In this final instalment of the ‘AFCA: A common complaint’ series, we take a look at how the body has been responding to member feedback, updating its processes, and its top tips for reducing the likelihood of complaints.
Feedback is the breakfast of champions,” author and consultant Ken Blanchard once said. While accepting constructive criticism and complaints can be a hard process for anyone, learning from challenges and friction can be a key part of growing and improving performance.
While the first two instalments of this series have looked at some of the challenges brokers have faced while going through the new complaints system – and the emotional and psychological impact this stressful situation can have on them – the Australian Financial Complaints Authority (AFCA) has also been listening to member feedback and looking at how it can evolve.
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Last year, for example, AFCA’s new funding model came into effect, including the introduction of five free complaints. This means that brokers will not be charged for the first five complaints that are received each year, thereby reducing the cost burden as the vast majority will only ever need to pay their annual registration fee.
AFCA is also continually consulting with members on how it assesses complaints and determines a fair outcome. For example, it put forward 14 recommendations to ensure that the body can develop and improve its procedures earlier this year (see part 1 in the July 2023 edition of The Adviser for more), and recently consulted on how it approaches and assesses responsible lending complaints and appropriate lending to small business (final approaches are expected by late 2023/early 2024).
Speaking to The Adviser earlier this year, Natalie Cameron, the lead ombudsman for banking and finance at AFCA, provided valuable insights into the complaint landscape, common themes, and practical recommendations for both prevention and resolution.
Ms Cameron revealed that the number of complaints made against brokers made up less than half a per cent of the overall complaint workload and that the trend since 2020 has been a steady decline in complaints.
However, of the complaints that do come in against brokers, the three most prevalent categories focus on service quality, incorrect fees or costs compared to customer expectations; and complaints alleging misleading product or service information.
Service quality claims top the list, often stemming from communication issues and misunderstandings between brokers and and clients, while delays in mortgage approvals are a common sub-issue under service quality complaints.
Ms Cameron told The Adviser: “These categories are relatively evenly balanced but service quality does remain the number one complaint type. Looking at what comes in, they very often relate to communication – so it’s often about expectation versus what occurs. And those service quality complaints might, for example, relate to delay or misunderstanding of what’s going to happen next.”
As such, she recommended that brokers could look to reduce the likelihood of receiving these complaints by:
1) Taking action to prevent complaints by ensuring clients understand the process and setting realistic expectations. This could include effective communication, listening to clients’ concerns (can help mitigate issues) and documenting the process in writing in plain English.
2) Managing complaints or disputes effectively when they arise and addressing any potential problems early to prevent them from escalating into formal complaints. “It is absolutely about your customer understanding what the process is going to be and communicating well, and listening well when concerns start to arise,” she tells The Adviser.
“As humans, we’re all so very different in these situations, and they can be very stressful situations. I think it’s just really imperative to listen closely when those escalations arise and to see whether, as a broker, you can identify what is driving the concern, and front-foot those issues so that they don’t escalate into complaints. I think it really just comes down to that to those strong communication skills.”
What to do when a complaint arises?
The AFCA ombudsman added that should a broker be made aware of a complaint, the best thing they can do is be as proactive and transparent as possible.
“When complaints come in, AFCA gives every opportunity for the financial firm to resolve a complaint before it travels through the process – and even as it’s going through the process.
“Directly dealing with these issues, where possible and looking for resolution early and communicating early is my advice.”
She emphasised that maintaining good records of what was said and what occurred during the whole process is also key, so that if, later on, “memories don’t match”, then there is a clear account of the service provided, which can be valuable in dispute resolution.
AFCA also has measures in place to prevent vexatious complaints, including a merit review process. Complaints that lack merit/have no grounds or have already been compensated adequately may be closed early in the process. Brokers can raise with AFCA that they would like complaints reviewed should they believe there is no merit.
Ms Cameron said: “AFCA is impartial. We by no means push for a particular outcome and we’re not representing either party. We certainly wouldn’t push a broker to settle the matter that they felt was unfair or had no merit.”
The complaint resolution process
So, what is the actual process that AFCA undertakes when it assesses a complaint? While the approach will differ depending on what the complaint is about and whether the complaint was lodged against the credit licensee (the aggregator) or the individual broker, it will typically follow these steps:
- Registration and referral: Complaints are lodged against an AFCA member and AFCA will give the financial firm 45 days to seek to resolve the matter themselves. Around 61 per cent of banking and finance complaints are resolved at this stage, Ms Cameron said.
- Case management review: The case management team has a specialist broking team who are experienced in broker complaints. They assess whether AFCA has jurisdiction to proceed with the complaint (for example, it must be within six years after the complainant becomes aware of the loss) and, if so, set about investigating the facts. This includes sending a letter to both parties outlining the complaint and what is being investigated and asking for documentation and records relating to the issue at hand.
- Conciliation: The contact at the case management team might suggest having a conciliation conference. This face-to-face meeting, facilitated by an AFCA conciliator, aims to find common ground and potentially resolve the complaint.
“The conciliation step can be a really productive step. Sometimes, what a consumer is really looking for is an opportunity to express how they’re feeling about a situation and feel that they have been understood and heard. Sometimes, having an opportunity to say all of that directly and then to have it acknowledged is sometimes enough to resolve the complaint,” Ms Cameron said.
Preliminary assessment: If conciliation fails, the complaint proceeds to the preliminary assessment stage. Here, the specialist reviews the case, prepares a draft decision, and informs the parties of their findings and what the outcome is likely going to be considering the relevant laws, conduct of conduct and best practice. If both parties accept the terms of the assessment, it is then resolved at that stage. If one party rejects it, AFCA then takes the complaint to final determination.
Determination: If the complaint is still not resolved, the issue then goes to decision makers (typically a senior lawyer who specialises in that area) who independently review the entire file and make a final judgment. This decision is binding if both parties accept it. Only one in 10 make it all the way through to a decision.
Acceptance or rejection: The complainant has 30 days to accept or reject the decision. If accepted, any compensation awarded is binding. If rejected, the process ends, and the complainant can explore other legal avenues. A complaint that has gone through determination cannot be lodged again.
Ms Cameron outlined that of the complaints that went through preliminary assessment and final determination in 2022, 59 per cent were found in favour of the financial firm, indicating that a significant portion of complaints had no merit or were resolved in favour of the broker.
In all, the complaints body says it aims to resolve complaints within 30 days, however, she noted that it depends on the complexity of the matter and the co-operation of the parties involved.
The ombudsman continued: “Complaints resolve much more quickly if there is a settlement at some stage. But otherwise, we’d recommend brokers provide as much information as possible, as early as possible, to assist us in identifying if there has been an issue and how it should be resolved.
“Co-operating through the process, responding to requests and engaging practically can also speed up the process.”
She concluded: “If I could give one piece of advice it is that file notes of meetings and phone calls are often very worthwhile, particularly if the matter has the potential to be a contentious one ... We do find that a lot will turn on a file note.”
You can read the previous instalments of the 'AFCA: A common complaint' series in previous editions of The Adviser magazine. Premium members can access part 1 of the series here and part 2 here.