The Turnbull government has announced that it will make a number of changes to the proposed Australian Financial Complaints Authority (AFRA), a one-stop-shop dispute-resolution scheme aimed at improving how financial disputes are dealt with in Australia.
Kelly O'Dwyer MP, minister for Revenue and Financial Services, said improvements will be made to the Treasury Laws Amendment Bill 2017, which provides for the establishment of the scheme, following feedback received during the consultation. Meanwhile, AFCA's terms of reference (TOR), governance, and funding arrangements, will be developed following stakeholder consultation to be handled by the transition team, being led by Dr Malcolm Edey.
Starting July 1, AFCA will operate in place of the Financial Ombudsman Services (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT). It will also raise to almost double the amount the monetary limit and compensation cap of existing schemes to $1 million and $500,000, respectively.
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In the case of small business credit facility disputes, a small business will be able to seek resolution where the credit facility is up to $5 million and may be able to receive up to $1 million in compensation – almost triple the amount of the existing monetary limit and compensation cap.
The bill will reflect the following key changes:
- authorising the minister to appoint a minority of the AFCA board upon establishment, including the independent chair;
- enshrining in the bill the key features of the SCT's complaints-handling model;
- requiring membership of the FOS and CIO to be maintained up to 12 months after AFCA commencement to settle any outstanding disputes;
- allowing the SCT to operate until June 30 2020 to resolve its backlog of legacy complaints; and
- allowing ASIC to publish IDR data to improve transparency and accountability of firms' internal dispute resolution.
In a statement, O'Dwyer also listed the matters to be addressed in AFCA's TOR, including the monetary limits for disputes, AFCA's decision-making processes, internal dispute resolution requirements, and the appointment of an independent assessor.
AFCA will also be required to report on any decisions to change the fees it charges members to the responsible minister annually.
“These changes provide industry and consumers with certainty on the AFCA framework and the opportunity to engage in further consultation with the transition team on AFCA’s TOR,” O’Dwyer said. “Constructive stakeholder engagement will underpin the smooth commencement of this landmark reform.”
The
Insurance Council of Australia (ICA) welcomed the government announcement, as it provides clarity for the transition to AFCA from the current schemes. It also committed to working with Treasury to ensure an orderly resolution of disputes and enhanced outcomes for insurance customers during the transition period.
“The Insurance Council of Australia supports a single ombudsman for financial, credit, and investment disputes,” ICA CEO Rob Whelan said. “The industry welcomes stakeholder consultation on AFCA’s terms of reference. It looks forward to the delivery of streamlined consumer experiences and efficiencies created by sharing resources and back-office functions and services.”
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