Financial Ombudsman: relief - giver to the enterprising public

Lynn Ockersz

Sri Lanka's Financial Ombudsman scheme which has been in existence since 2003, is proving effective in resolving disputes the public has with banks, finance companies etc.

In this interview, the current Financial Ombudsman, Walter Ladduwahetty, describes how the Ombudsman scheme operates to the benefit of both the public and the financial institutions. An Attorney-at-Law, Ladduwahetty is a former Member of the Sri Lanka Judicial Service, a former Secretary, Ministry of Justice and one-time Principal, Sri Lanka Law College.

Q: What is your mandate as Sri Lanka's Financial Ombudsman ?

A: The concept of the Ombudsman as a person who resolves a dispute between two persons is as old as the hills. We had a similar set-up in the Kandyan court in the form of a person called 'Duk Ganna Rala. Whether he looked into disputes of the public against the administration or not is not quite clear. But that there was an institution to hear complaints etc is what is important.

The Chinese Ombudsman they say is over 2000 years old. In India, the Ombudsman is referred to as 'Loka Yuktha' or 'Universal Justice'. The important thing about this institution is that you are not tied down by rules and regulations.

Nobody really worries about the technicalities of it, unlike in a court of law. In a court of law, you would say this is the course of action, you cannot go outside it. Or something happens, and the action should be filed within a prescribed time.

Here there is a general rule, in the Ombudsman scheme, that the complaint should be made within one year. But those are merely guidelines. However, for example, if you have had a problem with a bank and you file a complaint with me in one and a half or two years, that would not limit my jurisdiction. Because these are very broad outlines and guidelines for my guidance.

Right now, I was reading of a case where in the nineteen nineties a settlement was effected. Currently the disputants are coming out with various other matters in relation to this case. Now on the face it, the case is too old and too complicated. When that happens, I operate on my own. Lawyers are not permitted.

So, you come out with a very complicated situation. On the other hand the bank in this case says there is nothing we can do; the case is very old," we have destroyed the documents". I am not an investigator. I have no machinery to investigate. So, what the Ombudsman can do is listen to the parties, look at the documents and on the basis of that come to a binding decision. What is important is that my award is binding on the banks. So, they cooperate.

In the banking world various problems are there between customers and the banks. To whom can the customers complain ? They go to the bank and naturally, the bank officer will look at it from the bank's point of view. There is no one sympathetic enough to look at the client's problem.

Now, does that mean that you and I have to go to the Consumer Affairs Authority, which is the law ? Because of this problem, various disciplines, professions, thought of establishing certain things for their own benefit instead of going to the Consumer Affairs Authority. Take the lawyers; you have the Bar Association, the Council and various other institutions.

Banks found that they do not have similar institutions. Therefore, they created what is called the Ombudsman scheme.

That was how the Financial Ombudsman came into existence at the end of 2003. It was a very complicated process where the Central Bank was involved, the banks and finance companies were involved. Everybody came in. They were not sure what the Consumer Affairs Authority was going to do. So they thought they will have an internal regulatory mechanism. That was the genesis of the Financial Ombudsman scheme.

Q: Would you say that the Financial Ombudsman is a consensual appointment of all the banks ?

A: I wouldn't say all the banks because there are a few banks outside the scheme, like Deutsche Bank, the foreign banks etc. But I have addressed the Cental Bank on a number of occasions and have suggested that those banks too should be brought within the scheme for the integrity of the finance industry. Everybody should be there. There are a number of finance companies too which are not in the scheme, who should be brought in. The scheme is voluntary, so some organisations are outside it.

The case I am making out is that by law, the Central Bank should regulate all the finance companies.

Now, the procedure that we follow here is an interesting area which has to be completely informal. If you have a problem, you take a piece of paper and write to me and say, "Sir, this is what has happened" etc.

On the basis of that complaint, I will send that to the bank concerned or the finance company concerned, asking them to respond within two weeks, three weeks, whatever.

When they respond, the original complaint is like a plaint in a civil case. You have the answer of the bank and the two parties are here. It is a question of finding out what is your complaint against the bank.

There are all sorts of complaints. One basic area is lack of adequate information. Because the banks can get parties to sign documents and do various things. But they don't explain what the documents are.

If a person is not told precisely what is the document that he is signing, serious problems may arise. I have told the banks that the most important thing is that the customer should be aware of what he is signing and what the implications of the document are.

Over 600 complaints have been received by us so far. Almost 400 have been settled. That shows our tremendous impact and the banks are aware of this. They are aware that I will give them every opportunity to establish their case.

Q: What are the commonest complaints that are brought before you ?

A: The commonest complaints are essentially in regard to loans. When a person wants a loan he goes to an institution and everybody is soon full of smiles etc, documents are given and the customer signs the documents. Money is made available and the customer goes. Unfortunately, there's no one to advise these customers on whether it is a viable investment.

There are instances where ladies, for example, mortgage their "Mul Gedera" in their villages, and raise seven, eight lakhs of rupees from a bank and buy a bus. The bus driver meets with an accident and the bus is in the garage for five months. During the five months, the customer doesn't have the means to pay the loan. The loan gets into a delinquency state.

Now the customer is in a downward spiral. Interest starts accumulating and there is no way of paying the instalment, till the finance company concerned comes in and says, "you are in default for so many instalments, we will pass a resolution etc and seize your property". That is the first time, the customer realises what she has signed.

So, I feel that it is very important that the organisations concerned explain what the documents are. Now I find that certain finance companies have adopted that practice. I can show you a document which runs into about seven or eight pages in small print issued by one of these organisations.

The legal implications are terrible. But nobody is there to explain it to the customer. Now, partly because of my suggestion many finance companies summarize this and say "Mr X has taken Rs. one million, rate of interest is so much, amount payable is so much per month" etc. If the said amount is not paid on the due date, the penalty is this and so on. Such instructions are given in all three languages now. This gives the customers some understanding of what their obligations are.

Action can be taken by the organisations once this is done but when this happens the customers come to me and I call the companies and go into the matter. Consequently, interest is adjusted, loans restructured, facilities granted etc and I caution the customers that it is their obligation to pay. If they don't pay certain other things happen.

When the scheme started it was only open to individuals to make complaints, not corporate bodies and prior to parate execution. Then after some time, I suppose the banks were satisfied, and they allow non-individuals that is corporate bodies also, to make their complaints to me.

Even after the parate resolution is passed, they have permitted me to go into the matter and find out whether a settlement is possible.

Q: How could you be located ?

A: My office is at 143 A, Vajira Road, Colombo 5. My telephone number is 2595625 and my fax number 2595624.