In November 2016, the Standing Committee on Economics issued its Review of the four major banks (first report)
. The report contains 10 recommendations, one of which is that the Government give ASIC the power to collect recurring data about internal dispute resolution (IDR
) schemes of Australian financial services licensees. In support of this recommendation, the Committee refers to evidence provided to the expert panel chaired by Professor Ian Ramsay, who released the Interim report - review of the financial system external dispute resolution and complaints framework
, December 2016. The evidence suggested that there has been little progress in the last five years in the way the industry approaches IDR. The fact that the number of complaints reaching FOS and CIO has grown led the Committee to suspect that there may be structural problems with IDR processes forcing consumers to pursue their complaint through the external dispute resolution schemes. However, the Committee was unable to reach a firm view about this due to the lack of data.
This paper does not seek to comment upon the correctness or otherwise of the Committee's findings, or appropriateness of their recommendation; though it is understood the four major banks broadly support the recommendation. Whatever the outcome of the recommendation, given the recent focus on dispute resolution in the banking industry, it is timely to consider some strategies for resolving disputes at an early stage.
Disputes can arise from all manner of circumstances during the course of the bank-customer relationship and may include grievances from the customer about the bank's conduct or a customer's default under their credit contract. A willingness by the parties to cooperate and act in good faith will aid early resolution of a dispute. However, there is more that can be done to facilitate early dispute resolution. Set out below are some tips for handling a dispute, which can be followed as soon as a dispute is raised without the need to wait for the dispute to be referred to IDR or an external dispute resolution scheme.
- Identify key aspects of the complaint early on. Make sure you properly understand the complaint being made. This is not always an easy task, depending on the manner in which the complaint has been formulated. For example, where a 20-page, double-sided, complaint is received (as we have seen happen on occasion) it can be a difficult task to identify the main concerns of the customer. Nevertheless, it is important to carefully read every complaint received and do your best to understand the key elements. If necessary, run it past a colleague, or even call the customer and re-state to them over the phone what you understand the critical points to be. Do you understand it correctly?
- Speak with relevant bank staff involved, where possible. If the complaint concerns matters that transpired before your involvement with the customer's account(s), speak with the other bank staff who were involved at the relevant time. What is their version of events? It is critical to do this as close to the relevant event as possible, whilst their memory is still fresh. It is also important to locate any bank records which are relevant to the complaint and may help address the issue. If any bank record requires clarification, speak to the relevant person who can explain it.
- Confer with internal or external advisers about potential legal issues and risks prior to formulating the bank's response to the complaint. Not only is it important to know the facts and history of the dispute, it is arguably even more important to know whether there are any legal issues or challenges with your position. This is often the most critical stage. Some potentially very costly disputes can be resolved at this stage if key issues are identified early, with the assistance of a legal adviser.
Gadens offers a complimentary helpdesk for its bank clients so that bank personnel do not have to worry about being billed for simply picking up the phone to speak with us.
- Be open to meeting the customer in person. In certain cases, meeting face-to-face can be more conducive to reaching resolution. An in-person meeting adds a personal touch to what can be a very daunting process for an individual or small business customer who may be suffering personal or financial hardship. In our experience, there are often times where customers wish to be heard by their bank. Whilst we understand it is not always practical, a face-to-face meeting with a customer can have a very positive impact on the dispute resolution process. You may also wish to ask the bank's internal or external adviser to be present at the meeting.
- Be flexible in approach and think creatively about possible options to resolve the complaint. Listen and be open to the other parties' point of view. All parties should be given the opportunity to communicate their position. Seek to resolve issues together and work towards an outcome that is fair for all parties concerned. Be prepared to take into account a customer's financial circumstances, if evidenced by satisfactory documentation. Don't use the word 'final' (often referred to as the 'F word' in the legal profession) when making any offer unless you truly intend it to be your final offer; otherwise the effectiveness of it is lost in negotiations. Finally, don't underestimate the power of an apology, if one is warranted in the circumstances.
- Clearly document any resolution. We recommend making it clear throughout discussions (whether conducted in person, by phone, by letter or by email) that there is no binding agreement until a formal settlement contract is agreed and signed by all parties. If agreement on terms can be reached, make sure you properly document the resolution and that the bank and customer have the same understanding of the written terms. Many disputes arise out of ‘resolved’ complaints. Where possible, ask your internal or external adviser to look over any proposed settlement agreement.
Once a dispute has been resolved, it is worthwhile considering the lessons that can be learned. For example, can systems or processes be improved to avoid a similar dispute arising in the future? What training is needed for bank staff to implement any change?
In summary, take a good hard look at a complaint, early on. Consider the need to obtain a preliminary legal assessment, whether from an internal or external adviser to assist with identifying the key elements and challenges arising from the complaint. Seeking to avoid legal costs at this initial stage is not always in the best interests of the parties. If your legal adviser can help achieve an early resolution, the parties will have potentially saved significant legal costs that would otherwise be incurred if the dispute ended in litigation. Be open to meeting in person and keep an open mind about settlement options. If certain options are outside your scope of authority, consider obtaining the appropriate authority at the earliest opportunity, preferably before any meeting with the customer. Finally, a clear, well documented settlement agreement is critical and it is not something to be rushed. Take care to ensure everyone has the same understanding of the terms and do not leave any room for argument down the track.