IFSO says many complaints come down to consumer misunderstanding
The Insurance & Financial Services Ombudsman (IFSO) scheme has released its 2018-2019 annual report, and has revealed a small increase in complaints (up to 322 from 320) and a more significant increase in complaint enquiries (up to 3,805 from 3,357) from the previous year.
70% of total complaints were in relation to general insurance, and 25% were about health, life and disability insurance. Twelve complaints were about credit contracts, and financial advisers saw only three complaints for the full year. The most common credit contracts complaints were around fees, charges and hardship applications.
IFSO Karen Stevens says the rise in complaints is not a bad thing – it means consumers are more aware of their rights, and that insurers and lenders can get better feedback on how to improve their services. However, she says the root cause of complaints is too often a customer’s misunderstanding around the product they hold – and this needs to be tackled from both ends.
“We deal with lenders who are generally responsible, and have signed up to a code of responsible lending,” Stevens said. “We had very few actual credit contracts complaints, but we had many more enquiries.”
“Most of them are with regards to fees, and customers not wanting to pay them,” she explained. “In that situation, you have to look at whether or not the fee was set out properly in the initial contract. In other cases it might be a hardship application due to job loss, etc. There can be quite harsh situations that arise when people get into financial difficulty and simply can’t pay.
“We’re trying to make absolutely sure that the credit contract providers do what they’re required to do, and if it’s possible to come up with options that work for the consumer, payment arrangements, etc. – that’s a much better outcome than having the provider go into repossession mode.”
Nonetheless, Steven says that many complaints and enquiries come about because the consumer had not read the documents beforehand, and was not familiar with the fees the lender had the right to charge. She says too many consumers do not understand that if they terminate their loan early, a lender may charge them a fee – and in these cases, the Ombudsman is simply not able to give them the outcome they want.
“This really comes right back to financial literacy,” Stevens said.
“There’s a challenge for New Zealand consumers to think and learn more about financial services products before they commit to one. They can save themselves a lot of grief in many cases by simply reading the documents, asking questions and really understanding what they’re getting into.”
