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AFCA to herald ‘a new era of good faith’ after RC

financial

financial
Tas Bindi 5 minute read

AFCA’s mission is to herald “a new era of good faith in financial services”, the chair said, especially after the litany of abuses that were exposed by the royal commission.

The Australian Financial Complaints Authority (AFCA) aims to drive the nation into “a new era of good faith in financial services and herald improvements in solving financial services complaints”, according to the chair of the external dispute resolution (EDR) body, Helen Coonan, who was appointed in May.

Speaking at AFCA’s launch event in Sydney on Thursday (15 November), Ms Coonan said that the issues highlighted in the financial services royal commission mean that “restoring and maintaining public trust is probably more critical than ever”.

“Financial firms that are AFCA members will understand that regaining customer trust is important to the survival and health of their industry. We know that when things go wrong, it can have a catastrophic impact on individuals, and extend beyond those individuals to their families and to the community more broadly, particularly when a small business is in distress,” the chair of AFCA added.

“Our ultimate aim is to work with our members to avoid customer complaints in the first place and reduce the number of disputes that AFCA considers.”

“Significantly expanded jurisdiction”

Ms Coonan stressed that the “one-stop-shop” EDR body, which has more than 36,000 members across the nation, is more than just a consolidation of three EDR schemes (the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman).

“AFCA is not simply a regrouping of these predecessor schemes but a new vision. I think that’s really critical to understand. We havent just rebadged ourselves,” Ms Coonan said.

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The chair noted that the EDR body, compared to its predecessors, has a “significantly expanded jurisdiction” in that it is able to consider complaints by 98 per cent of Australia’s small businesses due to its updated definition of small business as an organisation with under 100 employees (as opposed to the previous limit of 20 employees).

It will be able to consider disputes from small businesses regarding their financial services providers and credit facilities of $5 million or less, up from the $2 million limit under the FOS and the CIO, with the compensation cap increased from $323,500 to $1 million (or $2 million for primary producers such as farmers).

“We are particularly passionate about small business because we think, in many respects, they had a pretty raw deal in the past. Small businesses are a key part of the Australian economy and they have limited resources and time to navigate issues through the courts,” Ms Coonan said.

“With the arrival of AFCA, many small business complaints will now be covered by an external dispute resolution scheme for the very first time.”

The EDR body is currently on a hunt for a dedicated small business ombudsman with a strong understanding of the challenges small businesses face, for example, around access to credit, contract terms and third-party guarantors.

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Meanwhile, for individual consumers, the monetary limit has been doubled to $1 million, while the compensation cap has been raised from $323,500 to $500,000 (or unlimited “where the home secures the guarantee to be set aside”).

“Due to increased limits, more Australians are now able to obtain access to justice by bringing their complaints to this single, independent, alternative dispute resolution body rather than having to navigate multiple schemes or to go to court,” Ms Coonan said.

AFCA is also able to consider unlimited superannuation complaints.

“With all of this in play, AFCA is now likely the largest external complaints resolution organisation in Australia,” Ms Coonan said.

Over 1,200 calls in less than two days

AFCA expects to receive well in excess of 55,000 complaints in its first year.

The chair admitted that the EDR body received more than 1,200 phone calls by 2pm the day after it opened for business on 1 November, and over 550 complaints were lodged by that time.

These figures blew out to more than 2,500 phone calls and around 1,200 complaints after four days in operation, Ms Coonan said.

“This volume of contact from consumers and small businesses shows that there’s a real need for a service such as the one AFCA provides,” the chair added.

ASIC to focus on internal dispute resolution

With the establishment of AFCA, ASIC commissioner Danielle Press said at the launch event that the corporate regulator will now turn its focus on improving internal dispute resolution (IDR) processes within financial firms.

“We challenge financial firms who are members of AFCA… to actually learn from the complaints experience. You’ll find out more from the people who tell you you’re doing things wrong than those that tell you you’re doing things right,” Ms Press said.  

“For now, ASIC’s focus moves from EDR to IDR and how we can improve the internal dispute resolution because, hopefully, we get to a position where we don’t need external dispute resolution.”

The CEO of the Australian Banking Association, Anna Bligh, also said at the event that the banking sector is already working on improving their own complaints functions.

“Every bank has been considering their own complaints functions and making improvements because they know that getting this right is central to earning back trust and reputation,” Ms Bligh said.

“Whether its the industry-wide introduction of customer advocates in every bank, whether its increased investment in dispute resolution, or the restructuring of senior executive teams to include customer complaint functions, there are real and big changes afoot.”

[Related: New small business ombudsman to settle disputes]

AFCA to herald ‘a new era of good faith’ after RC
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Tas Bindi

Tas Bindi

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. 

You can email Tas on: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

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