In the final report for the banking royal commission, commissioner Kenneth Hayne recommended that the Corporations Act should be amended to require that Australian Financial Services Licence (AFSL) holders “take reasonable steps to co-operate with AFCA in its resolution of particular disputes, including, in particular, by making available to AFCA all relevant documents and records relating to issues in dispute”.
In the final report, commissioner Hayne noted that while the Corporations Act mandates the form of AFSL holders’ internal and external dispute resolution systems, “there is little benefit in mandating the existence of systems if there is no obligation to comply with those systems”.
The government has now announced that financial firms will be required by law to co-operate with AFCA to resolve financial complaints.
Making the announcement, Treasurer Josh Frydenberg said that the government had “gone further than commissioner Hayne recommended, extending the co-operation requirement to all AFCA members including Australian Credit Licence holders and Registrable Superannuation Entities”.
Mr Frydenberg added: “[This] announcement, as commissioner Hayne says, ‘…will serve to give statutory force to the promises that AFSL holders have made to [AFCA], and will allow the Australian Securities and Investments Commission to take action if those promises are not kept’.”
He emphasised that a breach of the requirement may give rise to a civil penalty.
“A strong economy requires a strong, accountable financial sector that Australians can trust,” he said.
AFCA warmly welcomed the decision, with chief ombudsman and CEO David Locke saying it was “an important step in ensuring consumers and small businesses have their financial complaints solved effectively and efficiently”.
“Commissioner Hayne recommended the law be amended to require AFCA members to take reasonable steps to co-operate with us in the resolution of disputes,” Mr Locke said.
“This was an important recommendation and we are pleased that from today, financial firms will be required by law to provide all relevant documents and records relating to complaints.”
Mr Locke said AFCA expects all financial firms to co-operate fully and respond promptly and comprehensively to all requests.
“Financial firms need to act in good faith at all times, treat consumers fairly and conduct themselves ethically. This is non-negotiable,” Mr Locke said.
“If we see any failure to co-operate fully and honestly with AFCA, we will call this out in the strongest possible terms and work with regulators to see appropriate regulatory action taken.
“AFCA already has the ability to draw adverse inferences where documentation is not provided and does so.”
[Related: AFCA appoints small business ombudsman]
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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.