External dispute resolution scheme changes

Following the release by ASIC in May 2009 of revised regulatory guides on dispute resolution schemes (RPG 139 and RPG 165) new dispute resolution “compensation caps” under which all EDRs will be able to hear claims up to the value of $500,000 will commence on 1 January 2010, even though the amount of compensation they can award is less.

From 1 January 2012, EDR schemes will only be allowed to limit (cap) the maximum amount of compensation payable per claim to a minimum of $280,000 (or $150,000 if the claim relates to an insurance broker) with the ability to opt for a higher figure in the rules of the scheme.

See Table 2 here for details of the transition for each EDR scheme.

The Terms of Reference for the Financial Ombudsman Service have changed.

Disputes lodged with it on or after 1 January 2010 will be considered under the 2010 Terms of Reference.

Its maximum amount of compensation for banking and finance and mutuals claims will remain at $280,000 until 1 January 2012.

Disputes lodged with the Financial Ombudsman Service before 1 January 2010 will continue to be considered under the previously applicable Terms of Reference.

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