The Australian Financial Complaints Authority (AFCA) is the proposed new dispute resolution body for the financial sector. Last week, the Government announced the latest step in the establishment of this new body with the appointment of a transition team for its establishment.
By Dr Drew Donnelly, Compliance Quarter
In today’s article, we summarise the proposals to date for overhauling external dispute resolution in financial firms.
Note, that it is proposed that ‘financial firms’ be defined broadly so that the new framework will affect and apply to a vast range of businesses including:
- All Australian Financial Services (AFS) licensees
- credit providers
- regulated superannuation funds
- approved deposit funds
- retirement savings account providers
- and life policy funds and insurers.
The transitional arrangements
The focus for the newly appointed team is to ensure a smooth transition between the existing dispute resolution schemes, including the three existing dispute resolution bodies, the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal, into a new framework, including the establishment of Australian Financial Complaints Authority. This will be done in consultation with consumers, industry and the existing dispute resolution bodies.
When it comes into force on 1 July 2018, it is intended that the resulting framework will apply to all disputes between consumers and financial firms.
Matters that the transition team will advise the Government on include:
- AFCA’s terms of reference
- Governance and funding arrangements for AFCA
- Recommendations on the authorisation process for AFCA
- Transitional arrangements to settle ongoing disputes in the three existing schemes.
Why the new framework?
The Government commissioned an independent review of the existing system for external dispute resolution in financial services in response to complaints. The final report of the Review of the financial system external dispute resolution and complaints framework identified several problems including:
- Multiple external dispute resolution schemes meaning inconsistent outcomes for consumers with similar complaints
- Multiple schemes meaning duplicated costs for industry and government
- The monetary limits being too low to allow adequate redress for small businesses
- Substantial delays in resolving superannuation complaints which might be helped by overhauling existing governance and accountability arrangements.
The exposure draft
In May, an exposure draft of the Bill that would establish this framework was released for public comment. Consultation is now closed and a finalised bill is yet to be introduced into Parliament.
The Bill does not establish the dispute resolution scheme itself, but a broad legislative framework that that would enable the Government to establish such a scheme.
Key features of the framework proposed in the exposure draft include:
- A power of the responsible Minister to authorise a disputes resolution scheme with specified functions
- Enhanced supervision powers for the Australian Securities & Investments Commission (ASIC), in relation to the scheme
- new statutory powers in relation to the superannuation jurisdiction of the scheme including the power to join parties to a complaint and to obtain information.
For further information see the exposure draft and accompanying documentation.