Credit Ombudsman Service Limited
The Credit Ombudsman Service Limited (COSL) is a non-government dispute resolution service overseen by consumer representatives and industry representatives. Like the Financial Ombudsman Service, its function is to independently and impartially resolve disputes between consumers (including some small businesses) and financial service providers who have appointed COSL as their external dispute resolution provider.
The ASIC-approved scheme currently has over 16,500 participants ranging from credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, investment managers, debt services and a wide range of other financial services and product providers.
How much does it cost?
COSL is a free service to consumers. The scheme is wholly funded by financial services providers who subscribe to the scheme by nominating COSL as its external dispute resolution service provider.
One of the drawcards of going through the COSL scheme is that there are no adverse cost implications involved – that is, you will not be required to pay the financial services provider’s legal costs (whatever they may be). It is not like the court system, where the loser pays.
Who can lodge a COSL complaint?
Only individuals and small businesses can lodge a COSL complaint.
Small business is defined as any non-manufacturing business (including a company) with less than 20 employees, or any manufacturing business with less than 100 employees.
When will COSL have jurisdiction?
COSL may only hear a dispute where it concerns a financial services provider who is a member of the COSL scheme. A financial services provider includes banks and non-bank lenders, mortgage managers and mortgage brokers. To find out whether or not a financial services provider is a member of the scheme, you can search the COSL website here. (link)
The dispute must also relate to whether or not the member financial services provider has complied with its contractual obligations, or other obligations imposed under Australian law.
COSL will not have jurisdiction where the dispute is simply about the amount of the fee being charged (unless the underlying issue is non-disclosure, misrepresentation or the incorrect application of the fee), or about the financial services provider’s internal assessment of the credit risk posed by the consumer as a borrower.
COSL will also generally not want to be involved where there are already legal proceedings instituted in court, or where the dispute is already before another external dispute resolution scheme.
What are the key risks or challenges under COSL?
For consumers, the key challenge is that, even though it is an informal process, the issues are still determined based on the parties’ underlying legal position. In order to succeed, therefore, it is necessary for consumers to:
- Structure their case in such a way as to ensure that it will fall under COSL’s jurisdiction;
- Have a proper understanding of their legal rights and obligations;
- Have a proper understanding of their financial services provider’s legal rights and obligations;
- Present only relevant evidence and other documentation;
- Present their submissions in such a way as to clearly address the relevant legal issues;
- Present their submissions in such a way as to highly the weaknesses in the financial services provider’s case; and
- Calculate their losses in accordance with how a court would normally so calculate;
This sounds a lot like lawyers’ work, right? Well, in most instances, yes.
Unfortunately, consumers often grossly underestimate both the amount of work and the level of technical skill involved in presenting a strong case before COSL – to their detriment. They also mistakenly assume that just because they are “clearly in the right”, or that the COSL case manager is sympathetic to their situation, necessarily means that they will win in the end. However, we have seen too many people with an arguable case spend a considerable amount of time pushing their matter through COSL over the course of many months only to receive an unfavourable determination simply because they have failed to comply with the elements set out above.
For those people, the whole exercise ends up becoming costly, time-consuming and, worse of all, demoralising.
To ensure that you do not fall into this trap, you should always seek advice from a lawyer, particularly from someone who has experience in banking and finance law.
Are COSL determinations final and binding on the parties?
COSL determinations are final and binding on the financial services providers (by reason of their contractual relationship with COSL). On the other hand, determinations will only be final and binding on consumers where the consumer elects to accept its determination. If a consumer disagrees with COSL’s decision, then the only other alternative left is to commence legal proceedings.
Winthrop Mason Lawyers can assist you by:
- Advising you on your prospects of successfully securing a favourable COSL determination;
- Collating all the necessary documents and other evidence to substantiate your case;
- Requesting all relevant documents retained by the financial services provider;
- Drafting your formal submissions on liability and quantum (amount of compensation);
- Representing you at a telephone settlement conference;
- Regularly liaising with the COSL case manager as part of advancing your case;
- Advising you on whether or not to accept the COSL determination or commence legal proceedings.
Especially if your potential claim is over $5,000, we would strongly recommend that you seek legal assistance in preparing your COSL complaint. Leave nothing to chance. For a no-obligation initial consultation, go ahead and give us a call.