A World Bank diagnostic study has recommended that South Africa restructure its fragmented financial services ombudsman structure.
The diagnostic study, titled: “South Africa – Financial Ombud System Diagnostic”, was commissioned by National Treasury and prepared by the World Bank Group (WBG).
It aims to provide an independent review of South Africa’s financial ombud system. It also seeks to recommend reforms to enhance customer protection and good-quality outcomes in the financial services sector.
Recommendations to address the findings include establishing a National Financial Ombud, a new non-statutory body to replace the current seven schemes except for retirement funds; the proposed reformed Pension Funds Adjudicator would become the Retirement Funds Ombud.
The report also suggests that the country introduces enhancements to the current ombud council framework; as well as implementing an update of complaint-handling requirements to improve consistency among financial services providers.
The technical assistance for this diagnostic study has been provided as part of the South Africa Financial Sector Development and Reform Program (FSDRP) undertaken by the WBG and funded by the Swiss State Secretariat for Economic Affairs.
In this regard, the National Treasury and the Financial Sector Conduct Authority (FSCA) have invited the public to provide written comments on the diagnostic report.
The FSCA, as the regulator responsible for ensuring that customers are treated fairly in the financial sector, also participated in the process.
The Treasury and the regulator in a statement said the study followed the publication in 2017 of the discussion document: “A Known and Trusted Ombud System for All”, as part of the Twin Peaks financial sector regulatory reform programme in South Africa.
“That document sets out initial reforms to the ombud system included in the Financial Sector Regulation (FSR) Act (Act 9 of 2017) as well as the need to undertake further research to inform any future reforms,” reads the statement.
The study covered the country’s seven financial ombud schemes. These are the Credit Ombud, Ombudsman for Short Term Insurance, Ombudsman for Banking Services, Ombudsman for Long Term Insurance, Pension Funds Adjudicator, Ombud for Financial Services Providers (FAIS Ombud), and the Johannesburg Stock Exchange Ombud. The WBG extensively consulted the ombuds during the assessment.
The Treasury and the FSCA said the diagnostic study identified potential overlaps, gaps and inconsistencies both in the overall financial ombud system and individual ombud schemes, and recommends further reforms.
The study’s analysis and recommendations as well as the public comments received will help shape and inform National Treasury’s policy approach to reforming the financial ombud system.
Some high-level findings include:
a) The current highly complex and fragmented ombud system with overlapping jurisdictions increases costs for providers and is difficult for consumers to navigate.
b) There is a wide variation in complainant eligibility, processes, powers, and status of decisions among the Ombud schemes.
c) There is insufficient customer accessibility due to language barriers and regional distribution.
d) The lack of socio-economic data on complainants makes it difficult to identify and address systemic issues.
“The report acknowledges the many strengths and benefits of the current ombud schemes but findings point to the need for a centralised and comprehensive ombud system that supports greater accessibility and efficiency across the financial sector,” reads the statement.
The technical assistance for this diagnostic study has been provided as part of the South Africa Financial Sector Development and Reform Program (FSDRP) undertaken by the WBG and funded by the Swiss State Secretariat for Economic Affairs.
Comments can be sent to ombuddiagnostic@treasury.gov.za. Closing date for comments is 3 September 2021.
Leave a Reply
You must be logged in to post a comment.