A quick guide to what you need to be doing about the new external dispute resolution scheme.
The Australian Financial Complaints Authority (AFCA) is a new external dispute resolution (EDR) scheme to deal with complaints from consumers in the financial system which is set to commence hearing disputes from 1 November 2018.
AFCA replaces the three existing financial services EDR schemes, being the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT), so that consumers have access to a single EDR scheme. Consumers and small businesses with less than 100 employees will be able to make complaints to AFCA, who can hear complaints regarding matters of up to a $1 million value (other than superannuation complaints or complaints arising from a credit facility provided to a small business, for which there is no limit), and order compensation of up to $500,000.
What do affected entities need to do?
Australian financial services licensees who provide financial services to retail clients, Australian credit licensees, authorised credit representatives and superannuation trustees are required to be members of AFCA.
Firms were required to register with AFCA on or before 21 September 2018. Those who have not yet done so must take steps to register as soon as possible. For firms who are also AFS licensees, it will also be necessary to follow any internal breach reporting policies and procedures as failure to maintain membership with AFCA is a breach of the general licensee obligations under the Corporations Act 2001 (Cth).
ASIC has indicated that they are closely monitoring membership lists with AFCA and will be following up with firms who fail to meet this deadline.
Updating your documentation
Financial firms must also ensure their clients are aware that they can bring a complaint to AFCA. However, ASIC has provided transitional relief until 1 July 2019 in relation to the relevant disclosure requirements. AFCA has provided the following transition time line to assist members with complying with their disclosure obligations (as applicable) during this period.
Firms should also review and, if necessary, update their dispute resolution policies and procedures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.