The new Australian Financial Complaints Authority is to appoint a small business ombudsman dedicated to settling SME financial disputes.
The new external dispute resolution (EDR) body, which officially launched this month to handle complaints from consumers and small businesses previously covered by the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman, has said that it will appoint a specific lead for small business complaints given the important role SMEs play in the economy.
Under the one-stop-shop EDR scheme, AFCA’s yet-to-be-appointed small business ombudsman will consider complaints from “small businesses” (which it defines as an organisation with less than 100 employees) regarding their financial service providers and credit facilities up to the value of $5 million.
AFCA has confirmed that the recruitment process will begin immediately, and that it hopes for the post to be filled in “early new year”.
Speaking of the decision to appoint a dedicated lead, AFCA’s independent chair, Helen Coonan, said: “AFCA recognises that small businesses are a very important part of the Australian economy, and the banking royal commission has demonstrated how devastating it can be when they have financial disputes that are not fairly resolved.
“It is really important that AFCA understands small business and provides effective solutions to their disputes.
“A dedicated small business ombudsman will ensure that we place the needs of small businesses front and centre in all our work, and that all our services are informed by a good understanding of the issues that Australian small businesses face.”
AFCA has also lifted the compensation cap that can be awarded to small businesses to $1 million (from the previous cap of $323,500), while primary producers will have a compensation cap of $2 million.
Ms Coonan said: “These are significant increases compared to previous schemes’ jurisdiction. This change means that AFCA is now able to consider complaints from over 98 per cent of small businesses. This covers the vast majority of small businesses in Australia and removes the need and expense of going to court to resolve financial disputes.”
AFCA’s chief ombudsman and CEO, David Locke, added: “With the arrival of AFCA, and the increase in monetary limits, many small business complaints will now be covered by an external dispute resolution scheme for the very first time. This will be a big help and provides small businesses with a fair, free and independent way of resolving their disputes.”
SME sector welcomes news of dedicated small business ombudsman
Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell commended the move, saying: “We welcome the announcement of a dedicated small business lead ombudsman.
“We envisage a small business expert will be appointed, which will significantly improve small businesses’ access to justice and save them time and money.”
Likewise, the president of the Commercial and Asset Finance Brokers Association of Australia (CAFBA) and deputy chair of the Council of Small Business Organisations Australia (COSBOA), David Gandolfo, emphasised that small business issues are “often unique and require a special understanding of small business circumstances”.
“Appointing a small business specialist to deal with these issues and interface with the financial service providers will provide a more efficient and understanding process,” Mr Gandolfo said.
He congratulated the authority for “listening to the concerns of small business during the transition phase to the new authority” and said that the news of a dedicated ombudsman was a “welcomed outcome”.
The news comes amid a renewed focus on small business finance, following the announcement that the government is to launch a new $2 billion Australian Business Securitisation Fund (ABSF) to help provide additional funding to small business lenders.
In a joint statement on Wednesday (14 November), Treasurer Josh Frydenberg and the Minister for Small and Family Business, Skills and Vocational Education, Michaelia Cash, announced that the Australian Business Securitisation Fund would “significantly enhance” the ability for small businesses to access funds by providing “significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms”.
The government has also reiterated that it will “encourage the establishment of an Australian Business Growth Fund to provide longer-term equity funding”.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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