Australian Broadcasting Corporation
Broadcast: 16/03/2016
http://www.abc.net.au/7.30/content/2015/s4426428.htm
Australian Broadcasting Corporation
Independent Senator Nick Xenophon is calling for the Financial Ombudsman Service to be disbanded and replaced with a government body in the wake of a controversial case that has raised issues of trust and credibility in the bank-funded dispute resolution scheme.
Transcript
LEIGH SALES, PRESENTER: About 35,000 people complain about banks every year direct to the Financial Ombudsman Service. It's a body that's meant to help consumers resolve disputes with companies that offer financial services. But there are now calls for it to be scrapped amidst questions about its credibility. At the heart of the controversy is one of the Ombudsman's most senior officials and inaccurate records she made during a controversial case. Stephen Long has this exclusive story.
STEPHEN LONG, REPORTER: For Steve Goldsworthy, kites are a passion. He owned the oldest kite manufacturer in Australia and his small business made and sold a range of other toys as well. But it's now in the hands of receivers and Steve Goldsworthy is more than down.
STEVE GOLDSWORTHY, GOLDIE MARKETING: I'm just gutted. I'm ripped apart. Very emotionally destroyed, anxious, depressed, suicidal. It's not something that anybody should go through.
STEPHEN LONG: His small business, Goldie Marketing, fell into default with ANZ Bank in late 2013. Steve Goldsworthy accused the bank of breaching its own protocols - first, negligently lending too much, then delaying vital seasonal credit. He turned to the Financial Ombudsman Service, or FOS, as it's known - a free dispute resolution scheme the banks are required by law to fund and maintain.
STEVE GOLDSWORTHY: FOS is supposed to help people.
STEPHEN LONG: But it didn't and its conduct has led to questions at a Senate committee and questions about the future of the Financial Ombudsman Service.
NICK XENOPHON, INDEPENDENT SENATOR: Can I just go to the issue of the Financial Ombudsman Service and I just want to raise the issue of the findings of the Supreme Court of Victoria in the matter of Goldie Marketing and Financial Ombudsman Service. Who would be familiar with that? ...
... This is a very serious case that relates to issues of the credibility of this service.
STEPHEN LONG: At the centre of the controversy is Justi Tonti-Filippini, who has the title Ombudsman Decisions.
Bruce Ford helped Steve Goldsworthy in his dealings with FOS. Unbeknown to the service, he recorded all his telephone conversations with the Ombudsman.
STEPHEN LONG: On 21st October, 2014, Justi Tonti-Filippini rang him to say she was on the verge of deciding whether or not to hear Goldie Marketing's dispute with ANZ.
(Excerpt from phone conversation)
JUSTI TONTI-FILIPPINI, OMBUDSMAN DECISIONS: I still haven't finished making my decision. I'm expecting I'll probably finish it tonight, so I'll give you a call tomorrow morning and as I've previously represented, it'll give you five days notice of the outcome. So I won't tell you what the outcome is now because I want to sleep on it, so that I'll give you a call in the morning and let you know.
BRUCE FORD: So you've got a bit of an idea at the moment, have you, you're just going to sleep on it, as you say?
JUSTI TONTI-FILIPPINI: Yes.
BRUCE FORD: OK.
JUSTI TONTI-FILIPPINI: Yep. And I never like to tell people what my decision is before I sleep on it. I can sometimes change my mind.
BRUCE FORD: Right. OK, OK. Um, alright.
JUSTI TONTI-FILIPPINI: And this has ended up being quite a close call.
BRUCE FORD: OK.
(End of excerpt)
STEPHEN LONG: The next day, when the Ombudsman called with her decision, Bruce Ford was shocked by the reason she gave.
BRUCE FORD: The Ombudsman gave me specific reasons as to why she was ruling this matter outside her terms of reference: a staff shortage.
STEPHEN LONG: As the recording of that call makes clear, FOS would have accepted the case but for a lack of key staff with expertise in business banking.
(Excerpt from phone conversation)
JUSTI TONTI-FILIPPINI: We've had a significant loss of banking advisors in the past six months. We've had two really key people go. I may be prejudicing myself by being transparent, but I believe that you've got to be transparent people and explain exactly why you've got to a decision. When our business banking guy was still here, we would have taken it on and the dispute has merit, in my view.
(End of excerpt)
STEPHEN LONG: Goldie Marketing went to court, arguing that a staff shortage was not a valid reason for FOS to rule the case out.
It was then that the Financial Ombudsman Service furnished documents that rang alarm bells for Bruce Ford.
BRUCE FORD: I was absolutely stunned. I just couldn't believe what I was reading. I thought, "This doesn't seem correct."
STEPHEN LONG: In file notes of the phone calls, the Ombudsman claimed to have given a whole lot of other reasons for refusing to hear the case.
BRUCE FORD: Because of my concerns, I had to go and compare the file notes to the tape recordings of those conversations and, you know, the two were worlds apart.
STEPHEN LONG: So she's saying she ruled it outside the terms of reference, told you that and listed a whole heap of reasons.
BRUCE FORD: Look, that never happened. She didn't say that.
STEPHEN LONG: The court was told that the Ombudsman's file notes were a mixture of comment, observation and notation and not a verbatim record of the phone conversations - well that much is obvious. But that really doesn't explain why the file notes say things were said that weren't actually said.
STEVE GOLDSWORTHY: I don't understand how you can make a record of something that didn't happen, something that wasn't said. How does that work?
STEPHEN LONG: Unfortunately for the toy and kite maker, the final verdict went against him, a judge ruling that detailed written reasons FOS eventually gave for not hearing the case were compelling. And in any case, the explanation Justi Tonti-Filippini gave over the phone, a staff shortage, would have been reason enough.
STEVE GOLDSWORTHY: The banks are making billions of dollars. The banks and financial institutions are propping up FOS with cash. Not having resources to deal with a case is not acceptable.
STEPHEN LONG: Why a senior lawyer in a quasi-judicial role that made file notes that are so at odds with what was actually said in conversations is a mystery.
The Financial Ombudsman Service declined an interview, saying it had been fully dealt with by the Victorian Supreme Court.
NICK XENOPHON: It is simply not good enough for the Financial Ombudsman Service to say that this case has been dealt with. Unless the Financial Ombudsman Service gives a thorough explanation of what happened here, then it's basically finished as a credible body to deal with these sorts of disputes.
STEPHEN LONG: Senator Xenophon wants the bank-funded dispute scheme replaced by a new statutory body - a change that can't and won't come quick enough for this small businessman.
LEIGH SALES: Stephen Long with that report.