Legal Analysis on the Role of Ombudsman in Banking and Finance Disputes: A Comparative Study between Malaysia and Australia

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.