Informal, efficient, free and fair

Amidst the attack on the idea of a press ombudsman by some politicians, we asked Judge Brian Galgut, the current ombudsman for the first industry in South Africa to create such a scheme - long-term insurance - to explain the basics

There are six ombudsman schemes that operate within the financial services sector in South Africa, one being my own.

There are also various ombudsman schemes that have been established in various areas outside the financial services sector, examples being the Press Ombudsman, the Motor Industry Ombudsman, the Dental Ombudsman and others. Because my scheme does not operate outside the financial services sector, however, I am unable to speak for them.

The six schemes that operate within the financial services sector make up a sort of patchwork quilt covering complaints in all such services.

Two of them are statutory schemes, being the Pensions Funds Adjudicator (PFA), established under the Pension Funds Act, and the Ombud for Financial Services Providers, commonly called the Fais Ombud, established under the Financial Advisory and Intermediary Services Act.

In terms of those respective acts, the PFA has jurisdiction over all complaints to do with pension funds, and the Fais Ombud over complaints against any financial services provider who furnishes advice or renders intermediary services.

The remaining four are all voluntary schemes, being:

• The Ombudsman for Long-term Insurance, who has jurisdiction over complaints arising out of all long-term insurance contracts;
• The Ombudsman for Short-term Insurance, who has jurisdiction over complaints arising out of short-term insurance contracts;
• The Ombudsman for Banking Services, who deals with complaints against banks by their customers or prospective customers;
• The Credit Ombud, who deals with complaints against credit bureaus, credit providers and debt collectors, and anyone who submits credit information to them.

The Financial Services Ombud Schemes Act of 2004 stipulates that for an ombud scheme to operate in the financial services sector, it requires to be granted recognition under the act, and the act lays down certain minimum standards for this purpose. Each of the four voluntary schemes duly applied for and was granted recognition. Despite this, voluntary schemes are not controlled by statute, and the industry members concerned are not obliged to subscribe to the relevant scheme. In the case of all four of the voluntary schemes, however, the great majority of industry members have in each case in fact subscribed to the scheme concerned and in so doing have thereby agreed to be legally bound by the rulings made by the ombudsman concerned.

Not being bound by statute, each voluntary scheme fixes and follows its own procedure. While those procedures may differ from scheme to scheme, all of the voluntary schemes have the following in common:

They are not answerable to, and do not represent, either the industry or consumers, but are entirely independent.

Each is answerable to its own council or board, which in turn is independent and is neither appointed nor in any way controlled by the industry.

Their mission is to resolve complaints against members of the industry concerned.

They do so by conciliation, mediation or recommendation, failing which, by means of a ruling. The experience of each of the four schemes is that by means of the conciliation, mediation or recommendation process, complaints are resolved by way of settlement in the great majority of cases, and that it therefore only becomes necessary in a few cases to make rulings against members of the industry.

Their rulings are not binding on the consumers concerned, who may at any stage sue the industry member in court in the usual way. Their rulings are binding on the industry members who subscribe to their schemes, however, and in the case of a ruling against an industry member, it has no right to challenge the ruling in a court of law.

Their services are free to consumers, are time efficient, informal and fair.

Unlike with courts, their jurisdictions embrace the obligation to take considerations of equity into account where a strict application of the law will give rise to an unfair result.

They all recently agreed to share in a central call centre which will direct callers to the ombudsman office concerned.