The number of complaints to AFCA could exceed 50,000 within the first year, according to its CEO, who also stressed the importance of responding swiftly.
Speaking at the National Small Business Summit, the CEO of the new Australian Financial Complaints Authority (AFCA), David Locke, said that the authority expects to receive 50,000 complaints within the first 12 months of commencement (1 November 2018), but admitted that this could be a significant underestimation.
Mr Locke spoke of the importance of responding swiftly to complaints because “justice that is delayed is no justice at all”. He explained that small businesses have small profit margins and cannot be waiting for months and years for matters to be determined or resolved.
He also stressed that in order to better serve small business consumers, the authority needs to have a proper understanding of the pressures they face on a daily basis, while acknowledging that despite their expertise in many areas, they “are not, like individual citizens, immune from being duped or conned”.
“It is about ensuring that AFCA actually understands all of these issues, in addition to providing the best possible dispute resolution service [and] providing fair determinations,” the AFCA CEO said at the summit.
Mr Locke admitted that there is a lot to learn from the ongoing financial services royal commission, adding that AFCA wants to learn those lessons in a collaborative and “real-time way”.
This is to “ensure that where there is egregious behaviour or where there are players in the market who are real outliers in terms of their conduct that we can actually work together to try and seek some redress”, the AFCA CEO said.
The AFCA CEO also commented that the authority has “tremendous data” on financial services organisations at its disposal due to the “tens of thousands of disputes that are coming through”, and that this will help it to identify systemic issues.
“We already do work identifying where there are systemic issues and actually working with ASIC to put in place remediation schemes in respect of those,” Mr Locke added.
However, AFCA — which is the consolidation of the Financial Ombudsman Service (FOS), the Superannuation Complaints Tribunal, and the Credit and Investments Ombudsman (CIO) — has faced some criticism from both the banking and broking industry.
Last month, the broking industry had flagged that new-to-industry brokers were being prevented from joining aggregators or becoming accredited with lenders as a result of a hiatus in the issuance of certificates of ASIC-approved external dispute resolution (EDR) body, following the consolidation of three EDR schemes.
With CIO confirming that it would no longer be accepting any new members due to being in a transitional period, the industry expressed concern that new brokers would not be able to write loans or become an authorised credit representative until they are issued with their AFCA membership certification - which are expected to start being issued from 3 September.
Despite some brokers saying that they have been waiting for more than a week to receive the required certificate and that they have been in communication with AFCA about it, a spokesperson from the authority told The Adviser that once a membership application has been submitted via AFCA’s website, a confirmation email will “normally” be sent within three to five business days.
This confirmation email was said to be “sufficient to meet [the broker’s] EDR scheme obligations”, however some aggregators have disputed this - highlighting that they need membership numbers and expiration dates, among other details, which are only provided in certifcate confirmations.
Also in August, several members of the finance and mortgage industry said that the transition from three EDR schemes to one will result in some members being “double-charged”, which could cost the industry millions of dollars.
A month earlier, the Australian Banking Association (ABA) and major banks have for changes to the proposed rules that would define the jurisdictional parameters of AFCA, calling certain provisions “inappropriate”.
For example, the ABA has communicated concerns with one rule, which would give AFCA the power to request financial services entities to do or refrain from doing acts that it considers necessary to investigate and/or refer systemic issues for remediation.
The banking industry body suggested that AFCA is treading too far from its primary purpose of resolving individual disputes, noting that there is “no equivalent provision” in antecedent EDR schemes.
In its initial stage, financial services businesses and superannuation funds will be levied to pay for AFCA, similar to the APRA levy. However, future funding arrangements are being consulted.
The new EDR scheme will commence on 1 November with around 550 staff.
[Related: AFCA responds to EDR membership concerns]
Tas Bindi is the features editor for The Adviser magazine.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.
The number of mortgage brokers branching into commercial loans ha...
A new fintech backed by Resimac has launched, aiming to overcome ...