There are four schemes operating: the Banking Ombudsman, which has been around for 20 years; the Insurance and Savings Ombudsman (ISO), which has been around for 17; Financial Services Complaint Limited (FSCL), and Financial Dispute Resolution (FDR).

“There is an underlying question as to whether less is more for consumers in relation to the financial dispute resolution regime,” Consumer Affairs Minister Simon Bridges said.  “This work is on-going and no decisions have been made.”

And the review has attracted a mixed reaction from the industry, with the two more established schemes saying reducing competition could benefit consumers.

“There’s real concern internationally about having competition in a dispute resolution marketplace,” ISO Karen Stevens said.

“It can encourage ‘forum shopping’ by the various financial service providers, who will tend to choose the dispute resolution system that is best for them but not necessarily best for consumers.”

And Stevens said financial service providers wouldn’t be disadvantaged by having fewer schemes or even only scheme to choose from.

Banking Ombudsman Deborah Battell said competition is “not ideal” in the dispute resolution marketplace.

“Competition is usually effected by consumers making choices; we have a situation where financial service providers are able to effect choice.”

However, FSCL is strongly opposed to any merger and its chief executive Susan Taylor said there was no evidence consumers were being disadvantaged by the current set-up or that providers were gaming the system.
“I don’t think it’s a question of whether it [reducing the number of schemes] benefits consumers but whether it has been shown to have any disadvantages for consumers.  I haven’t seen anything that suggests there are disadvantages.
“There have been suggestions that if some participants don’t like a decision they will scheme-hop but I have seen absolutely no evidence of that it this stage.”
She said all schemes operate by the same rules, particularly now FSCL has removed the $200,000 limit on claim size and doubled the maximum pay-out on a claim from $100,000 to $200,000.
FDR scheme manager Stuart Ayres said he had a view on the issue but he was “not really at liberty to say anything.  It’s all being considered at the moment and we simply operate the reserve scheme.”
The government is also looking at the role of FDR, which was set up as a reserve scheme and receives government subsidies.