On 14 February 2018, the Australian Parliament passed legislation to establish the Australian Financial Complaints Authority. This article explains what the Australian Financial Complaints Authority is and what you need to know about it.
What is the Australian Financial Complaints Authority?
The Australian Financial Complaints Authority (AFCA) is an external dispute resolution (EDR) scheme, which will provide a single system to deal with complaints from individuals and small businesses in relation to financial services and products.
AFCA was created as a result of the Australian Treasury's review of the financial system's EDR and complaints framework in 2017. In short, the review found that:
- the existence of multiple EDR schemes caused unnecessary costs and consumer confusion;
- the monetary limits and compensation caps of the schemes have 'fallen behind' contemporary standards and need to be increased; and
- the Superannuation Complaints Tribunal required substantial reform, particularly due to the significantly delays associated with the resolution of its disputes.
What do I need to know about the Australian Financial Complaints Authority?
- It will replace the Financial Ombudsman Service, the Credit and Investments Ombudsmen and the Superannuation Complaints Tribunal.
- It will start receiving complaints from consumers from 1 November 2018, after which complaints can no longer be made to its predecessors.
- Some of the types of complaints it will hear include:
- complaints about inappropriate or incorrect advice from a financial advisor;
- complaints about an insurer's decision to reject a claim; and
- complaints about the amount deemed to be payable under a superannuation death benefit.
- All "Financial Firms", including financial services licensees, credit licensees and regulated superannuation funds, are required to become members of it by 21 September 2018.
- The draft rules indicate that it will have a greater ability to hear complaints than its predecessors. For example:
- the definition of small businesses has been extended from businesses with less than 20 employees to businesses with less than 100 employees; and
- the monetary limits for various complaints and the associated caps on compensation have been increased. Most significantly, there is no limit or cap for superannuation complaints.
The consultation process for the rules governing AFCA's jurisdiction and processes was completed on 29 June 2018. The final rules are anticipated to be released in September 2018.
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.
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