finPOWER Newsletter 7 July 2010
The Financial Service Providers Register is due to open in mid July 2010 and will usher in a new era of registration for the finance sector in NZ. This new register is introduced as part of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 and is designed to cast the net widely to cover all financial service providers and those who distribute financial products including loans.
All finance companies and entities that provide financial services must register on the Financial Service Providers Register (FSPR) before 30 November 2010. Those who are not registered on 1 December will not be allowed to trade and will commit a serious offence by doing so.
The requirements for registration are:
- File the application.
- Pay the Registration Fee of $350.
- Pay the Consumer dispute resolution regime administration contribution of $30.
- Pass criminal record checks on principals ($39.38 each).
- Be a member of an approved Dispute Resolution Scheme.
For more information on Fees see the Companies office.
Dispute Resolution Schemes
The new regime expects to hold Financial Service Providers to higher standards by forcing all to join Dispute Resolution Schemes (DRS), similar to the Banking Ombudsman scheme operated for banks. See S 48 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008. Such schemes will be approved and overseen by the Ministry of Consumer Affairs (MCA).
Under the new law all schemes must operate free to the customer – the customer has the right to complain about the services delivered by a lender, and the lender (or all lenders who are part of the scheme) must pay the cost.
To date we are only aware of three Dispute Resolution schemes in operation and approved by the MCA.
- Financial Dispute Resolution (FDR) Scheme.
- Financial Dispute Resolution (FDR) Scheme is run by Dispute Resolution Services Limited. The FDR Scheme is the government's reserve dispute resolution scheme that is privately run, but supervised by the Ministry of Consumer Affairs. It is a statutory requirement that MCA approves a reserve scheme that is available for all FSPs to join.
- Financial Services Complaints Ltd
- FSCL is an independent not-for-profit External Dispute Resolution (EDR) scheme approved by the Minister for Consumer Affairs under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. It was the first Scheme to be approved and has been designed for and in consultation with the Financial Services Industry and has been built on principles of efficiency and effectiveness. It is governed by an independent Board with equal consumer and industry representatives.
- Insurance and Savings Ombudsman
The Companies Office is responsible for administering the Register and have recently released the updated website that will be the gateway to the Register and a central point for information regarding it. This can be found at the Companies Office. It is expected that registrations will open in mid July. We will keep you informed as to its progress.
Financial Advisers Act 2008
In addition to the Financial Service Providers (Registration and Dispute Resolution) Act 2008 there is a requirement for those that provide financial advice to comply with the Financial Advisers Act 2008. There is some discussion around what is financial advice and what is not, but Section 13 of the Financial Advisers Act states that “(1) Financial advice does not include anything contained in a disclosure statement that is required under the Credit Contracts and Consumer Finance Act 2003” and also “(3) For the avoidance of doubt, the provision of information, whether orally or in writing, is not financial advice unless accompanied by a recommendation, an opinion, or guidance.”
Each entity will need to seek their own legal opinion as to their compliance with the Financial Advisers Act 2008 but one thing is clear, there is a whole raft of new legislation that finance companies will be forced to comply with and it is coming into effect soon! Now is the time to act and we advise that you do not leave it until the last minute to register and join a Dispute Resolution Scheme.