To provide a fast, cheap, fair, and efficient dispute resolution in the financial sector, the Financial Services Authority has issued Regulation No. 1/POJK.07/2014 of 2014 on Alternative Dispute Resolution in the Financial Services Sector (“Regulation”). The Regulation has been in force since 23 January 2014.
The Regulation is issued as a form of protection for consumers in the financial sector and the people overall. This protection is mandated by Article 31 of Law No. 21 of 2011 on Financial Services Authority and one of its implementing regulation, the Financial Services Regulation No. 1/POJK.07/2013 of 2013 on Consumer Protection in the Financial Services Sector.
Basically, the Regulation provides the framework for dispute resolution between financial service institutions and its consumers in the financial services sectors, including the banking sector, capital market, insurance, pension fund, financing institution, and other financial service institutions.
The Procedure of Dispute Resolution
The Regulation limits only certain type of disputes can be resolved by the mechanism available in this regulation. Dispute, as defined by Article 1 (13), is the dispute between consumer and financial service institution regarding activities of placement of funds by the consumer in the financial service institution and/or the usage of services and/or products of financial service institution after undergo the process of complaints resolution by the financial service institution.
Based on the Regulation, dispute in the financial services sector is resolved through two phases. In the first phase, the financial services institution resolves the complaints submitted by its consumers (Art. 2 (1), Regulation). To further regulate the process and procedure of complaints resolution, the Financial Services Authority already issued Circular Letter No. 2/SEOJK.07/2014 of 2014 on Service and Resolution of Consumer Complaints on Provider of Financial Service.
While in the second phase, if after undergo the first phase the dispute still cannot be amicably resolved, the consumer and the financial service institution may resolve their dispute in or outside the court. Dispute resolution outside the court is conducted through an Alternative Dispute Resolution (“ADR”) Institution that is listed in the List of ADR Institutions determined by the Financial Services Authority (Art. 2 (2) – (4) Jo. Art. 4, Regulation).
Further stipulated, every financial service institutions are obligated to become a member of an ADR Institution and abide by its decision (Art. 3 (1) & (3), Regulation).
The Establishment of Alternative Dispute Resolution Institutions
ADR Institutions are established by financial service institutions of which are coordinated by the association of each financial service sectors. Further, the Regulation sets a deadline for the establishment of ADR Institutions in the Banking sector, Financing, Credit Insurance, and Pawning that must be established at the latest on 31 December 2015 (Art. 10, Regulation).
An example of the establishment of an ADR Institution is also given by the Elucidation of Article 10 (1) of the Regulation. ADR Institution in the banking sector will be established by banks which are coordinated by the association in the banking sector, such as the National Banks Association (Perbanas), Association of State Banks (Himbara), or Indonesian Sharia Banks Association (Asbisindo).
Pursuant to Article 4 of the Regulation, an ADR Institution should at least provides services in a form of mediation, adjudication and arbitration. And, an ADR Institution should also have regulations regarding:
1. The procedure of the dispute resolution;
2. The cost of the dispute resolution;
3. The period of the dispute resolution;
4. Conflict of interests and affiliations of mediator, adjudicator, and arbiter; and
5. The code of ethic for mediator, adjudicator, and arbiter.
Furthermore, it is also stipulated in Article 4 of the
Regulation that an ADR Institution should implements the principle of accessibility, independency, fairness, efficiency and effectiveness in its regulations.And, an ADR Institution must have the resources to provide services of dispute resolution.
However, in case of the ADR Institution has not yet been established, the consumer may submits a petition to the Financial Services Authority to facilitate the dispute resolution (Art 11 (1), Regulation).
Why contact SMART Legal Consulting?
We are able to advise you on the procedure of Alternative Dispute Resolution in the Financial Services Sector and assist you in dispute resolution in the financial services sector.
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