Proposed Operating Rules

The functions of the reserve scheme are:

• To consider, at no cost to the complainant, complaints within its jurisdiction arising out of the provision within New Zealand of financial services by any member financial service provider to individuals and businesses that have no more than 19 employees;
• Subject to specified limitations, to facilitate the satisfaction, settlement or withdrawal of such complaints whether by agreement, by making recommendations or awards or by such other means as seem expedient;
• To promote and publicise the reserve scheme and to advise member FSPs on the development and maintenance of good complaint-handling practices; and
• To cooperate and collaborate with approved dispute resolution schemes, government and other authorities, companies or persons on all matters relating to and affecting the settlement of complaints and any financial services business related to those complaints.

Any FSP is eligible for membership to the reserve scheme (including those FSPs that have an approved dispute resolution scheme covering their sector of the finance industry), unless the FSP:

• Fails to pay any entry fee or the annual levy the reserve scheme members' levy; or
• Failed to take remedial action imposed on that provider by another dispute resolution scheme.

The reserve scheme is available free of charge for use by:

• Past or present customers of reserve scheme members; or
• Consumers affected by the actions of reserve scheme members; and
• Who are individuals or organisations that have no more than 19 full-time equivalent employees.

With respect to organisations, they may or may not operate with the intention of making a pecuniary profit; therefore small businesses, small incorporated societies, community groups and some charitable societies are eligible.

The reserve scheme may at its discretion consider a dispute from a complainant outside the eligibility criteria, for example, from a charitable organisation with 20 employees.

Members may refer customers' complaints to the reserve scheme, for example, when deadlock has not been reached but the member wishes to have an independent determination made. A fee, which may be greater than any fee for customer-initiated complaints, will be charged.

A complaint is an expression of dissatisfaction or concern about a service or a product provided by a member company for which the complainant expects redress (remedial action or compensation) and has not received satisfactory resolution.

Complaints about members may be made regarding breaches of:

• Contract
• Statutory obligations
• Industry codes
• Any other matter that the customer considers has affected his or her fair treatment.

While complaints about commercial decisions are not usually within jurisdiction of the reserve scheme (see limits on jurisdiction below), the reserve scheme may consider complaints about commercial judgement which involves an act or omission contrary to or not in accordance with a duty owed at law, in a code of practice, or pursuant to the terms (express or implied) of the contract between the scheme member and the consumer.

A complainant is not required to frame their complaint within one of these categories in order to access the scheme.
The complainant must have first raised their complaint with the internal complaints procedure of its FSP or a body representing the FSP or the individual FSP if a sole provider. The complaint will be accepted by the reserve scheme if:

• The complainant has not accepted any observations made or conditions of settlement or satisfaction offered by the FSP; and
• The complaint has been lodged within 3 months of the complainant being advised by the member that deadlock has been reached that the complaint may be taken to the reserve scheme within 3 months of being advised of deadlock; or
• The complaint has been in consideration for at least 2 months and the member has not advised deadlock has been reached.

If the complainant has not been advised by the member of the time limit relating to taking complaints to the reserve scheme, and then the complainant becomes aware of the reserve scheme and/or the time limit, the complaint can be lodged within 2 years of the complaint being originally lodged with the member. However, the dispute resolver has the discretion to consider complaints outside the 2 year timeframe if it is considered there are special circumstances.

A complaint may be made to the reserve scheme at any time within 6 years from the date that the consumer first became aware, or should reasonably have become aware, that they suffered the loss the complaint is about.

The reserve scheme will not consider complaints that:

• Are the subject of action being taken by the same complainant in any court, tribunal or arbitrator, or any other independent or statutory complaints or conciliation body;
• Relate to a member's commercial practice or policy about lending, deposits or insurance, but this does not preclude the reserve scheme from considering complaints about administration in these matters;
• Relate to government policy or the general level of fees allowable or levies payable under any relevant legislation.

The reserve scheme does not have to consider complaints that:

• Appear to be more appropriately dealt with by a court, under another independent or statutory complaints, conciliation or arbitration procedure;
• Are frivolous and vexatious in manner or not being pursued in a reasonable manner;
• It considers on the basis of facts presented by the complainant that the relevant member has made a reasonable offer in settlement of the complaint.

A prospective member must not have any outstanding obligations of remedial action imposed by another dispute resolution scheme.
A prospective member with outstanding remedial actions within the allowed period for being carried out (20 working days) may become a provisional member. Membership will be confirmed once the obligation has been fulfilled.
Prospective members must apply to be a member of the reserve scheme. The application will include:

• Business status e.g. limited company, partnership, sole trader;
• Reference number from Companies Office, Reserve Bank or Securities Commission;
• Name of directors and senior management;
• Description of the products and services provided;
• Indication of business size e.g. number of employees and customers.

The prospective member will undertake to:

• Abide by the rules and carry out its obligations under the scheme;
• Respond to and assist with enquiries and complaints in a constructive and timely manner; and
• Pay any fees or levies the reserve scheme requires.

A member of the reserve scheme cannot also be a member of an approved dispute resolution scheme

Members of a dispute resolution scheme which has had its approval withdrawn will automatically become members of the reserve scheme.

A member may be required to provide to the service provider any information necessary to consider a complaint. The member must, as soon as possible, disclose the information requested by the decision-maker, unless:

• That disclosure would place the member in breach of its confidentiality to a third person who has refused its consent to disclosure; or
• That information is subject to legal or litigation privilege; or
• The member does not have the information requested.

Any confidential or sensitive information provided for the purpose of dispute resolution will be kept confidential by the dispute resolver and reserve scheme service provider, subject to disclosure required by law, except with the consent of the party supplying the information.
Information about a complaint may be disclosed (in accordance with the Privacy Act 1993 and protecting information that is subject to an obligation of confidence) to:

• Another FSP if there needs to be consultation because the complaint relates to more than one FSP, provided all the parties to the complaint are advised; and
• The relevant licensing authority, if there is a material complaint or series of complaints about a particular licensed provider or class of licensed providers.

Where a party to the complaint supplies confidential or sensitive information to the service provider in relation to a complaint and the complaint has been resolved or ceased to be considered, that information must be returned to that party as soon as is reasonably practicable, or with the party's permission will be destroyed.

After a complaint has been lodged, a reserve scheme member may only lodge legal proceedings in the following circumstances:

1. To preserve their legal rights where a limitation period is about to expire, subject to the following conditions:
   1. while the reserve scheme service provider is dealing with the complaint, the member will not pursue the legal proceedings beyond the minimum necessary to preserve its rights; and
   2. if the complaint is resolved, whether by agreement or determination, the member will discontinue any aspect of the legal proceedings that is inconsistent with the agreement or determination.
2. In test case situations.

If there is no such settlement, the dispute resolver may make a recommendation for settlement, partial settlement or withdrawal of the complaint. The dispute resolver must then:

• Give the complainant and member concerned 15 working days notice of the intention to make a recommendation;
• During the period of notice allow the complainant and member concerned to make further representations to the disputer resolver in respect of the complaint; and
• If no agreement has been reached at the end of the period of notice, make a recommendation.

Members of the reserve scheme are required to disclose information about the reserve scheme to their customers. Disclosure is specifically required at the time a complaint is made to the member. Details which must be disclosed are:

• When and how a dispute can be lodged;
• Assistance available to complainants;
• How the reserve scheme works;
• The timeframes and other terms which are imposed on the procedure.

If a reserve scheme member wishes a dispute to be treated as a test case, the member may at any time before an award is made, provide the reserve scheme service provider notice in writing containing:

• A statement, with reasons, that in the opinion of the member the complaint involves or may involve:
  • an issue which may have important consequences for the business of the members or FSPs generally or
  • an important or novel point of law; and
• An undertaking that, if within three months after the reserve scheme service provider's receipt of the notice, that either the complainant or the member institutes Court proceedings in New Zealand against the other in respect of the complaint, the member will pay the complainant's costs and disbursements of the proceedings.

Providing the dispute resolver concurs with the member's statement, he or she shall cease to consider the complaints and he or she shall inform the complainant in writing of the receipt of the notice, the date of its receipt and the effect of the notice upon the complaint.

The reserve scheme service provider will report all systemic issues (without identifying information) to, as appropriate, the advisory body and all members. In broad terms, a systemic issue is one which will have a material effect for individuals or small businesses beyond the parties to the complaint. Some examples of systemic issues are:

• Poor disclosure or communications;
• Administrative or technical errors;
• Product flaws; and
• Inaccurate interpretation of standard terms and conditions.

Case studies of determinations , without any identifying information, may be provided to reserve scheme members, approved dispute resolution schemes and any interested bodies or stakeholders for the purposes of:

• Educating reserve scheme members and consumers; and
• Demonstrating consistency and fairness in decision-making.

An annual report will be provided to the Minister of Consumer Affairs by 30 September (within 3 months after the end of the scheme's financial year on 30 June).
The Annual Report will contain:

• Information about how the scheme works;
• Results of the internal review;
• Statistics on caseload, resolved cases, cases rejected on jurisdictional grounds, the amount of time taken to resolve complaints;
• Results of feedback surveys;
• Some examples of typical cases;
• Information on compliance with the benchmark principles;
• The list of members;
• Information on performance standards;
• The results of the independent review, if any independent review has been conducted that year;
• Financial statements which sufficiently illustrate how the funding is being utilised;
• A list of scheme members who committed substantial/material breaches of their membership obligations;
• Any systemic issues arising from complaints, and how those issues have been dealt with; and
• Information about new developments or key areas in which policy or education initiatives are required.

The reserve scheme service provider will also respond to requests from the Minister for information additional to the Annual Report in a timely manner.

An independent review of the scheme will be undertaken to assess:

• Whether the scheme is meeting the benchmark principles and rules set out in this document;
• Whether the scheme is meeting the performance standards set out in this document;
• Whether the performance standards set by the advisory body are adequate;
• The quality of internal reviews; and
• The effectiveness of the scheme's governance.