Last Updated on Wednesday, 5 October, 2022 at 3:22 pm by Andre Camilleri
Arbiter says contracts should be ‘short and simple’
The Office of the Arbiter for Financial Services received 167 formal complaints in 2021, its Annual Report says.
The report and audited Financial Statements for 2021 was tabled in Parliament by the Minister for Finance and Employment Clyde Caruana this week.
The Annual Report provides a comprehensive overview of the operations of the Office of the Arbiter for Financial Services for the year and includes the summary of a selection of over 30 decisions delivered by the Arbiter during the year.
In the year under review, 167 new formal complaints were registered, which is higher than the number of complaints registered in each of the previous two years and surpasses the average of formal complaints processed between 2016 and 2020.
Just under 70% of formal complaints received were lodged online through the OAFS’ new portal which went live at the beginning of the reporting year. 54% of complaints (90) were submitted by non-residents, compared to 46% (77) from Maltese residents.
During the year, the Arbiter delivered 82 final decisions of which only 19 (23%) were appealed, with the remaining 63 cases becoming final and binding on the parties. The summaries to more than 30 decisions of the Arbiter in the annual report provide a broad spectrum of cases relating to banking, investments, insurance and pension complaints. The Arbiter’s decisions are available on the OAFS’ website in their entirety, except for the complainant’s name which is pseudonymised.
Particularly significant are the number of decisions delivered during the year relating to private retirement schemes. Such cases are submitted by expatriates residing in different jurisdictions who would have bought a private pension scheme offered by a service provider authorised in Malta.
Indeed, one such final decision collectively comprised 60 complainants as the merits of their case were intrinsically similar in nature. In several of these decisions, the Arbiter found that the service provider, acting in its dual role of retirement scheme administrator and trustee of the scheme, did not act in the best interests of the scheme members and did not perform its duties diligently as
required by the applicable legislation and the service provider’s own guidelines. The Arbiter’s
decisions were also confirmed on appeal.
The Arbiter observed that: “The outcome of these decisions was also mentioned in international media and it was quoted as part of a call for evidence on protecting pension savers submitted before the Work and Pensions Select Committee of the House of Commons in the UK. It was also cited in a UK voluntary code of best practice issued by the Pension Scams Industry Group (PSIG) to administrators of registered pension schemes. This highlights even more the sensitive nature of the work undertaken by the Office and other alternative redress bodies.”
In his report, the Arbiter also touched upon a number of issues relating to aspects which the OAFS comes frequently across when dealing with customer enquiries and complaints. For instance, in the context of anti-money laundering and counter terrorism financing legislation, he observed that whilst banks are obliged to carry out ongoing due diligence of their clients, retail clients with small accounts, whose transactions are easily traceable, should not carry the burden of unnecessary
bureaucracy. “Such precautionary measures should be implemented only where they are truly needed, especially in dealing with professional money launderers”, the Arbiter said.
The Arbiter also called for financial services providers to provide short and simple contracts that consumers are able to understand. The Arbiter noted that: “very often clients are required to sign lengthy consumer contracts which are highly technical and which the average consumer cannot understand. This practice only serves to create ‘onerous contracts’ which run counter to the provisions of the Consumer Affairs Act, and which have been criticised even by the Maltese Courts. This practice should change because it is both illegal and unfair.”
The Arbiter also made observations regarding several enquires and complaints relating to different scams that were reported to the OAFS by consumers involving payments to online investment platforms or payments by bank transfer for services or products which remain undelivered. The Arbiter called on stakeholders to embark on an effective and ongoing financial education campaign to help consumers not to fall for such scams.
The Annual Report, which includes the audited financial statements of the OAFS as at 31 December 2021, may be downloaded from www.financialarbiter.org.mt.