Malaysia’s New Financial Ombudsman Scheme

The Financial Services (Financial Ombudsman Scheme) Regulations 2015 and their Islamic equivalent came into force on 14 September 2015. The regulations establish a Financial Ombudsman Scheme (FOS) in Malaysia as part of efforts by Bank Negara Malaysia (BNM) to enhance financial dispute resolution arrangements for consumers and strengthen consumer protection. The FOS will be an alternative to, but will not replace, dispute resolution through the courts.

The FOS is expected to commence operations in the first quarter of 2016, at which time BNM will publish all-important terms of reference, which will essentially define the scope of the FOS and the disputes it will handle. Indications are, however, that the FOS will be restricted to individuals who are consumers of financial products or services for personal, domestic or household purposes, or small businesses and SMEs. Eligible consumers will include individuals insured under group insurance/group takaful where the premiums/contributions are paid by the persons insured/covered.

The FOS also appears to be available to hear complaints by third parties in respect of insured motor property damage, complaints by guarantors in respect of credit facilities granted by member institutions, and complaints by nominees/beneficiaries under group insurance/group takaful where the premium/contribution is paid by the persons insured/covered. The terms of reference will hopefully add detail to BNM’s intention to extend the FOS to third party claimants.

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Financial Ombudsmen Scheme under the Financial Services Regulation 2015

Monetary Thresholds….

Monetary thresholds for disputes reflect the retail consumer and small business/SME complexion of the FOS. Disputes involving banking and insurance/takaful with a value of up to RM 250,000 fall within the jurisdiction of the FOS. The threshold for disputes concerning motor third party property damage insurance/takaful claims is just RM 10,000. Disputes above the various monetary thresholds may be accepted by the FOS, subject to the mutual agreement of both complainant and the member institution.

Finally, the categories of member institutions of the FOS are listed below. Not only are these categories extensive, but the FOS will also include complaints against agents or representatives of member institutions where there is a recognised principal/agent relationship:

licensed banks and Islamic banks; 
licensed insurers and takaful operators;
prescribed development financial institutions;
approved designated payment instrument issuers and designated Islamic payment instrument issuers;
approved insurance and takaful brokers; and
approved financial advisers and Islamic financial advisers.

Previously written by

Steven Dewhurst
Insurance Partner at DAC Beachcroft LLP | Mediator

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