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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
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Legal Analysis on the Role of Ombudsman in Banking and Finance
Disputes: A Comparative Study between Malaysia and Australia
Ilyani Noor Khuszairy*1, Nur Ezan Rahmat2, Shahnaz Aina Mohd nor Shah3
1,2Faculty of Law, Universiti Teknologi MARA (UiTM) Shah Alam, Jalan Sarjana 1/2, 40450 Shah Alam
Selangor,
3Legal Department, Inland Revenue Board of Malaysia, Menara Hasil 1, Jalan Padi Emas, 181200
Johor Bahru.
*Corresponding Author
DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000268
Received: 12 October 2025; Accepted: 19 October 2025; Published: 10 November 2025
ABSTRACT
Financial Markets Ombudsman Service (FMOS) in Malaysia is a form of Alternative Dispute Resolution (ADR)
that provides an accessible and affordable resolution mode for financial consumers. The FMOS was previously
known as the Ombudsman for Financial Services (OFS) and had recently consolidated with the Securities
Industry Dispute Resolution Centre (SIDREC) under the Securities Commission Malaysia. Before the
consolidation with SIDREC, which took effect in January 2025, OFS had the jurisdiction to hear financial
disputes between individuals and Financial Service Providers, as well as claims against private organisations or
individuals. Meanwhile, SIDREC was able to cater to disputes involving capital markets services and products.
However, although the new integration offers alternative dispute resolution to consumers, service providers,
investors, and sole proprietors, the FMOS continues to experience low public patronage. The OFS Annual Report
2024 recorded that only 1856 new cases were registered. However, the number of financial disputes has
increased significantly over the years, and statistically, the report also shows that awareness of the OFS remains
at only 12.7%. Moreover, the FMOS can only adjudicate claims up to RM250,000, a threshold far below the
current average house price of RM490,376, limiting its relevance for disputes involving high-value claims. These
structural and procedural constraints show why complainants rely on the judicial system rather than alternative
dispute resolution mechanisms. By employing qualitative research methodology using the doctrinal legal
research method, this article concentrates on the challenges and jurisdictional limitations faced by the current
FMOS framework when dealing with Conventional and Islamic banking disputes after its consolidation with
SIDREC in January 2025, as well as the inadequacies in the Financial Services Act 2013 and Islamic Financial
Services Act 2013 regarding its monetary jurisdiction. Moreover, this study is grounded in access to justice
theory and institutional legitimacy theory to evaluate the effectiveness of the FMOS in resolving conflicts in
Conventional and Islamic finance in Malaysia. These theories will also guide the comparative analysis between
the FMOS and Australia's Financial Complaints Authority (AFCA). Findings reveal that the FMOS's structural
and procedural constraints, including its limited jurisdiction, weak enforcement powers, and low public
awareness, resulted in its inadequacy. Therefore, reforms are necessary to strengthen the FMOS's credibility and
adequacy, gain public confidence, and abide by the principle of justice.
Keywords: Financial Ombudsman Scheme, Ombudsman for Financial Services, Financial Markets Ombudsman
Services, Securities Industry Dispute Resolution Centre, Alternative Dispute Resolution, Financial Services Act
2013, Islamic Financial Services Act 2013, Capital Markets and Services (Dispute Resolution) Regulations 2010
INTRODUCTION
It is beyond dispute that Malaysia’s banking and finance sector has grown tremendously in the last decade,
particularly with the emergence of the Islamic Banking industry. Developing an effective dispute resolution
mechanism is a key criterion for the growth and expansion of the banking and finance industry. As a result,
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Malaysia has developed numerous institutional mechanisms for financial dispute resolution as an alternative to
the judicial system. For instance, the Ombudsman for Financial Services (OFS), a body corporate that operates
a financial ombudsman scheme, was established on October 1 2016, under Section 126 (2) of the Financial
Services Act 2013 (FSA 2013) and Section 138 (2) of the Islamic Financial Services Act 2013 (IFSA 2013), in
accordance with Section 42A of the Development Financial Institutions Act 2002 and approved under Section
379(b) of the Capital Markets and Services Act 2007. Subsequently, the OFS received its mandate from Bank
Negara Malaysia (BNM) and was approved by the Central Bank of Malaysia Act 2019 (CBMA 2019) to operate
the financial ombudsman scheme.
OFS originally was a public company limited by guarantee and a non-profit organisation that served as an
alternative dispute resolution mechanism. OFS resolves disputes between its members, the financial service
providers (FSPs) licensed or approved by the BNM, and financial consumers. Tun Ariffin Zakaria (2013), the
then Chief Justice, believed that introducing OFS is "a bold step in the right direction". Since 2016, the OFS has
substantially benefited Malaysians by offering a different path for the fair resolution of financial disputes.
In January 2025, the OFS changed its name to FMOS due to the consolidation with the Securities Industry
Dispute Resolution Centre (SIDREC). Despite these institutional mergers, public engagement with the FMOS
remains low, and many people in Malaysia are still unaware of the FMOS. Empirical findings indicate that only
12.7% of the respondents had heard of the OFS before (Nadiah et al., 2022). Apart from the low level of
awareness and patronage, the FMOS can only adjudicate claims up to RM250,000, a threshold far below
Malaysia's current average house price of RM490,376, as reported by the National Property Information Centre
(NAPIC, 2024). This monetary limitation has become a constraint for the FMOS in dealing with high-value
claims filed by the consumers. These structural and procedural constraints show why complainants rely on the
judicial system rather than alternative dispute resolution mechanisms.
According to Hong Leong Investment Bank (HLIB) Research (2023), loan growth in Malaysia is likely to pick
up in the latter part of 2023, in line with expectations that the overnight policy rate (OPR) will remain steady for
the rest of the year. This growth spurt will likely lift the full-year loan growth number to 4.5% to 5%. Malaysia’s
banking sector will revert to a pre-pandemic state of modest growth and profitability in 2024 (Bernama, 2023).
Indeed, the reduction in the OPR by Bank Negara Malaysia in July 2025 has resulted in a 5% year-on-year
increase in loan applications compared to August 2024 (Banking sector gains traction as loan growth picks up
post-OPR cut, 2025). According to S&P Global Ratings, Malaysia remains Asia-Pacific's most significant
Islamic banking market, with two-thirds of the institutions’ total assets amounting to USD 400 billion, equivalent
to RM 1.9 trillion (The Star, 2024). This indicates that more consumers will opt for financial assistance from
service providers. With this growth, conflicts and disputes arising from banking matters cannot be prevented.
Accordingly, this study employs a qualitative research methodology using the doctrinal legal research method
to evaluate the effectiveness of the FMOS as an independent alternative dispute resolution and further to analyse
the legal, institutional and jurisdictional challenges faced by the FMOS that contribute to its low awareness and
patronage in resolving the Conventional and Islamic financial disputes. Furthermore, this study also seeks to
strengthen the roles of the FMOS and to suggest a review or necessary statutory amendments to the Financial
Services Act (FSA) 2013 and Islamic Financial Services Act (IFSA) 2013 in strengthening the role of FMOS in
settling financial disputes by adopting relevant practices or legislation from Australia, specifically in reference
to Australia’s Financial Complaints Authority (AFCA), as a potential model for Malaysia.
LITERATURE REVIEW
Conceptual Framework
Ombudsman for Financial Services (OFS) was officially launched and approved by the Central Bank of Malaysia
Act 2019 (CBMA) as the scheme operator of the financial ombudsman scheme on October 1 2016, pursuant to
the Financial Services Act 2013. OFS resolves disputes between its members, the financial service providers
(FSPs) licensed or approved by Bank Negara Malaysia (BNM), and financial consumers. However, the
Ombudsman for Financial Services is an independent redress mechanism that requires minimal formality for
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financial consumers to resolve disputes with financial service providers. Its services are an alternative to, not a
replacement for, legal actions taken in a court of law (BNM, 2017).
Section 121 FSA 2013 defines the “financial ombudsman scheme” as "a scheme for resolving disputes between
an eligible complainant and a financial service provider regarding financial services or products”. The eligible
complainant would be the customer, while the financial service provider is the financial institution. On the other
hand, Section 126 FSA 2013 addresses the administration of disputes between financial service providers and
their clients. Meanwhile, Section 133 IFSA 2013 defines the “financial ombudsman scheme” as “a scheme for
the resolution of disputes between an eligible complainant and a financial service provider in respect of financial
services or products”. The eligible complainant would be the customer, while the financial service provider is
the Islamic financial institution. (Umar A. Oseni et al., 2014).
On the other hand, Section 138 IFSA 2013 addresses the administration of disputes between Islamic financial
service providers and their clients. This dispute resolution can also be extended to any other innocent third party
who may be directly or indirectly affected by the concluded Islamic financial service transactions. (Nor Razinah
et al., 2014). The Financial Ombudsman Scheme (FOS) is a distinct dispute resolution mechanism for Islamic
financial services in Malaysia (Nor Razinah et al., 2014). 2016 the Financial Ombudsman Service (FOS) was
established, and the Ombudsman for Financial Services (OFS) was designated to operate it. Introducing the
financial ombudsman scheme does not portend to oust the jurisdiction of the Court to hear and determine related
Islamic finance disputes. (Umar A. Oseni et al., 2014).
Legal Framework
In response to the rising volume of disputes within the commercial and Islamic finance industries, as well as
capital markets services, regulators from both the Ombudsman for Financial Services (OFS) and the Securities
Industry Dispute Resolution Centre (SIDREC) proposed the merger of the Ombudsman for Financial Services
(OFS) and the Securities Industry Dispute Resolution Centre (SIDREC). The proposal reflects the regulators’
recognition of the OFS’s mandate in handling banking and insurance-related companies, while SIDREC
specialises in resolving disputes about capital markets and investment services. Accordingly, the primary
objective of merging these two institutions is to enhance the mechanism for resolving disputes involving
financial service providers and capital markets investors in the near future (Muhamad Ikhwan Mohd Zain, et al.,
2024).
Disputes arising from banking matters are usually litigated in Court, and Islamic banking disputes are referred
to the Muamalat Division at the Kuala Lumpur High Court. No other Court in Malaysia has a Muamalat Division
within its territory. For the selection of judges in the Muamalat Court, the judges are not required to have
adequate knowledge of Shariah laws, Islamic banking, and finance (Hizri Hasshan, 2016). When he was the
Chief Justice of Malaya, Tun Ariffin Zakaria admitted that there is no specific training for a judge sitting in the
Muamalat Court to prepare him with the knowledge of Islamic banking and finance. In this regard, Tun Ariffin
encourages Islamic financial disputes to be referred to alternative dispute resolution to dispose of the matter
speedily (Zakaria, 2013).
It is also not disputed that when matters are channelled through the formal court system, the parties tend to be
farther apart after the judgment. The Court's decision leads to a win-lose situation where one party rejoices with
pomp, while the other wallows in anguish. To avoid a winner-takes-all syndrome as generally occasioned in
litigation, effective alternatives were created which satisfy the needs of many litigants. (Umar A. Oseni et al.,
2014).
Meanwhile, in Australia, on February 14 2018, the Australian government enacted the Treasury Laws
Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Act
2018 (‘AFCA Act’), which formally established the Australian Financial Complaints Authority (AFCA). This
statutory body consolidated and replaced the Financial Ombudsman Service (FOS), the Credit and Investments
Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT). AFCA now serves as the single external
dispute resolution scheme for financial service providers that previously fell under the jurisdiction of these three
separate bodies.
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AFCA is the dispute resolution scheme that follows the model of the industry ombudsman scheme. The model
aims to provide a free, informal, speedy and cost-effective alternative to litigation. Section 912A(1)(g)(i) and
912A(2)(c) of the Corporations Act now require Australian financial services licensees (AFS), licensees who
provide services to retail clients, to be members of AFCA. As of June 2023 - 2024, AFCA has received 104,861
complaints, compared to 96,987 registered cases in 2022–2023. One hundred four thousand two hundred three
complaints have been resolved, reflecting a 21% increase from 2022 to 2023. The complainants managed to
secure $313,903,256 million in compensation and refunds. According to AFCA Annual Review 2023 – 2024,
the highest complaints received are from banking and finance sectors, which shows a rise of 12% to 60,076,
personal transactions with 16%, financial difficulty with 18%, home loan complaints with 16% and general
insurance claims with 5% from 27,924 to 29,335 (AFCA Annual Review, 2024).
THEORETICAL FRAMEWORK
Access to Justice and Institutional Legitimacy Theories
Access to justice theory is one of the theoretical concepts adopted in this study, particularly in explaining the
functions of the FMOS as an alternative and equitable dispute resolution mechanism in Malaysia, especially in
matters concerning conventional and Islamic banking. The theory of access to justice focuses on a system that
is accessible to all consumers and must be equally and socially fair and just for consumers to seek remedies
through alternative dispute mechanisms (Garth & Cappelletti, 1978). Empirical studies often recognise an
Ombudsman as a scheme providing an alternative dispute resolution (ADR) to resolve disputes involving
citizens, public services, and the private sector.
Theoretically, access to justice encompasses a form of dispute resolution mechanism, an integral part of the
justice system. One of the familiar mechanisms for alternative dispute resolution is the Ombudsman, which
operates as a scheme to address individual complaints in both the public and private sectors (Beqiraj et al., 2018).
Hence, this theory helps to analyse how the FMOS's structural and procedural methods affect the consumers'
ability to seek redress effectively, because low public awareness and patronage of the FMOS can lead to a deficit
in the access to justice system. By comparing FMOS with AFCA, the latter clearly provides for broader and
unlimited jurisdiction, higher monetary thresholds, wider aspects of claims and a stronger statutory framework.
Therefore, access to justice theory offers an analytical framework and a normative standard to evaluate the
FMOS and determine whether it advances or impedes equitable access to financial dispute resolution.
Complementing the access to justice theory is the institutional legitimacy theory, which explains how one
institution evolves towards a broader institutional field that includes Bank Negara Malaysia, Securities
Commission Malaysia, financial service providers and statutory regulators. According to DiMaggio and Powell
(1983), these institutions are within the same environment that governs banking and financial dispute resolution.
The structure of the FMOS is fashioned through expectations, norms, and regulatory standards aligned with
Malaysia's economic structure. Conforming to these institutional pressures enhances the FMOS's legitimacy and
credibility in banking and the Islamic financial system. Nevertheless, excessive conformity may decrease its
autonomy and innovation in addressing the needs of the consumers.
Moreover, Suchman (1995) emphasises that legitimacy is not just about legal compliance or formal recognition;
it is more about public perception and social acceptance. Legitimacy will arise when people believe that one
organisation is doing what is right, fair, and appropriate within its institutional scope. In relation to the FMOS,
legitimacy is of the utmost importance because it operates under the FSA 2013 and IFSA 2013. It still faces
challenges if consumers believe that the FMOS is unfair, inadequate, or lacks authority. Therefore, the
institutional legitimacy theory is relevant in this study to explain why public trust and confidence are key factors
in determining the effectiveness of the FMOS as an alternative mechanism in resolving banking and Islamic
finance disputes.
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Hence, by adopting these two theories, this study presents a comprehensive conceptual framework that explains
the practical challenges contributing to FMOS's low public awareness and patronage, as well as its limited
monetary jurisdiction compared to AFCA.
METHODOLOGY
The research methodology employed in this study utilises a qualitative approach by using the doctrinal research
category, incorporating analytical and comparative methods. The doctrinal legal research is an analytical study
of existing laws, related cases and authoritative materials as a whole, on some specific matter. The primary focus
is on legal doctrines, statutes, and regulations pertinent to the subject matter. Key primary sources include the
Financial Services Act 2013, Islamic Financial Services Act 2013 and the Financial Services (Financial
Ombudsman Scheme) Regulations 2015. These legal frameworks serve as foundational documents for
understanding the regulatory landscape surrounding financial services and the functioning of the Financial
Ombudsman Scheme.
Furthermore, the research relies on case law, examining judicial decisions related to disputes within the financial
sector, especially those involving the ombudsman scheme. These cases contribute to the analytical aspect of the
research, providing insights into how legal principles are applied in real-world scenarios. In addition to primary
sources, a comprehensive array of secondary sources is employed. Academic journals, books, and online
databases, including Current Law Journal, HeinOnline, and LexisNexis, offer in-depth analysis, commentaries,
and scholarly perspectives on the legal aspects of financial disputes and ombudsman schemes. Newspaper
articles are also included, providing a broader context and practical insights into public perceptions and real-life
instances. This combination of primary and secondary sources ensures a robust and thorough exploration of the
subject matter, enhancing the depth and reliability of the research findings.
FINDINGS AND DISCUSSION
OFS’s Annual Report 2024
The findings of this study reveal that FMOS's challenges extend beyond its low public awareness and patronage
to include institutional perception and legitimacy. In contrast, AFCA possesses a higher degree of legitimacy in
its structural and procedural mechanisms due to its transparency, broader jurisdiction, and strong institutional
powers, which eventually enhance public trust and confidence in the system.
This can be further explained by analysing the OFS’s Annual Report in 2024 (the final edition issued under the
OFS), which states that a total of 4150 disputes were handled, encompassing matters related to commercial
banking, Islamic finance, payment systems sectors, insurance, and takaful. The report also revealed that over
half of the complaints were directed at the banking, Islamic banking and payment systems sectors. Specifically,
1498 cases involved commercial disputes, 275 cases involved Islamic banking and 77 cases involved payment
systems sectors. The OFS annual report further indicated that the commercial banks accounted for the largest
share of disputes at 56%, followed by insurance companies at 13% and Islamic banks at 10% (OFS, 2024). The
nature of complaints primarily involved the unauthorised online transactions from scams, lost/stolen cards, e-
money unauthorised online transactions, non-receipt of notification letters, unfair terms and conditions, as well
as delay in refunding fire insurance premiums (OFS, 2024).
Australia Financial Complaints Authority (AFCA)
Compared with Australia, the Annual Review 2023 – 2024 revealed that the number of complaints received and
registered under AFCA has increased significantly from 96,987 in 2023 to 104,861 in 2024. The highest
complaints received were from banking and finance sectors, followed by personal transactions, home loan
complaints and general insurance claims (AFCA Annual Review, 2024).
Thus, it can be said that there is a significant difference in the number of complaints between OFS in Malaysia
and AFCA in Australia, given that Malaysia's population is 34 million, compared to Australia's 27 million, as of
March 2025. The massive gap between Malaysia and Australia is the lack of marketability of OFS in Malaysia,
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the range of disputes provided, and the monetary jurisdiction, which only offers a limit of up to RM250,000.00
for Malaysia's OFS. In contrast, AFCA offers a limit of up to $5 million, equivalent to RM1,513,136.00
(Complainant Resolution Scheme Rules).
OFS in Malaysia and AFCA in Australia
The table below shows the differences between OFS in Malaysia and AFCA in Australia:
OFS in Malaysia AFCA in Australia
Who can complain? i) Individuals (for personal, domestic or
household purposes)
ii) Small and Medium Enterprise (SME)
iii) Financial consumers, insured persons
under group insurance, takaful, third-
party claim for property damage
involving a motor vehicle
iv) Guarantor of a credit facility,
nominee or beneficiary under a life
policy/takaful or personal accident claim
or takaful
i) Credit, finance and loans
ii)Insurance, domestic, travel
iii) Pet, death, motor vehicle
iv) Life insurance claim
v) Small business, including farm, strata
title and medical indemnity
vi) Banking deposits and payments
vii) Investment and financial advice
Monetary Jurisdiction RM250,000.00 (unless consented by
both parties in disputes to increase the
limit)
i) Up to $5 million = RM1,513,136.00
ii) For a superannuation complaint, the
monetary claim is unlimited
Methods of Settlement i) Methods of settlement provided are
mediation, negotiation and conciliation
ii) If the Financial Service Provider and
the Complainant failed to enter into a
settlement, then the case will be
adjudicated by the Ombudsman
i) Methods of settlement provided are
negotiation and conciliation
ii) If the complainant disagreed, the AFCA
would determine the dispute.
iii) The complaint may be determined by
an Ombudsman, an Adjudicator or an
AFCA Panel
Awards and Decisions i) The decision of the Ombudsman will
be binding upon both parties.
ii) If the parties are not satisfied with the
award, the parties may pursue their case
to the Court or other alternative dispute
resolution, such as arbitration
i) Decision of the AFCA will be binding
upon both parties;
ii) If the parties are unsatisfied with the
award, they may file an appeal, which is
available under the Corporation Act 2001
or pursue their case in Court.
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Limitations under the OFS
Numerous studies suggest that OFS only admits financial dispute cases within its monetary jurisdiction, which
is RM250,000.00. However, the Terms of Reference (TOR) may allow the OFS to handle disputes exceeding
this limit if both parties mutually consent to the TOR.
Figure 1 Monetary Value of Disputes Handled by Sector. Source: OFS Annual Report, 2024.
As shown in Figure 1, in 2024, over half of the disputes lodged with OFS were for RM10,000 or less. Meanwhile,
874 cases fell within the range of RM10,001 to RM50,000. As enacted, OFS only admits financial dispute cases
within its monetary jurisdiction, as shown in Table 1 below. A dispute involving financial services or products
offered by its members to be heard before OFS has a monetary limit of RM250,000.00.
Apart from the economic range of disputes handled by OFS, the report also disclosed that 2520 cases had been
closed in 2024, of which 1958 were related to banking, Islamic banking, and payment systems. The report also
indicated that 1499 cases were resolved at the case management stage and 1021 cases were proceeded with
adjudication. A total of 765 cases were resolved within six months from the date of registration until the closure
date.
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Table 1: Third Schedule of the Financial Services (Financial Ombudsman Scheme) Regulations 2015
Malaysian House Price Index Q2 2025 by state and average house price. Source: National Property Information
Centre (NAPIC, 2025)
Figure 2 shows that the average house price in Malaysia is RM490,376. Based on this and assuming a financing
rate of 2.5% per annum over a tenure of 35 years, the estimated monthly instalment would be RM1,654.73. Over
the whole loan period, the total repayment amount would accumulate to approximately RM700,000.00. This
reflects the combined principal and interest obligations borne by the consumer upon full settlement.
The OFS’s monetary jurisdiction presents a significant limitation in addressing most financial disputes,
particularly those involving higher-value claims. Given that the average house price in Malaysia now exceeds
RM250,000, this monetary limitation restricts many consumers' access to alternative solutions. Hence, to ensure
that society can benefit from the OFS's services, expanding the OFS's monetary jurisdiction is imperative.
Although Regulation 18 (4) of the Financial Services (Financial Ombudsman Scheme) Regulations 2015 allows
claims exceeding the economic limit to be lodged with the OFS, such claims remain contingent upon the mutual
consent of all parties involved, including the OFS and its members.
Notably, the AFCA in Australia applies a monetary jurisdiction limit of up to AUD 1 million. Therefore,
Malaysia should consider adopting a more comprehensive and sustainable OFS like the AFCA in Australia by
increasing its monetary limit to ensure that OFS services can cater to most disputes in Malaysia.
In addition to the limitation with regards to the monetary jurisdiction of the OFS, it is also crucial to highlight
the appointment of the OmbudsmanOmbudsman, which is provided under Rule 2 of the Financial Services
(Financial Ombudsman Scheme) Regulations 2015 to define "Ombudsman" as: "An officer of the scheme
operator appointed by the board of directors of the scheme operator to adjudicate disputes referred to the
approved financial ombudsman scheme".
The appointment of an Ombudsman is made by board members, who will establish a link between these two
parties. This may lead to internal pressure or conflict of interest, especially in adhering to the OFS’ principles of
independence, fairness, convenience, accountability, openness and utility (Nadiah et al., 2022). Accordingly, it
is recommended that the appointment of the Ombudsman by Bank Negara Malaysia be made with strict
qualifications and thorough evaluation to uphold an effective system of checks and balances between the
Ombudsman and the board of members.
In comparison with Australia, three (3) different categories determine the disputes between the parties: the
Ombudsman, the Adjudicator, and the AFCA Panel. This ensures checks and balances and avoids any conflict
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of interest between the disputing parties and the persons hearing the disputes (AFCA, 2021-22). It is also
pertinent to highlight herein that when the Ombudsman has decided the conflicts between the parties, the
decision shall be binding upon both parties. However, suppose one of the parties is dissatisfied with the
Ombudsman's decision, the aggrieved party has other options: they can seek alternative dispute resolution, such
as arbitration, or pursue their case in a court of law (AFCA, 2021-22).
If the disputing parties seek to challenge the OFS's decision, a pertinent legal question arises as to whether the
decision can be subjected to Judicial Review before the Court. To date, very few reported cases directly address
or clarify the issue. The matter remains unresolved, as neither the FSA nor the IFSA expressly provide for
judicial review as part of the mechanism for appeal.
For discussion purposes, the case of Prudential Assurance Malaysia Bhd v Ombudsman Perkhidmatan
Kewangan & Anor [2022] MLJU 2366 illustrates a procedural challenge in seeking judicial review of an
Ombudsman’s decision. In this matter, the applicant filed a judicial review application under Order 53 of the
Rules of Court 2012, seeking to quash the decision of the Ombudsman. The adjudication in question was issued
pursuant to the Financial Ombudsman Scheme operated by the first Respondent, in accordance with Section 126
of the Islamic Financial Services Act 2013 (IFSA), the Financial Services (Financial Ombudsman Scheme)
Regulations 2015, and the Terms of Reference governing the OFS. The award was made by an Ombudsman
named S. Kalyana Kumar, who was notably not named as a party to the proceedings. The Court held that the
omission of the adjudication Ombudsman as a named party rendered the judicial review application procedurally
defective. Despite the application being filed adequately under Order 53, the Court refrained from addressing
the substantive merits of the case or determining the legal principle governing the party's right to seek judicial
review against the Ombudsman's award.
The applicant in the case of Loh Swee Liang (suing as administrator of the Guan Song, deceased) & Anor v Am
General Insurance Bhd [2021] MLJU 1434 whereby had adopted a different procedural approach, wherein rather
than pursuing for judicial review, the applicant filed a fresh suit by way of a writ of summons against the
Respondent, following the dissatisfaction with the decision of the OmbudsmanOmbudsman in dismissing his
complaint. The matter proceeded to a full trial, resulting in the dismissal of the applicant’s claim. He
subsequently appealed to the High Court, citing among his grounds that the Magistrate’s Court had failed to
overturn the Ombudsman's decision. However, the High Court dismissed the appeal and did not address the legal
status of the Ombudsman, specifically whether the Ombudsman's decision was subject to review or could be
quashed.
The situation in Australia
In comparing the judicial approach in Malaysia with that of Australia, it is evident that the Australian courts
have made a more apparent distinction regarding the availability of judicial review in relation to decisions made
by the Ombudsman. In BFJ Capital PTY LTD & Ors v Financial Ombudsman Services Ltd & Ors [2019] VSC
71, the Ombudsman declined to adjudicate the disputes, stating that the courts more appropriately resolved the
matter. BFJ filed a judicial review against the decision, contending that the Ombudsman’s decision is subject to
judicial review. The applicant relied on the principle established in R v Panel on Take-Overs and Mergers; Ex-
Parte Datafib Plc (‘the Datafin principle'), where the Court held that judicial review is not available when the
private entity's authority is derived solely from contract. However, where such an entity performs functions
imbued with public duty or exercises powers with a public element, judicial review may be applicable.
A contrasting judicial approach was adopted in Mickovski v Financial Ombudsman Service Ltd [1995] LRLR
101, where the Court of Appeal held that Section 912A of the Corporation Act 2001 does not confer upon the
Ombudsman Service any public duty or function of a public nature. Similarly, in R v Insurance Ombudsman
Bureau; Ex Parte AEGON Life Assurance Ltd, the Court affirmed that the Ombudsman’s authority remains
purely contractual, despite its integration into a broader regulatory framework. In a nutshell, even though it has
been woven into a governmental system, the Ombudsman is considered a private law determination, lacking the
characteristics of governmental action or public law enforcement. Consequently, the Ombudsman Service is not
subject to judicial review.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
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Page 3289 www.rsisinternational.org
Australian case law makes it clear that decisions of the Ombudsman are subject only to limited judicial review.
Although the Ombudsman may perform functions that resemble those of a governmental body, its authority
remains rooted in contract, meaning that the power is derived from private law. Consequently, the Ombudsman
Service is generally not susceptible to judicial review. It will usually involve questions about the Ombudsman’s
jurisdiction to conduct an investigation, rather than attempts to review the substantive outcome of the
adjudication.
Another pressing concern regarding the limitations of the functions and roles of the OFS is its struggle with
marketability and public awareness of the service it offers. Despite its regulatory significance, Malaysia lags
behind Australia, which has already settled with its Ombudsman Act 1976 and a comprehensive set of laws and
regulations on the Ombudsman in Financial Services. As of March 2023, the government of Malaysia is still
studying the Ombudsman policies and rules. The Ombudsman draft bill is still at its final stage and has yet to be
tabled in Parliament (New Straits Times, 2023).
Considering that Malaysia’s population stands at approximately 34 million and Australia’s is around 27 million,
Malaysia lags substantially behind Australia in the use of OFS. This disparity may be attributed to the limited
public awareness and market visibility of the OFS. This issue was notably highlighted in a Malaysiakini
publication titled ‘Many still unaware of Ombudsman for Financial Services’ (Malaysiakini, 2021). Although
the publication was made in 2021, it remains relevant under the current FMOS. Therefore, the OFS must adopt
proactive measures in marketing and educating the public on its role in resolving financial disputes.
Furthermore, the findings also show that although the FMOS was established under the FSA 2013 and IFSA
2013, the scheme lacks the concept of access to justice due to the limitation of its monetary jurisdiction of
RM250,000. The annual review clearly shows that the FMOS is overly reliant on the concept of mutual covenant
between the conflicting parties when the amount of disputes is over RM250,000. This technically indicates
structural barriers to equitable redress. In addition to that, the absence of the right to appeal against the decision
of the Ombudsman and limited public awareness have reduced the inclusivity of the mechanism. In comparison
with Australia, the AFCA provides more comprehensive, structural and equitable access to justice by offering
wider monetary jurisdiction, more vigorous enforcement and greater transparency. This clearly shows that proper
access to justice requires not only legislative adequacy, but also institutional legitimacy and procedural fairness.
CONCLUSION AND RECOMMENDATIONS
The role of OFS in Malaysia, particularly in resolving banking and financial disputes, must be strengthened and
acknowledged not only by private institutions but also by the judiciary and legislative bodies. Such
acknowledgement is essential to cater for the needs of society at large in dealing with the settlement of their
disputes through the OFS. Based on the findings, it is pertinent to highlight the importance of the monetary
jurisdiction exercised by the OFS, which has a financial limit of only RM250,000.00. Therefore, this study
recommends that the law be reformed to expand and increase the monetary jurisdiction, for instance, up to
RM1,000,000.00, so that consumers can enjoy settling their disputes through OFS without needing a mutual
covenant.
Furthermore, the FMOS also needs to be reformed institutionally, wherein the law must be reviewed and
amended, particularly on the FSA 2013, to give more options to the OFS and the consumers in cases where one
party is not satisfied with the decision of the OFS and vice versa, either party can file an appeal or a review to
the High Court to seek relief. These options are essential to strengthen and expand the role and functions of the
OFS, enabling the courts and society to acknowledge and resolve their disputes through it. This can help the
courts dispose of the backlog of cases in a short period. Proper guidelines or additional provisions must be added
to the FSA 2013 regarding the application for judicial review, ensuring that parties and courts have a clear
understanding and guidance in deciding future disputes, as well as to enhance transparency, to provide checks
and balances in the appointment of the Ombudsman and to launch a continuous campaign throughout Malaysia.
These recommendations will eventually help the FMOS gain more potential consumers and become a trusted
institution that provides access to justice and institutional legitimacy.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue X October 2025
Page 3290 www.rsisinternational.org
Apart from that, creating awareness about the role of the Ombudsman in resolving financial disputes in Malaysia
is also essential to enable the public to resolve their conflicts with the OFS. This awareness should be cultivated
not only through public education campaigns but also within the courts and legislative bodies in Malaysia.
Platforms such as conferences, public forums, public discussions, or even legal proceedings in courts can provide
valuable opportunities to promote the OFS. For instance, judges presiding over banking and finance matters
could actively inform litigants of the option to resolve their disputes through the OFS or other alternative dispute
resolution mechanisms, depending on the nature and circumstances of their claims.
Reference has to be made to the Australian Financial Complaints Authority (AFCA), which serves as a role
model in demonstrating how a well-structured alternative dispute resolution mechanism can uphold justice and
public confidence within its banking and financial sectors. Hence, this would be a benchmark for the FMOS to
get aligned with AFCA in resolving banking and Islamic finance disputes.
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