LAPS SK – Alternative Dispute Resolution Institution in Financial Sector

Based on mandate of Law No. 4 of 2023 on Development and Strengthening of Financial Sector and in conjunction with Bank Indonesia Regulation No. 3 of 2023 on Consumer Protection of Bank Indonesia, Bank Indonesia has issued Bank Indonesia Regulation No. 3 of 2024 on Alternative Dispute Resolution Institution in Financial Sector (Lembaga Alternatif Penyelesaian Sengketa di Sektor Keuangan/LAPS-SK) (“PBI 3/2024”).

LAPS-SK is established as an out-of-court dispute resolution institution to resolve any dispute arising between consumers and “Operator” (or Penyelenggara) (i.e. any party which is either banking or non-banking institution that is conducting business activities regulated and supervised by Bank Indonesia whose products and/or services are utilized by consumers).

Summary

As an institution, LAPS-SK is a legal entity and required to be approved by Bank Indonesia – noting that approval from Otoritas Jasa Keuangan needs also to be obtained before applying the required approval to Bank Indonesia.

Bank Indonesia has made clear in PBI 3/2024 that LAPS SK is authorized to resolve any disputes arising between consumers and “Operator” which falls into category of: (i) payment system operator, (ii) money service activity operator, (iii) party conducting activities in money market and foreign exchange market, and (iv) other parties regulated and supervised by Bank Indonesia that are directly related to consumers.

LAPS-SK will have specific duties and authority: (i) carrying out handling and resolution of disputes, (ii) providing consultation for disputes in the financial sector, (iii) conducting research and development of dispute resolution services in the financial sector, (iv) cooperating with national and international consumer protection institutions and/or agencies, (v) drafting regulations in the framework of dispute resolution in the financial sector, and (vi) developing the competence of mediators and arbitrators registered with LAPS-SK.

PBI 3/2024 provides criteria for complaint that can be handled by LAPS-SK: (i) the Organizer has tried to resolve the complaint but either rejected by the consumer or no response has been provided to such consumer yet, (ii) it is not in the process of being resolved or has been resolved by court, arbitration, or other alternative dispute resolution institutions, (iii) it is civil dispute, or (iv) constitutes “other disputes” which are approved by Bank Indonesia.

In its development, LAPS-SK will have at least mediation and arbitration as its dispute resolution forum. Dispute resolution via LAPS-SK can be carried out in 3 (three) ways, namely (i) direct face-to-face meetings in the presence of a mediator or arbitrator, (ii) electronic media (which allows the parties to the dispute to directly hear and/or see the dispute resolution process) and (iii) examination of documents. Furthermore PBI 3/2024 also requires LAPS-SK to organize all information and data related to dispute resolution and to apply security measures by establishing an internal policy on cyber resilience and security.

Take-aways

The existence of LAPS-SK is Bank Indonesia’s further attempt to strengthen the regulation of various aspects in financial sector with the hope, among others, of providing a mechanism to resolve dispute lodged by consumers in a win-win manner. Needless to say, the financial sector (in particular related to banking, payment systems as well as money and foreign exchange services) is virtually vulnerable. Disputes in the banking industry, as we understand as of date, still has the largest chunk compared to the other industries in the financial sector.

It appears that LAPS-SK will co-exist to complement LAPS SJK (Lembaga Alternatif Penyelesaian Sengketa Sektor Jasa Keuangan or Alternative Dispute Resolution in Financial Services Sector) which has been effectively operating since 1 January 2021. We will keep a look out for any further developments regarding this.

*Vanessa Christine Togatorop assisted in the preparation of this insight

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