What is an External Dispute Resolution Scheme (‘EDR’)?

There are two EDR schemes in Australia that deal with the disputes with credit providers (lenders)and mortgage brokers. The relevant one for your dispute depends on who you have a dispute with. If your dispute is about a banking service, rather than a loan, you can also use this fact sheet to complain about banks, credit unions and other organisations who provide banking services.

A reference to “mortgage broker” in this fact sheet also includes finance brokers who arrange other types of consumer loans apart from home loans, but some brokers may not belong to an EDR Scheme before 1 July 2010 when this will become compulsory.

EDR schemes are FREE and are independent of their members.

The first thing to do if you have a dispute with your credit provider is to try and resolve it directly with them. Your complaint to an EDR scheme will usually not be processed unless you have first tried to resolve your complaint directly with the lender.

If this is unsuccessful, you must first identify which EDR scheme to use. Below we have provided information about both EDR schemes available for borrowers and banking customers.

If you have a serious dispute it is usually wise to first obtain legal advice. But you can still make a complaint to the relevant EDR scheme even if you haven’t first obtained legal advice.

There is a list of handy contacts at the end of this fact sheet.

EDR Schemes

For disputes with credit providers, banking service providers and mortgage brokers:

Financial  Ombudsman Service (FOS); or

The Credit Ombudsman Service (COSL).

This fact sheet provides information about EDR schemes to use if you have an unresolved dispute with your credit provider, banking service provider or mortgage broker.

If you can’t resolve your dispute with your Telecommunications (phone, internet or mobile phone) provider, you need to contact the Telecommunications Industry Ombudsman (TIO): Phone: 1800 062 058 or visit www.tio.com.au.

If you have a dispute about insurance or financial planning you can also complain to the Financial Ombudsman Service.

See the contacts section at the end of this fact sheet for contact details for the TIO and other useful contact details.

Which EDR Scheme should you use?

1. Financial Ombudsman Service (FOS)

You should contact FOS if you have a dispute with your retail bank or one of its affiliates, such as Esanda (affiliated with ANZ), and you are unable to resolve the dispute. All retail banks in Australia are members of FOS. There are also a number of finance companies and mortgage brokers who are members of FOS (for example GE Money). You can check who is a member of FOS by ringing FOS or going to their website.

FOS will consider and investigate your dispute and will then make a decision that is binding on the financial service provider. Borrowers are NOT bound by the decision; you can either accept or reject the decision.

To complain to FOS you must be seeking to recover a loss, either financial or non-financial, that has arisen as a result of the actions of the member of FOS. The maximum amount of financial loss that can be recovered is $250,000. If you believe your loss is more than $250,000 (but less than $500,000) and you are prepared to have the compensation awarded capped at $250,000 you can still go to FOS.

There are time limits involved. You have:

1. Six years from the date you reasonable became aware of the loss to file a dispute in FOS; or

2. Two years from the date that you received a final response from the Internal Dispute Resolution of the credit provider or mortgage broker to file a dispute in FOS. 

Warning: If the credit provider or mortgage broker is threatening to commence court action against you, do not try to resolve the dispute with them first; instead complain to FOS immediately. This is because members of FOS agree not to commence court proceedings while a complaint is being investigated at FOS.

Even if the credit provider or mortgage broker has commenced court proceedings you can still go to FOS if judgment has not been obtained. It is important that you file in FOS as soon as legal proceedings have been commenced. If you have filed a defence you may still be able to go to FOS but you should get legal advice immediately.

2. The Credit Ombudsman Service (COSL)

You should contact COSL if you have a dispute with your credit provider, mortgage manager or mortgage broker and you are unable to resolve the dispute. COSL is a free and independent dispute resolution service, established to assist borrowers and lender members resolve complaints in a fair, timely and cost-effective manner. COSL is able to investigate disputes and make decisions that are binding on the lender. However, borrowers are NOT bound by the decision; you can either accept or reject the decision.

COSL can only consider complaints about their member lenders. You should be aware that not all mortgage lenders, mortgage managers and mortgage brokers are members of COSL. You should first check if your lender is a member of COSL using the contact details below.If your credit provider, mortgage manager or broker is not a member of COSL, check to see if it is a member of FOS. The contacts are listed above.

You must be seeking to recover a loss that is less than $250,000 to complain to COSL.There is a time limit involved. To complain to COSL you must file your complaint within 6 years of reasonably becoming aware of your loss.

Warning: If your credit provider or mortgage broker is threatening to commence court action against you, you should instead complain immediately to COSL. This is because the members of COSL have agreed not to commence court proceedings while a complaint is being investigated at COSL.

Even if the credit provider or mortgage broker has commenced court proceedings you can still go to COSL if judgment has not been obtained. It is important that you file in COSL as soon as legal proceedings have been commenced. If you have filed a defence you may still be able to go to COSL but you should get legal advice immediately.

How do you contact COSL?

Telephone: 1300 78 08 08
By Fax: 02 9267 3125
Address: Credit Ombudsman Service Limited, Level 6, 50 Park St Sydney NSW 2000

Hints for writing your letter to an EDR scheme

Use a simple structure for your letter. You should include the following details in your letter:

Facts
Write a simple description of how your problem arose. For example:

• I had a direct debit to pay Optus for my phone bill from my savings account
• On 6/3/09, I cancelled my phone agreement with Optus.
• On the same day I handed a letter to my bank stating that I wanted the direct debit cancelled. A copy of this letter dated 6/3/09 is attached.
• On 29/3/09, the bank debited my account in favour of Optus for the amount of $110. A copy of my statement is attached.

a. My dispute
Write a simple description of your dispute. For example:The bank should have cancelled the direct debit when requested. As the bank did not cancel the direct debit as I requested, I lost $110 from my account.

b. What I want?
Write how you want the dispute resolved. For example:I want the (name of EDR scheme) to investigate and make a Finding that the bank must:1.    Cancel the direct debit immediately 2.    Refund $110 and any associated fees resulting from the unauthorised debit

c. Keep a copy of the complaint letter you send to the EDR scheme.

What will happen after I send my complaint to an EDR scheme?

1.    The EDR scheme will send you a letter of authority for you to sign to enable the lender to give the EDR scheme information about your matter. Make sure the signed authority is returned to the EDR scheme by the required date.

2.    The EDR scheme will then send your complaint to the member for it to respond. The member is given a certain time to respond (usually 30 days).

3.    The lender will then send you a response to your complaint.Important: You don't have to settle with the lender. If you are not happy with the Lender’s response say so! For example, you can write to the EDR scheme and say, for example:
“I refer to the letter from the lender dated / / . My dispute with the lender is still not resolved because… (provide your reasons). I request that the EDR scheme investigate this matter.

4.    This “lender responds then you reply” process may occur again. Do not give up! Make sure you respond by any date set by the EDR scheme or seek an extension of time. If an extension of time is given confirm this in writing with the EDR scheme. If you believe the dispute has not been resolved you must tell the EDR scheme why it is not resolved and that you want your dispute to be investigated

5.    Once your complaint has gone to investigation, the EDR scheme will investigate your matter and make a Finding. You have the option of rejecting the Finding, if you wish. Write to the EDR scheme with your reasons for rejecting the Finding and the case will be referred to the Ombudsman to issue a Recommendation. If you reject the Recommendation, legal action is usually your only other alternative. Legal action can be expensive and you may not have a better chance of success. You should get legal advice before rejecting a Finding or Recommendation of any EDR scheme.

Getting help