The change
The National Financial Ombud Scheme South Africa (NFO Scheme) was recognized by the Ombud Council on March 1, 2024, as an industry ombud scheme in terms of Section 194 of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017) (FSR Act). In addition, the National Treasury published a Media Statement titled “A Simpler, Stronger Financial Sector Ombud System”, as a part of the ongoing review and study of South Africa’s ombud system to further enhance consumer protection and improve consumer outcomes which resulted from identified overlaps, gaps and inconsistencies in the broader financial ombud system.
The full implementation of the Ombud reform necessitates further legislative amendments and will take some time. In the interim, the National Treasury noted and welcomed the voluntary amalgamation, in consultation with the Ombud Council, of four of the current industry schemes (Predecessor Schemes). The successful amalgamation of the following recognised Industry Schemes – the Credit Ombud Association, the Ombudsman for Banking Services, the Ombudsman for Long-term Insurance and the Ombudsman for Short-term Insurance resulted in the creation of the NFO Scheme.
The NFO Scheme’s governing regulations, which comprise its Memorandum of Incorporation and the Rules of the Scheme, have been approved by the Ombud Council as part of the recognition process. With effect from midnight on 29 February 2024, the Ombud Council will simultaneously revoke the recognition of the Predecessor Schemes and confer recognition to the NFO Scheme. The relevant revocation notices below were sent out on 27 February 2024.
- Revocation of recognition of the credit ombud association as an industry ombud scheme
- Revocation of recognition of the ombudsman for banking services as an industry ombud scheme
- Revocation of recognition of the ombudsman for long-term insurance as an industry ombud scheme
- Revocation of recognition of the ombudsman for short-term insurance as an industry ombud scheme
Some of the key elements of the proposed reform are:
- A structural reformation of the Ombud system, thus reducing the Ombud schemes from seven to two. The two schemes are the National Financial Ombud (NFO) and the Retirement Funds Ombud (RFO).
- The NFO is a new body, independent of the industry and government. It replaces all of the industry schemes noted above and eventually also the FAIS Ombud.
- The Pension Funds Adjudicator has been renamed and reformed to the Retirement Funds Ombud with a board to support its independence and oversight of its efficiency and effectiveness.
- Modification of the Ombud Council – modifications to the title and appointment of its Chief Executive, which will be reviewed at a later stage to further simplification.
- Improved consistency across the ombud system on the following:
- Visibility and accessibility
- Eligibility of complainants
- Powers and enforceability of decision
- Processes
- Coverage to reduce jurisdictional gaps and overlaps.
Impact on complaints:
The NFO Scheme will guarantee that financial clients and impacted financial institutions can continue to use the Predecessor Schemes’ contact information to access the NFO’s services for a minimum of six months.
As of 29 February 2024, all complaints that are being handled by a predecessor scheme will be handled through to completion by the NFO scheme. The goal is to ensure that financial customers, financial institutions, and other Scheme stakeholders have as smooth a transition as possible from the Predecessor Schemes to the simplified and unified complaints handling service of the NFO Scheme.