What is Alternative/Online Dispute Resolution (ADR/ODR)?
Non-judicial procedures through which consumers (for our constituency, “retail” financial services users) can solve disputes with professionals and obtain redress for their rights. These are generally referred to as alternative dispute resolution (ADR) or out-of-court settlement of consumer claims.
Cases are (or should be) handled by independent and impartial entities (ADR bodies), established by law, through a procedure that is meant to be simple, fast, and cost-efficient for consumers.
In financial services, all professionals (including firms) must adhere to an ADR body/scheme.
Complaint-handling mechanisms (preliminary procedure)
Sectoral financial services regulation requires providers of services and products to establish complaint-handling mechanisms, which in most cases are a prerequisite (preliminary procedure) for accessing ADR mechanisms.
BETTER FINANCE’s research and member input concludes that there is a need to limit the response deadline for complaint-handling procedures at provider level to an overall maximum of 35 days: this would ensure swift and efficient replies.
Raising consumer awareness
As highlighted by the EU Commission, the uptake of ADR mechanisms to solve claims between consumers and traders is fairly low, to which we add that financial services do not make an exception.
One reason is the general unawareness of consumers of this dispute resolution tools. The situation can be improved by informing consumers on a wide range of channels about this possibility, particularly of its potential advantages, such as:
- Awarenessraisingcampaigns,asproposedbytheEUCommission,suchasnational/EU- wide ADR-focused campaigns (social media, TV/radio, newspaper, Consumer Rights Campaign, etc);
- throughplatformsthatarefrequentlysearchedforbyconsumersinneed(e.g.European ODR platform, Your Europe, etc);
- byimposingdisclosureofADRinformationontraders’websites,platforms,marketplaces; and finally,
- by publishing information on consumer or trade associations’ platforms.
Independence of ADR bodies
BETTER FINANCE’s research and analysis points to the fact that, in many jurisdictions, the members of ADR bodies (those who handle case) are not entirely independent from the financial industry. Thus, we propose that EU law requires a minimum 5-year cooling off period for ADR members and restricts financing from the financial industry.
Fragmentation of ADR bodies
The ADR landscape in the EU is very diverse and in some jurisdictions ADR bodies are set up at entity level, particularly in the banking industry. This raises questions as to the independence and effectiveness of ADR bodies, reason for which we propose to reduce the fragmentation of ADR bodies, in particular in the banking industry.
ADR decision compliance
To prove useful for consumers, ADR procedures must be efficient in leading to a swift resolution of the dispute with the trader and not overburden the consumer’s journey. To achieve the latter, EU law should make ADR decisions (for cases under a certain threshold) binding for financial services providers.