Complaining about financial products is difficult. Anyone who has complained to a financial services provider, for instance, by calling a call center or a visiting a branch office will know this. Often one has to follow up by sending a written complaint and that can cause additional frustration and aggravation. Imagine how much worse it is for a complainant who has no easy access to emails or phones, who doesn't speak the language, or who may even be illiterate; the so-called base-of-the-pyramid (BoP) consumer.
It takes patience and perseverance to complain at the best of times but it is so much worse when there is a personal financial crisis, for example, if you have to bury a family member and your funeral policy has not paid out. It is all too often at the time of these personal crises that a financial complaint will unfortunately arise.
Any internal or external complaints handling system should therefore ensure that the complainant does not face any unnecessary hurdles when lodging a complaint because that may deter the complainant from following through. This is important for any complainant but especially so for BoP complainants because of the inherent constraints they face.
The financial services provider may think that "losing" a complaint is the easy way out, but that is shortsighted: not only will there be an unhappy client out there who can cause reputational damage, but it is also an opportunity lost to find out about a potential problem within the institution. A complainant is in effect a client offering his view about the institution or service without the institution having to intentionally seek out this information through a consumer survey or a mystery shopper exercise. While it is to the institution’s benefit to view a complaint as an opportunity to win back the goodwill of a frustrated client and a source of valuable information, I have come to realize in my 16 years of working in consumer recourse that an institution will only take complaints handling seriously if senior management makes it a priority.
Photo Credit: Mohammad Saiful Islam
The ability to have a complaint properly resolved should be the right of every consumer. Fortunately in more and more countries financial institutions and policy makers are realizing the importance of establishing proper complaints handling mechanisms within financial institutions themselves and establishing proper external or third party recourse (other than formal court processes). This development is not restricted to developed economies.
An indication of this is the fact that INFO (the International Network of Financial Services Ombudsman Schemes, a network which ombudsman can join to share and exchange ideas and assist each other) now has 56 members from 37 countries and there are also a number of countries considering the establishment of new ombudsman systems. What is particularly pleasing is that alternative dispute resolution (ADR, an option for resolving disputes without litigation) in the form of ombudsman schemes is spreading to new geographical areas, particularly to countries with developing economies:
- a number of Asian countries have started such schemes over the past few years and more are considering them;
- in Sub-Saharan Africa there is also renewed interest in establishing ombudsman schemes, particularly in the credit market;
- Eastern Europe is another region where there is growth and interest in ombudsman schemes, with the Armenian Financial System Mediator being the trend setter.
This is where INFO members can assist - helping to lay the foundation for such new complaints handling systems by advising and assisting policy makers and new schemes. The experience and knowledge that such members bring to the process can be very useful for a new scheme. Although there are fundamental principles to which all such systems should aspire, there is no "one size fits all" approach. The system has to be adapted to suit the culture the environment and the consumer profile of the particular country. For example, while a voluntary scheme may work perfectly well in one country, such a system might fail elsewhere unless it was made mandatory.
What then are the most important features of an ombudsman scheme?
- Independence, to ensure impartiality is a non-negotiable feature;
- Clarity of scope and powers
- Fairness Effectiveness
It may not be possible for an ombudsman scheme, because of resource and structural constraints, to include all these features at first but these should be the features to which every scheme aspires and works towards.
Jennifer Preiss is Deputy Ombudsman, Ombudsman for Long Term Insurance, South Africa, as well as the Chair of the International Network of Financial Services Ombudsman Schemes.
The blog provides a perspective from someone inside the Ombudsman system for long and this system is emerging as a last resort for most of the financial services customers. Indian Ombudsman experience in banking has developed under the close supervision of the banking regulator-RBI. Recently, the banks have started internal Ombudsman system so that simpler complaints can be resolved faster. The basic tenets given in the blog can be really useful for such officers. While it is important to strengthen the alternate dispute resolution mechanisms like ombudsman, yet the institutions have to develop the sensitivity to correctly handle the customer complaints at the first instance.(ex General Manager Financial Inclusion, Punjab National Bank, New Delhi. India.)