Words on Wealth: One-stop ombud for insurance, banking and credit complaints

Reana Steyn, the Ombudsman for Banking Services. Photo: Ombudsman for Banking Services.

Reana Steyn, the Ombudsman for Banking Services. Photo: Ombudsman for Banking Services.

Published Mar 10, 2024


Last week, on March 1, the office of the National Financial Ombud (NFO) opened its doors, replacing the four voluntary industry-based ombud schemes representing short-term insurers, long-term insurers, banks and non-bank credit providers.

Two statutory schemes, the Ombud for Financial Services Providers (better known as the Fais Ombud, after the Financial Advisory and Intermediary Services Act) and the Pension Funds Adjudicator, remain separate.

The launch date for the NFO was originally set for January 1, but admin hiccups delayed it for two months. The new website is up and running, and the websites of the Insurance Ombudsman (short- and long-term insurance), Ombudsman for Banking Services SA and Credit Ombud now direct you automatically to the NFO site (https://nfosa.co.za).

Ombud reform

The amalgamation of the insurance, banking and credit ombuds into the NFO was the second step in the National Treasury’s overhaul of the ombud system, the first being the establishment of the Ombud Council in 2020.

The process goes back to 2017, when the Treasury’s discussion document, “A Known and Trusted Ombud System for All”, initially proposed reforms – these were later incorporated into the Financial Sector Regulation Act as part of the “Twin Peaks” regulations.

In 2021, the World Bank published a diagnostic study of South Africa’s financial ombud system, which identified overlaps, gaps and inconsistencies and recommended further reforms.

Last month, the Treasury published a policy position statement titled “A Simpler, Stronger Financial Sector Ombud System”. In a press release, it noted: “This publication is a necessary step to communicate and publish the National Treasury’s policy position statement and accompanying detailed feedback statement including an implementation plan. It also provides a response to consultation comments, and enables ombud schemes and the Ombud Council to work towards implementing a reformed structure.”

The full implementation of reforms would require legislative amendments, the Treasury said. In the interim, it “notes and welcomes the voluntary amalgamation, in consultation with the Ombud Council, of four of the current industry schemes to form a new, streamlined industry scheme”.

The Treasury’s plans include incorporating the FAIS Ombud and the JSE Ombud into the NFO at some stage, but keeping the Pension Funds Adjudicator a separate office, renamed the Retirement Fund Ombud.

How are you affected?

The NFO has four divisional ombuds corresponding with the four previously industry-based ones.

“The main purpose, mission and manner of dispute resolution will not differ significantly from the way the four schemes operated in the past,” the Ombud Council said in a statement last year. “The NFO’s mandate is to provide individuals, small businesses and financial customers or beneficiaries with a fair, expeditious and effective dispute resolution process, free of charge.”

Reana Steyn, the divisional banking ombud, said: “We believe that both the financial customers and the participants of the scheme will benefit significantly as a result of the new single-entry point process, with the same rules applicable to all types of complaints. Other benefits of the new scheme include improved efficiencies at the administrative level and a harnessing of the institutional knowledge, expertise and staff experience of the previous schemes, built up over more than 20 years.”

Complaints process

In essence, the complaints process is as follows:

• After exhausting internal complaint mechanisms with a provider, you may lodge a complaint, which will be directed to the appropriate division.

• The divisional ombud’s office will contact the provider involved for a response.

• After possible further investigation, including obtaining expert advice, the ombud will issue a recommendation to the parties on whether the complaint should be upheld or dismissed and any appropriate remedies.

• If either party rejects the recommendation, a ruling may be issued, which may be provisional or final.

• If a provisional ruling is challenged, after further deliberation, the ombud may make the ruling final. A final ruling is legally binding.

• Either party may apply to appeal the ruling. If successful, the appeal will be heard by a designated Appeal Tribunal consisting of three members who are retired judges or senior counsel.

Jurisdiction and monetary limits

The NFO’s monetary limits are, in summary:

• Banking complaints (including bank credit complaints): R5 million complaint value and R10 000 for unnecessary delays by the participant. Small businesses may make use of the complaints service if their annual turnover is below R10m.

• Non-bank credit complaints: R5m complaint value. Small businesses with an annual turnover of below R10m may make use of the service.

• Non-life insurance complaints: R10m for homeowners' or buildings cover and R5m for all other types of cover. The limits apply to commercial and personal lines insurance.

• Life insurance complaints: No monetary limits.

Apart from an award made in relation to a complaint, any division of the NFO may award up to R50 000 as compensation for material inconvenience, distress or financial loss caused by an error, omission or maladministration (including manifestly unacceptable or incompetent service).

* Hesse is the former editor of Personal Finance.