On April 14, 2011, I, as the Chairperson of the Fiji Commerce Commission (FCC), addressed concerns from the public regarding excessive charges and fees in Fiji’s financial sector. I emphasized the critical issue of Substantial Market Power (SMP) within the banking industry, which could significantly hinder economic growth and the ability of low-income families to enhance their living standards.
The Commission’s actions stemmed from complaints raised by consumers, businesses, potential investors, and the Consumer Council of Fiji. The Commerce Commission Decree 2010 mandates the Commission to supervise the market conditions that may not adequately promote the objectives outlined in the Decree. Consequently, the Commission was required to (a) identify and assess relevant financial service markets; (b) analyze the existing or potential competition levels, considering the effects of intermodal competition; and (c) discern the impact of any insufficiency in competition on the objectives of the Decree.
Determined to confront the issue, the Commission issued a call for submissions from stakeholders to conduct a study on SMP. The study aimed to assess the lack of competition within the financial services market, identify institutions with substantial market power, and propose measures for resolution.
On September 5, 2011, the Commission revealed the results of the SMP study, identifying three banks that held substantial market power within Fiji’s financial services market. Collectively, these banks accounted for 74.36% of total market share by assets, 77.49% in loans, and 83.67% in deposits. This concentration stifled competition, led to higher interest rates, and imposed additional fees that burdened consumers and stunted the growth of small and medium enterprises (SMEs) as well as low- and middle-income households. The findings also indicated that consumers faced challenges in lodging complaints due to a lack of accessible channels.
While discussions were held regarding the creation of a Financial Services Ombudsman, the Reserve Bank of Fiji (RBF) expressed intentions to enhance its oversight in place of such an appointment. However, the persistence of SMP in the banking sector has continued to frustrate consumers, especially given the limited access to the RBF’s complaint resolution mechanisms. The recent announcement by Finance Minister Prof. Biman Prasad about appointing a Financial Services Ombudsman is a significant advancement, deserving commendation.
This article will examine how the Financial Services Ombudsman (FSO) can function effectively to avoid falling into the trap of being an underutilized entity, often referred to as a “white elephant.” The FSO is vital for consumer protection and dispute resolution in financial services, providing an impartial platform to address consumer grievances against financial providers.
The success of the FSO is crucial for fostering consumer confidence in financial markets and contributes to the overall stability of the financial system. Strategies for optimizing the office include clarifying its roles, establishing essential institutional frameworks, collaborating with stakeholders, and committing to ongoing improvement.
Clearly defining the FSO’s responsibilities is the first step towards effectiveness. Its duties should encompass (i) delivering an equitable and timely process for resolving conflicts between consumers and financial providers; (ii) offering resources and guidance related to consumer rights in financial services; and (iii) making policy recommendations to enhance regulatory frameworks and consumer protections.
Moreover, the FSO must operate independently from the financial services sector and government, fostering trust among consumers. Legislative measures should be enacted to clearly outline the ombudsman’s powers, ensuring its autonomy from outside influence to facilitate binding decision-making as seen in the Fiji Consumer and Competition Commission.
An advisory board comprising diverse stakeholders, including the Consumer Council of Fiji, Fiji Chamber of Commerce, and other experts, should be established to enhance the legitimacy of the FSO and enrich its decision-making process.
The effectiveness of the FSO hinges on its accessibility for consumers to file complaints. Simplified complaint processes should be designed to ensure ease of use for individuals with varying levels of education and financial literacy. Complaint submission forms should be available in the main languages of Fiji—English, Hindi, and Itaukei—with options for both online and manual submissions. Additionally, the FSO’s offices should be situated in major towns for in-person consultations, and a toll-free contact number should be available for inquiries.
Professionalism among FSO staff is critical. Staff should be trained in dispute resolution techniques, with an emphasis on mediation and arbitration to tackle disputes effectively. Given the limited expertise in these areas, bringing in external experts for training is advisable. Staff should also possess a solid understanding of financial law and economics to ensure informed resolutions.
A transparent, data-driven approach is essential for building trust. The FSO should implement a monitoring system for complaints to identify trends and patterns while sharing regular reports to enhance public perception of its efficacy. Consumer feedback mechanisms should be established for continual service improvement.
Lastly, the FSO should engage cooperatively with regulatory bodies to complement its functions. Working closely with the RBF and FCCC will allow for shared insights and data to facilitate regulatory reforms and enhance the FSO’s operational effectiveness. Additionally, conducting awareness campaigns to educate consumers about their rights and the Ombudsman’s role will be beneficial.
In conclusion, the effective establishment of a financial services ombudsman is critical for consumer rights protection, instilling trust, and promoting fairness in financial markets. By clearly defining roles, ensuring independence, simplifying processes, training staff, maintaining transparency, and fostering collaboration with regulatory bodies, the FSO can adequately address consumer grievances and contribute to a stable financial environment. The efforts by Finance Minister Prof. Biman Prasad to initiate this office are commendable, yet much work remains to establish its effectiveness. Ongoing developments should be monitored closely, with expectations for quarterly updates on complaints and their resolutions to foster public confidence in the FSO.
Dr. MAHENDRA REDDY is a Senior Fellow at the Graduate School of Business at the University of the South Pacific, Suva, Fiji. He is a former Member of Parliament and former Minister. The opinions expressed in this article are his own and do not necessarily reflect those of the University, his employer, or this publication.