By David Locke

On 1 November 2018, the Australian Financial Complaints Authority (AFCA) became the single body providing fair, independent and effective solutions to consumers and small businesses with financial disputes.

AFCA is now the one-stop shop for external dispute resolution in the financial service industry, replacing the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).

AFCA was formed following a federal budget recommendation to review external dispute resolution (EDR) in financial services. The 2016 Ramsay Review, led by the University of Melbourne’s Professor Ian Ramsay, had more than 20 months of public consultation and inquiry. It recommended simplifying the existing EDR system and using the already established and successful attributes of industry ombudsman arrangements.

The AFCA scheme is the most fundamental reform to external dispute resolution since the mandatory membership of an ASIC-approved EDR scheme for financial advisers and credit providers was implemented in 2001.

“Our jurisdiction is broader than the predecessor schemes, meaning more Australians will be able to access our services.”

As AFCA’s independent chair, Helen Coonan, has said, AFCA is much more than a restructure. Along with the AFCA board, my team and I are absolutely committed to providing a fair, transparent, efficient and accountable dispute resolution service.

AFCA’s establishment means consumers and small businesses will no longer have to navigate multiple systems and jurisdictions when they have a complaint about a financial product or service.

We are expecting about 1000 complaints per week and about 50,000 complaints per year – perhaps more. To resolve these, a solution-focused approach is required, and this is a key focus for AFCA’s complaint resolution process.

Complaints will be heard and decided in an efficient but informal way, without the strict legal rules of evidence that apply in the courts. In most cases, AFCA will use negotiation and conciliation tools to assist both parties to reach a resolution. If a complaint can’t be resolved by agreement, we can then to use our more formal powers to make a determination and award a remedy as provided under our rules.

AFCA continues to build its internal expertise to support this process, and soon we will have more than 550 staff, including 17 ombudsmen and 14 adjudicators. AFCA staff will be located across Sydney and Melbourne.

Increased jurisdiction and powers 

AFCA’s jurisdiction is broader than the dispute resolution schemes that preceded us, and that means more Australians will be able to access our services.

For example, AFCA has a higher dollar limit on the claims we can consider and the compensation we can award. The previous FOS and CIO monetary limits for most non-superannuation disputes have doubled from A$500,000 to A$1 million and the compensation cap has increased from A$323,500 to A$500,000. In addition, the definition of small business has been widened to cover business with fewer than 100 employees.

AFCA is required to report publicly about the complaints it receives. Its public reporting will also include annual reporting of complaints received by financial firms, through its comparative reporting.

The organisation is focused on actively engaging with the financial services industry. We are working with stakeholders to resolve and reduce financial disputes through innovative solutions, education and communication. We are building these strong relationships to ensure positive results can be achieved for all involved.

In establishing our rules, we have worked closely with consumers, small business and community groups, financial firms and industry associations, regulators and government. Talking to our members means our reporting of systemic issues will be significantly enhanced, and we’ll be working with ASIC and financial firms to implement appropriate remediation programs if things have gone wrong.

What it means for CA ANZ members

We understand that for small business owners, which many chartered accountants in private practice are, financial disputes can be extremely disruptive.

Given the cash-flow demands of running a small business, justice delayed after a lengthy court process can feel like no justice at all. We are confident that AFCA will be able to improve the timeframe in which small business owners can expect to resolve disputes with their banks, insurers, mortgage brokers and credit providers.

Some CA ANZ members, such as those who hold an Australian Financial Services (AFS) licence, will also be subject to the AFCA scheme in relating to any complaints about their provision of financial advice. The deadline for AFSL holders to join AFCA and update their client disclosure statements was September 2018.

AFCA members need to ensure their customers are aware that they can bring a complaint to AFCA in accordance with ASIC Regulatory Guide 165. It is also important to understand that any decisions AFCA makes are binding on financial firms. Visit AFCA.org.au and go to the ‘Members’ section for more information.

Restoring faith in financial dispute resolution

In the wake of the Hayne Royal Commission into banking and finance, it is clear AFCA is needed. The September 2018 Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry found consumers are disheartened with the current financial services environment.

Many of the people who have called AFCA so far have mentioned the Royal Commission, and we expect the volume of complaints we receive in 2019 may be higher due to increased public awareness of misconduct in the sector.

It is critical that there are effective mechanisms in place to deal with disputes across the entire financial services industry. Part of our role at AFCA is to re-establish trust and confidence, with consumers knowing there is a single body they can come to if they have a dispute with a financial firm that they can’t easily resolve.

More than 36,000 financial services providers around Australia are now members of AFCA and we will work closely with them to ensure they are able to provide a higher standard of internal dispute resolutions services to their customers.

Regaining customer trust is important to the survival and health of the industry, and AFCA will go a long way towards establishing a new era of good faith in financial services.

How to make a complaint

Consumers and small businesses can lodge a complaint to AFCA online at afca.org.au, email [email protected] or call 1800 931 678.

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