The Ombud Council, which oversees the financial sector ombud system, has released its 2023/24 annual report, its first formally tabled annual report since becoming listed as a Schedule 3A public entity under the Public Finance Management Act from April 2023.
The main objective of the Council, in terms of the Financial Sector Regulation Act (FSRA), is to assist in ensuring that financial customers have access to and are able to use affordable, effective, independent, and fair alternative dispute resolution processes for complaints about financial institutions in relation to financial products, financial services, and services provided by market infrastructures.
The 2023/24 year marked the first time the Ombud Council received levy income directly from financial institutions following the implementation of the Financial Sector and Deposit Insurance Levies Act.
In terms of the Levies Act, all entities that must pay levies to the FSCA are also required to pay levies to the Ombud Council. The levy payable to the Council is equal to a fixed percentage (2.5%) of the levy amounts payable to the FSCA.
The Council’s total revenue in 2023/24 was more than R32.1 million, of which R24.1m was derived from levies. It ended the year with a surplus of more than R22.3m (2022/23: R3.8m).
Revenue included a grant of R8m (2022/23: R10m) from National Treasury. Over the years, these transfers were intended to provide contingency bridging funding and cash flow until the Council’s levy funding stabilised. Levy revenue was sufficient to cover the Council’s expenditure in the year under review, and the grant was not used and will be paid back to Treasury, the annual report stated.
The Council’s budget for 2025/26 and the following financial years no longer provide for the grant for Treasury, and the Council will aim to achieve a break-even position when it comes to revenue and expenditure.
The annual report reviews the Council’s achievements and activities during the financial year, some of which are summarised below:
Streamlining the ombud system
In his forward to the annual report, Finance Minister Enoch Godongwana said a notable achievement during the reporting period was the Council’s facilitating the amalgamation of four industry ombud schemes to form the National Financial Ombud Scheme (NFO): the Ombudsman for Banking Services, the Ombudsman for Long-term Insurance, and the Ombudsman for Short-term Insurance.
The Ombud Council recognised these four schemes in May 2022, and they previously operated in terms of the repealed Financial Sector Ombud Schemes Act.
The amalgamation culminated in the Council’s granting recognition to the NFO to enable it to start operations on 1 March 2024. At the same time, the Council revoked the recognition of the four predecessor schemes.
The granting of recognition included the Council’s approval of the NFO’s governing rules.
The fifth industry scheme, the JSE Ombud, remains outside the NFO.
Read: New National Financial Ombud scheme launches
Godongwana said the establishment of the NFO marked a significant step towards the “simpler, stronger financial sector ombud system” proposed by National Treasury in its February 2024 policy paper of that name – “a set of far-reaching reform proposals, which the Ombud Council was instrumental in helping to shape over the course of the year”.
Perhaps Treasury’s most significant proposal is to reduce the number of ombud schemes to two:
- A revamped NFO that will be independent of the industry and the government. The new NFO will include the FAIS Ombud, plus the four amalgamated schemes and the JSE Ombud.
- A Retirement Funds Ombud (RFO) – a renamed and reformed Pension Funds Adjudicator (PFA). Treasury said it would be too complex a transition for the NFO to absorb the work of the RFO immediately. It would likely happen once the NFO has been up and running for a while.
Read: Key aspects of Treasury’s proposals to reform SA’s financial ombud system
Leanne Jackson (pictured), the Chief Ombud and head of the Council, said the recognition of the NFO was a substantial achievement in the Council’s delivery of its statutory responsibility to promote co-operation among ombuds and the co-ordination of their activities, and to resolve overlaps of the jurisdictional coverage of the different ombud schemes.
New FAIS Ombud Rules
The Council consulted on proposed new Rules for the FAIS Ombud. The Rules, which came into operation on 1 July 2024, are the first formal regulatory instrument (subordinate legislation) made by the Council, Jackson said.
The Council is empowered by the FSRA to make binding regulatory instruments for or in respect of ombuds and ombud schemes. These Rules must be made in accordance with the public and Parliamentary consultation processes prescribed in the Act.
Jackson said an important aspect of the new FAIS Ombud Rules is that they give effect to the long-overdue increase in the Ombud’s compensation limit, from the R800 000 that had been in place for about 20 years to a more meaningful R3.5m.
Read: Changes to aspects of FAIS Ombud’s approach to handling complaints
Inspection of schemes
The Ombud Council is responsible for monitoring the performance of all the ombud schemes it oversees, including the industry and statutory schemes.
As at the end of the reporting period, the Ombud Council oversaw the NFO and the JSE Ombud and the two statutory ombud schemes: the FAIS Ombud and the PFA.
The Council’s primary tool for monitoring ombud scheme performance is to conduct supervisory on-site inspections. The Council aims to conduct one on-site inspection a quarter.
Three schemes were inspected in 2023/24: the Ombudsman for Long-term Insurance, the Ombudsman for Banking Services, and the PFA. A fourth planned inspection did not proceed because the scheme’s recognition was revoked following its amalgamation into the NFO, the annual report stated.
Misunderstanding of the Council’s role
The Council must frequently address the incorrect perception among consumers that it is an overarching adjudicator or escalation body in relation to complaints against financial institutions, the annual report said.
The Council does not interfere in the decisions of the ombud schemes in relation to consumer complaints. It is not the role of the Council to become involved in, or review or reconsider the outcome of any complaints handled by ombud schemes. This would be inconsistent with its mandate, in terms of the FSRA, to protect the ombud schemes’ independence and impartiality.
The Council does, however, consider complaints about the conduct of ombud schemes themselves, including the extent to which they comply with the applicable financial sector laws and their governing rules.
The Council has not to date identified a need for enforcement action or other regulatory interventions in relation to ombud schemes, the annual report said.
Links to documents
Click here to download the Ombud Council’s 2023/24 annual report.
Click here to download the Council’s proposed budget for 2025/26. The deadline to comment is 12 November 2024. Submissions must be emailed to admin@ombudcouncil.org.za
