On April 14, 2011, as Chairperson of the then Fiji Commerce Commission (FCC), I addressed the public in response to complaints about the financial sector’s exorbitant charges, fees, and other conditions. I underscored the pressing Substantial Market Power (SMP) issue in Fiji’s banking sector.
If left unchecked, this SMP could severely impede Fiji’s economic development and the efforts of low-income households to improve their standard of living.
This move by the Commission was based on complaints from consumers, businesses, potential investors, and the Consumer Council of Fiji. The Commission noted that the Commerce Commission Decree 2010 (“Decree”) obliges it to regulate the market when there is reason to believe that prevailing market conditions do not adequately assure the advancement of the objectives of the Decree.
In such circumstances, the Commission must (a) identify and review relevant product and service markets for financial services; (b) evaluate the level of existing or likely competition in these markets, including the substitution effects of intermodal competition; and (c) determine whether, and to what extent, an insufficiency of existing or likely competition will impede the advancement of the objectives of the Decree.
The Commission, committed to rectifying the problem, invited submissions from all stakeholders to undertake a Substantial Market Power (SMP) study. The study aimed to determine the insufficiency of existing or likely competition within the relevant market, identify the financial institutions with substantial market power, and take appropriate steps to rectify the problem.
On September 5, 2011, the Commission announced its findings from the SMP study. It determined that three banks held substantial market power in the relevant market for financial services in Fiji. These banks, in terms of asset base, held 74.36 per cent of the total market share. In terms of loans, the banks held 77.49 per cent of the total market share, and regarding deposits, they accounted for 83.67 per cent of the total market share.
This concentration led to reduced competition, high interest rates, and additional fees that burden consumers and hinder the growth of SMEs and low- and middle-income households. The study also revealed a lack of accessible avenues for consumers to forward their complaints.
The Commission discussed the potential appointment of a Financial Services Ombudsman but was informed that the Reserve Bank of Fiji (RBF) would take a more vigilant stance and carry out the functions of the Ombudsman.
However, the ongoing SMP within the banking sector has persisted, and consumer frustrations have mounted without proper documentation of it. Consumers have struggled to access the RBF’s redress mechanism as it is not readily accessible. In light of this situation, the recent announcement by the Hon. Minister of Finance, Prof. Biman Prasad, regarding the appointment of the Financial Services Ombudsman represents significant progress, and the Minister should be commended for this decisive and bold step.
In this write-up, I aim to explore how the office of the Financial Services Ombudsman (FSO) can be effective and avoid becoming another “white elephant” beyond the reach of ordinary people and SMEs. The FSO serves as a crucial mechanism for consumer protection and dispute resolution in financial sectors, providing an independent and impartial forum to address consumer complaints against financial service providers.
The effectiveness of such an institution is vital, as it not only builds consumer trust in financial markets but also contributes to the overall stability of the financial system. This write-up discusses strategies for establishing a vibrant and compelling financial services ombudsman, highlighting its roles, necessary institutional frameworks, stakeholder collaboration, and continual improvement.
Defining the role of the ombudsman
The first step toward fostering an effective financial services ombudsman is clearly defining its role and scope.
As mentioned earlier, the functions of the ombudsman should include the following (i) providing a fair, transparent, and timely resolution process for disputes between consumers and financial service providers; (ii) offering resources and guidance on consumer rights and responsibilities in financial services to empower consumers; and lastly, (iii) provide policy recommendations for reforms to improve regulatory frameworks and consumer protections in the financial sector. This clear mandate will ensure that the ombudsman can operate effectively and respond to the evolving needs of the financial services landscape in Fiji.
Independence and Authority
I wish to suggest that the FSO must operate independently of the financial services industry and government. This independence fosters trust and credibility among consumers.
To achieve this, it is essential to enact legislation that defines the authority of the ombudsman, guaranteeing its autonomy from external influences and providing the necessary powers to make binding decisions, just like how the Fiji Consumer and Competition Commission (FCCC) are able to do.
Secondly, an advisory board for the FSO should be established, comprising various stakeholders, such as the Consumer Council of Fiji, the Fiji Chamber of Commerce, and the Fiji Employers Federation, as well as well-researched economists and accountants. This representation can enhance the institution’s legitimacy and ensure diverse perspectives/expertise are considered.
Accessible and user-friendly processes
The FSO will only be effective if its processes are accessible and straightforward for lodging complaints. Ordinary consumers with basic education or financial literacy should easily be able to submit their complaints. Details of the complaints must be obtained by FSO staff after the complaint is lodged; consumers should not be required to submit lengthy compliant and extensive material initially.
The complaint form should be available in the three main languages (English, Hindi and itaukei), and both manual and online lodgment modes should be permitted. Ombudsman offices should not be housed within the RBF but instead be located in all major towns to enable in-person consultations and a toll-free number must be established for those who wish to make contact by phone.
Robust training and professionalism
The staff of the financial services ombudsman should be well-trained and professional. This professionalism includes training in dispute resolution; dispute resolution should be prioritized as the first approach to resolving all disputes. Staff should receive comprehensive training in mediation, arbitration, and conflict resolution to effectively handle complex cases. This expertise is often scarce in Fiji; therefore, external experts should be brought in to train local staff for a reasonable duration.
The staff recruited for the FSO should possess a range of skills and qualifications, including knowledge of financial laws, regulations, economics, and accounting/finance, to provide informed and credible resolutions. These subject matter experts must support the mediation and arbitration staff. Furthermore, investing in continuous professional development for staff will help maintain high service standards and enhance the ombudsman’s effectiveness in resolving disputes.
Data-driven approach and transparency
Transparency and accountability are vital for building trust in the ombudsman system. A data-driven approach can support this. The FSO must implement a robust system for monitoring and analysing complaints, which can help identify patterns and trends in consumer grievances.
Regular reports on the volume and nature of complaints should be published to inform stakeholders and improve public perception of the ombudsman’s effectiveness.
Furthermore, the FSO must also establish channels for consumer feedback on the ombudsman’s services, allowing for ongoing improvements and responsiveness to consumer needs.
Strengthening collaboration with regulatory bodies
Lastly, an effective financial services ombudsman should actively engage with regulatory authorities to ensure complementary functions. The office should foster partnerships with the RBF and FCCC to share data, insights, and best practices, helping all entities identify areas that require regulatory reform and enabling the FSO to undertake its functions effectively. The FSO should also conduct consumer awareness campaigns that inform the public about their rights and the role of the Ombudsman.
Concluding remarks
A vibrant and compelling financial services ombudsman is fundamental for ensuring consumer protection, enhancing trust, and promoting fair practices in financial markets. By defining clear roles, ensuring independence, simplifying processes, providing robust training, maintaining transparency, and fostering collaboration with regulatory bodies, an ombudsman can effectively address consumer grievances and contribute to a stable financial environment. Strengthening these elements in establishing a financial services ombudsman will ultimately lead to a more resilient financial system that serves the interests of all stakeholders.
The Finance Minister, Prof. Biman Prasad, has taken this important and bold step of appointing the FSO. However, a lot needs to be done to make this office effective, and we will monitor the developments closely. We wish to see quarterly updates from the office of the FSO on what complaints they have received and how they have been resolved. Only then will the public have confidence in the office and be willing to bring forward their issues.
• Dr. MAHENDRA REDDY is a Senior Fellow at the Graduate School of Business at the University of the South Pacific, Suva, Fiji. He is a former Member of Parliament and a former Minister. The views expressed in this article are his and do not represent those of the University, his employer, or this newspaper.
