The release of a new report on small business lending by the major banks has prompted the government to push for expanded external dispute resolution (EDR) options for customers.
Released today, the Inquiry into Small Business Loans
(also known as the Carnell report) recommended that banks enhance small business access to EDR through a “one-stop shop” with a dedicated small business unit. This unit will have the expertise to consider disputes involving loans of up to $5 million.
Under the recommendations, the EDR scheme would also be expanded to involve disputes with third parties such as valuers by investigating accountants and receivers.
Following these developments, the government has extended the deadline of the independent Ramsey review into external dispute resolution in the finance industry.
“I have written to the Ramsay Review panel to ask that they take particular account of these recommendations as they develop their final report, which will be delivered to government by the end of March 2017,” Kelly O’Dwyer, Minister for Revenue and Financial Services, said.
This means that in addition to the main review paper delivered in March, the panel will also supply a supplementary paper on the Carnell report’s recommendations at the end of June.
“I have today strengthened the Ramsay Review terms of reference to allow the expert panel to make recommendations, rather than observations, on the merits and potential design of a last resort compensation scheme, and to consider the merits and issues involved in providing access to redress for past disputes,” O’Dwyer said.
The Mortgage & Finance Association of Australia (MFAA) has itself delivered a submission to the government outlining its concerns with the Ramsey Review’s principle recommendation to amalgamate the Credit and Investments Ombudsman (CIO) and the Financial Ombudsman Service (FOS) into a single scheme.
“[The MFAA’s] submission outlines the industry’s concerns of suggested improved service levels under a proposed monopoly model which the MFAA believes would disadvantage its members as small business owners and have little impact on the major credit providers,” the association said in a statement.
“The need for two alternative EDR providers better supports the different types of customers and businesses serviced by each scheme while offering members the choice of provider.”
The proposal is anti-competitive while lacking efficiency, equity, transparency, accountability and comparability of outcomes, the MFAA said.
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