As of today (1 November), the new external dispute resolution (EDR) body will take complaints from consumers and small businesses previously covered by the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman.
AFCA, which expects to receive 50,000 complaints within its first year, will act as an “independent” entity to investigate unresolved complaints related to a financial product or service and reach “fair outcomes, with a focus on delivering accessible services to meet diverse community needs, and a commitment to independent and impartial decision making”.
It will be able to hear consumer complaints where the value of the dispute is less than $1 million and will be able to award compensation of up to $500,000, while small businesses will be able to have their complaint heard where it relates to a credit facility of less than $5 million and will be eligible for compensation of up to $1 million.
In the case of a small business primary production dispute, AFCA will be able to award compensation of up to $2 million.
It will also retain an unlimited monetary jurisdiction for superannuation complaints.
Earlier this month, AFCA released its new strategy and brand, revealing that its purpose has been defined as providing “fair, independent and effective solutions for financial disputes”.
However, it outlined that its focus will not only be on resolving disputes in the financial arena, but mitigating them too, through innovative solutions, education programs and communication with all stakeholders.
Launching AFCA today, independent chair, the Hon. Helen Coonan, commented: “AFCA will play an important role in restoring trust in Australia’s financial institutions in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“We will influence reform in the financial services sector by raising standards and improving internal practices to reduce and resolve disputes.”
Meanwhile, AFCA chief executive and chief ombudsman David Locke added: “AFCA will provide Australians with services that are easy to use, free and efficient. We will use a range of skills including conciliation and negotiation to find fair solutions for all the parties.
“Where matters cannot be settled then we will make timely and impartial determinations based upon the evidence. Any determinations of AFCA, if accepted by the consumer or small business, is binding on the financial services firm involved.
“The official opening of AFCA’s doors is a significant milestone for the financial services sector and the consumers and small businesses who use these services every day.”
Treasurer Josh Frydenberg noted the launch of AFCA, stating: “Australian consumers and small businesses will be spared the expense and inconvenience associated with taking financial complaints to court, with the Coalition government’s Australian Financial Complaints Authority (AFCA) opening for business as of Thursday, 1 November 2018.
“This new one-stop shop represents a new era for financial dispute resolution, delivering free, fast and binding services for all financial complaints, whether they be related to banks, credit providers, insurance companies or superannuation funds.”
Noting that the Coalition government committed to provide $1.7 million to support AFCA’s establishment in the 2018–19 budget, the Treasurer said that its launch “overhauls Australia’s financial dispute resolution system, bolstering community confidence by providing consumers who have suffered a loss with greater access to free and fair dispute resolution”.
“The establishment of AFCA is part of the Coalition government’s plan for stronger economy and ensuring a fair go for all Australians,” the Treasurer said.
Speaking on behalf of the banking industry, the CEO of the Australian Banking Association, Anna Bligh, said that the banks are strong supporters of external dispute resolution and supported the streamlining of the complaints process.
“A fast, free and binding service which deals with disputes outside of court is the best way for a customer’s issue to be heard and quickly resolved,” Ms Bligh said.
“Banks first set up an external dispute resolution scheme for their customers in 1989 with the Australian Banking Industry Ombudsman Scheme to ensure a fair and transparent outcome for both parties.
“The creation of AFCA as a one-stop shop is an important next step for the industry, as it provides customers [with] an easy-to-access and easy-to-understand avenue for having disputes resolved quickly and fairly.”
AFCA will reportedly use the ABA’s new Code of Banking Practice as “the new benchmark for industry practice” and will draw on the code in its investigations should a bank be accused of breaching its contract with a customer.
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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.