The FSCA published a draft Amendment Notice on 6 July 2022 and received public comment during August 2022. However, after engagement between the FSCA and Ombud Council, the rule-making powers of the FSCA were reconsidered in terms of the legislative framework and established within the Ombud Council to take responsibility for the scope and content of the FAIS Ombud Rules, as Ombud Council Rules. These changes are related to the formation of the new Ombud system in terms of the Financial Sector Regulation Act No. 9 of 2017 (FSR Act), in terms of which the Ombud Council will have oversight powers over both statutory and industry Ombuds, namely:
- Office of the Pension Fund Adjudicator
- Office of the Ombud for Financial Services Providers (FAIS Ombud)
- Office of the Credit Ombud
- Ombudsman for Long–Term Insurance
- Ombudsman for Short–Term Insurance
- Ombudsman for Banking Services
- Johannesburg Stock Exchange Ombud.
In September 2023, the Ombud Council then published draft rules for the Ombud for Financial Service Providers (FAIS) Ombud in terms of the Financial Sector Regulation Act 9 of 2017 (FSRA), for public comment. After considering the comments received, the Ombud Council submitted a revised draft of the Rules to Parliament for a period of 30 days while Parliament is in session, as required by section 103(1) read with section 98 of the Financial Sector Regulation Act, 2017. The 30-day period commenced on 15 April 2024 and ended on 14 May 2024.
After reviewing the comments received, the Ombud Council submitted a revised draft of the rules to Parliament. Once the Parliamentary procedure is complete and subject to any comments made by Parliament, the final rules will be published on the Ombud Council’s website and will take effect on the date of publication.
According to Section 176 of the FSRA, the Ombud Council’s objective is to help ensure that customers have access to and can use affordable, effective, independent, and fair alternative dispute resolution processes for complaints about financial institutions, financial products, financial services and services provided by the market infrastructure. The Ombud Council has the authority to establish rules for the Ombud schemes that will ensure this objective is met. The above changes are related to the National Treasury 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 proposed new Ombud Council Rules retain the substance of the previous Rules but also present the opportunity for necessary changes to address aspects like outdated terminology, refinement of jurisdictional limits and improvements to the FAIS Ombud process based on practical learnings from dealing with complaints.
It is important to take note that the new rules suggested by the Ombud Council will implement the compensation limit increase previously consulted on by the Financial Sector Conduct Authority (FSCA). This rule raises the maximum amount of compensation the FAIS Ombud can award for a particular kind of financial prejudice or damage from the maximum of R800 000 in the previous rules, to a maximum of R3 500 000. The increased limit is considered necessary to ensure that the monetary compensation the office of the FAIS Ombud can award is appropriate in terms of the changes in the value of money and market realities since it was first established two decades ago and to be more consistent with compensation levels available from other financial sector ombud schemes. An increased jurisdictional limit also aims to support the effectiveness of the ombud system by ensuring that financial customers’ access to affordable, effective, independent, and fair alternative dispute resolution for complaints (against financial services providers and representatives) is not inappropriately restricting, leaving them to have to resort to formal (and cost-intensive) litigation to seek assistance.
The purpose of the new Ombud Council rules is the same as that of the previous FAIS Ombud rules made under Section 26 of the FAIS Act which is to provide for practical procedural matters regarding the operation of the office of the FAIS Ombud, as contemplated in Part I of Chapter VI of the FAIS Act.
These matters include but are not limited to matters provided for in Section 26(1) of the FAIS Act being, in summary:
- types of complaints and complainants dealt with by the FAIS Ombud
- rights of complainants in connection with complaints
- rights and duties of financial service providers or representatives on receipt of complaints
- circumstances under which the FAIS Ombud may summarily dismiss complaints
- setting of time limits by the FAIS Ombud
- liaison between the FAIS Ombud and the FSCA.
For information, the Ombud Council attaches the following documents as submitted to Parliament:
- The Draft Ombud Council Rules for the Ombud for Financial Services Provides, 2024 (Annexure A);
- The statement of need, intended operation, and expected impact (Annexure B); and
- The public consultation report (Annexure C).