Experts fear the chances of consumers and business owners having their disputes with credit reporting agency Veda swiftly resolved will be reduced after it switched from the “gold standard” ombudsman to another.
Veda moved from the Financial Ombudsman Service (FOS) to the Credit and Investments Ombudsman (CIO) in November last year.
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It has the right to choose between the external dispute resolution schemes, but FOS has five times as many full-time employees, half the staff turnover rate, and a better standing amongst financial counsellors, compared to that of CIO.
A Sydney-based credit repair company, that asked not to be named, said it was concerned that business owners wanting to dispute a commercial default listing on their credit files would lose out.
An incorrect listing can reduce the credit score, lowering the chances of getting a loan at a good rate.
“In our experience of making … complaints, FOS is the gold standard in external dispute resolutions schemes,” she said
“The FOS holds credit providers accountable for their actions beyond the Privacy Act, and includes other relevant codes and rules, [whereas] the CIO limits complaints to the Privacy Act, thereby lessening the scope for accepting disputes.”
Veda said other credit reporting bodies – Dun & Bradstreet and Experian – were with CIO.
“The best outcome is to have a body that understands the complexities of the Privacy Act, the differences between a [credit reporting bureau] and a financial service provider, and arrives at fair and lawful decisions,” Veda’s spokeswoman said.
“Veda now has a number of commercial disputes before [CIO and] we are confident based on their experience … they will arrive at decisions that are both fair and lawful.”
But the credit repair company raising concerns claimed Veda was driven by its bottom line because CIO was likely to accept fewer disputes, saving Veda money.
It claimed that unlike FOS, which accepted disputes based on Veda’s own subscriber rules, CIO was unlikely to accept complaints about commercial credit (for business, not personal purposes) because this did not fall under the Privacy Act.
“This means a vital protection for commercial borrowers has been lost, and commercial credit providers can literally slap on a default notice of any amount over $100 with no notice, no contact, no delay, and no Ombudsman service to hold Veda accountable,” she said.
Credit repair agents charge a fee to resolve default listings, and fewer opportunities to lodge a dispute would also hurt their bottom line.
Veda has previously complained that credit repair groups were misusing FOS’ services by automatically disputing every entry on their client’s credit report without regard to whether or not the information was accurate.
The independent Ramsay Review is currently examining dispute resolution and complaints bodies in the financial sector and it recently made a draft recommendation that FOS and CIO be merged.
FOS wants to merge, while CIO believes two schemes allow price competition and service quality comparison.
In 2015-16, FOS had about 13,600 members, including the big four banks and insurers. Seventy-eight per cent were “small” or “very small” businesses.
In the same period, CIO had about 23,000 members, 97 per cent of which were sole traders, partnerships or small businesses. Most are brokers.
Raj Venga, CIO’s chief executive, said its funding model better allowed credit reporting members to respond to the threat of “unscrupulous” operators lodging baseless claims that attack the validity of default listings.
He denied claims that CIO would accept fewer complaints because of a smaller scope.
“We consider complaints by reference not only to the law, but also to applicable industry codes, good industry practice and fairness,” he said. “We can, and do, deal with complaints from commercial borrowers and business owners.”
A joint submission by consumer groups supported the idea of a single scheme. It said there were concerns about delays at CIO, its “hands off approach”, and “at times, poor quality decision-making”.
“These problems undermine its effectiveness and cause consumer detriment,” the joint submission reads.
“Consumer Action reports that, in some disputes, clients achieve a faster and better outcome by taking their dispute to court instead of CIO.”
However, it also listed problems about FOS.
A survey by Financial Counselling Australia found more counsellors had positive experiences with FOS than CIO, and rated their experiences with FOS more highly than CIO.
Alexandra Kelly from the Financial Rights Legal Centre said her main concern about the move was FOS published every decision on their website while CIO published a few.
Fiona Guthrie of Financial Counselling Australia said she hoped there will be no differences in the way in which FOS and CIO determine disputes.