The Australian Financial Complaints Authority (AFCA) is set to start on 1 July 2018, after the Bill creating the new external dispute resolution body passed the Parliament.
The Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 passed the House of Representatives on Wednesday. As the Bill was introduced to the Senate first and passed there it now awaits Royal Assent.
The Australian Financial Complaints Authority is a new external dispute resolution body for the financial services industry. It replaces the Superannuation Complaints Tribunal (SCT), Financial Ombudsman Service (FOS) and Credit and Investments Ombudsman (CIO).
“AFCA will commence operations on 1 July 2018 and will receive all financial disputes, including superannuation disputes,” says the Explanatory Memorandum to the Bill. The Government says AFCA will start receiving disputes from no later than 1 November 2018.
The Government says consumers and small businesses are the “big winners” from the passage of the AFCA Bill.
“AFCA will provide a one-stop shop to ensure consumers get a fair deal in resolving disputes with banks, insurers, super funds and small amount credit providers, without the expense, inconvenience, and trauma associated with going to court,” said Minister for Revenue and Financial Services, Kelly O’Dwyer.
However concerns have been raised about the new body, in particular around the inclusion of superannuation, with some worried by potential reductions in consumer protections and others calling the 1 July 2018 start date “unrealistic”. Additionally the Superannuation Complaints Tribunal told a Senate committee that it lacks the budget to resolve complaints before it is set to close.
ASIC, which will have oversight of AFCA, welcomed the passage of the legislation. ASIC Deputy Chair Peter Kell said the establishment of the scheme was a “very positive development”.
“Fair, timely and effective dispute resolution is a cornerstone of the financial services consumer protection framework. The combination of firms’ internal dispute resolution procedures and access to a free independent external scheme currently provides redress for many tens of thousands of Australians each year. Strengthening these dispute resolution requirements will help deliver higher standards and better outcomes in the financial services market,” he said.
AFCA is “strongly” supported by the SMSF Association. CEO John Maroney said it gives SMSFs access to a dispute resolution system that will help them deal with large institutions.
“This is an important reform for the SMSF sector. Giving SMSF members the ability to be able to have their grievances with a large institution dealt with by AFCA and avoid lengthy and costly legal proceedings is to be commended,” he said.
“Anecdotal evidence suggests that SMSF members often do not pursue their complaints with banks, insurers and super funds because of the potential legal costs and complexity.”
“But the establishment of AFCA as a one-stop shop now gives them an avenue to address their complaints in a way that is binding and without the cost and trauma that can occur in the court system.”
AFCA is a result of the Review into Dispute Resolution and Complaints Framework, also known as the ‘Ramsay review’, which found “the dispute resolution mechanisms for superannuation are broken”.
The interim report of the review recommended that “there should be a single industry ombudsman scheme for financial, credit and investment disputes (other than superannuation disputes) to replace FOS and CIO” with the SCT transitioned into an industry ombudsman scheme. However the final report of the review recommended: “there should be a single EDR body for all financial disputes to replace FOS, CIO and SCT.”
The Bill was successfully amended in the Senate by the Greens and the Government, in part adding a requirement for an independent review within 18 months into the appropriateness of limits on claims and if complaints have been resolved in a way that is fair, efficient, timely and independent.