial Ombudsman Scheme is expected to operate in the first quarter of 2016.

Background
The Financial Ombudsman Scheme (the Scheme) was proposed by BNM as part of its efforts to enhance dispute resolution arrangements for financial consumers. The Scheme is an independent and alternate avenue for the resolution of disputes between financial consumers and financial service providers (FSPs) in respect of financial services or products.

The Scheme is approved by the BNM under the Financial Services Act 2013 as well as the Islamic Financial Services Act 2013 (the Acts). The Financial Services (Financial Ombudsman Scheme) Regulations 2015 and Islamic Financial Services (Financial Ombudsman Scheme) Regulations 2015, governing matters on the operation of the Scheme, came into force on September 14, 2015.

Structure
The Scheme, operated by a corporate body (the Operator), is funded by financial institutions who are members of the Scheme. The Scheme will be governed by a board of directors (the Board) made up of independent directors who are neither in active employment, nor have a significant interest in any member of the FSPs. The Chairman of the Board shall also be an independent director. The Operator is accountable to BNM.

Members of the Board, and officers of the Operator, including the ombudsman, who has access to any document or information relating to any of the dispute referred under the Scheme, shall have a duty of confidentiality, unless consent has been obtained from the eligible complainant or member FSP, or when such disclosure is required or permitted by law.

Eligible complainants
The Scheme may only consider disputes referred to it from eligible complainants, which consist of financial consumers, who use or have used the financial product or service, for personal, domestic, household or business purposes.

Eligible disputes
The Scheme may consider only disputes against member FSPs for direct financial loss, provided they are within the prescribed monetary limit, and which are not expressly excluded from the financial contract.

The prescribed monetary limits are as follows, namely:
(a) MYR250,000 for disputes on banking and insurance or takaful products or services;
(b) MYR10,000 for disputes on motor third party property damage; and
(c) MYR25,000 for disputes on unauthorised transactions involving payment instruments and payment channel, or cheque.

Disputes above the monetary limit of the Scheme may be considered, subject to the mutual agreement of both complainant and member FSP. However, the same dispute is not allowed to be lodged with the Tribunal for Consumer Claims.

The resolution process
An eligible complainant must first allow his complaint to go through the proper channels of the member FSP. If that fails, a case management aimed at facilitating the resolution of disputes through negotiation, mediation or conciliation will be held. In the event that both parties fail to reach an amicable agreement, a recommendation shall be made by the case manager. If that recommendation is rejected by any of the parties, such dispute will then proceed to be reviewed by an Ombudsman, who will then issue a final decision. The parties are free to pursue the matter through the courts if an amicable settlement cannot be achieved via the adjudication by the Ombudsman.

Awards
The Ombudsman may make or grant monetary awards against the member FSP, direct the member FSP to take certain steps for the resolution of dispute, order the reimbursement of costs and order interest payable under the monetary award. Member FSPs are under a statutory obligation to comply with the awards granted, failing which, may result in action taken by BNM for non-compliance.

Conclusion
The Scheme is indeed a significant step on the part of BNM in its efforts to protect financial consumers. It is hoped that the Scheme could boost the confidence of financial consumers towards the financial products and services offered by both the conventional and Islamic financial services industry in Malaysia.

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ZUL RAFIQUE & partners
D3-3-8 Solaris Dutamas,
No 1 Jalan Dutamas 1
50480 Kuala Lumpur, Malaysia
Tel: (60) 3 6209 8228
Fax: (60) 3 6209 8221
Email: knowledge@zulrafique.com.my
Website: www.zulrafique.com.my