AFCA complaints handling hurry leaves thousands of matters exposed

Sources at the Australian Financial Complaints Authority warn its attempt to get on top of spiralling numbers exposes thousands of old cases to a fresh legal challenge.

Thousands of decisions by the Australian Financial Complaints Authority could be called into question because it has resorted to checking its own homework to process a backlog of claims.

AFCA insiders are concerned that the organisation is drifting from its promise to apply a high standard of scrutiny to complaints. Instead, it has resorted to allegedly misrepresenting that a fresh set of eyes had ruled on matters when they had not, sources told The Australian.

Where an AFCA ombudsman would rule on complaints at the final stage, these were routinely overseen by more junior case managers. The involvement of the ombudsman was allegedly limited to signing off on their recommendations.

This is despite AFCA’s assurance that decisions would be subject to review where either party to a complaint disagreed with the preliminary ruling.

David Locke, Chief Ombudsman Picture: Stuart McEvoy/ The Australian.

AFCA, assembled in the wake of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry, is designed to keep disputes from clogging up the court system and free-up regulators to pursue more egregious misconduct.

In its first six months, AFCA received 34,263 complaints. Between July 1, 2023 and June 30, 2024, the latest period for which data is available, it was handed 98,622 matters.

Of these, 41,583 were related to bank behaviour.

AFCA insiders told The Australian it has resorted to “quick and dirty” decision making in a bid to shift its backlog of claims, warning it put the outcomes of thousands of matters at risk.

It’s process boils down to a two-tiered arrangement.

Matters are initially allocated to a case manager, who attempts to resolve the complaint by mutual agreement.

If this fails, the complaint progresses to a second stage where a case manager assesses the merits of the case.

The matter proceeds to an ombudsman if a party refuses to accept the case manager’s finding.

But poor resourcing meant ombudsman matters were often being sent back to the initial staffers, leaving the ombudsman to sign-off on their thinking. This may be as little as

a “quick glance”.

“There were often times where instructions were given to not send out decisions by ombudsman because it looked like it was too quick,” a former AFCA staffer, who spoke on the condition of anonymity, recalled.

AFCA was pinged for weak processes in the 2022 NSW Supreme Court Notesco case, which saw a third party broker sue the body alleging it had acted without impartiality when awarding a decision to Jean Pasquier, a retired 83-year old living in France who lost €306,900 ($545,724) after making thousands of trades on Nextrade.

AFCA staffer May Chng had sought the view of her manager, who in turn consulted ombudsman Nicolas Crowhurst, before issuing a decision in Mr Pasquier’s favour.

When Notesco contested the decision, it was sent to Mr Crowhurst to rule on, again in Mr Pasquier’s favour.

Following this, AFCA engaged former Federal Court judge Julie Dodds-Streeton and barrister Ahmed Terzic to review 30 decisions.

AFCA deputy chief ombudsman Dr June Smith said the dispute’s body had reviewed the Notesco decision.

“Steps were then taken to ensure that a final decision maker is not involved in the early investigation stage of a complaint they will determine,” she said.

Dr Smith said AFCA had commissioned regular independent audits and its next review is slated for 2026 or 2027.

“These reviews have all found that AFCA is engaging in procedural and substantive fairness, and is meeting its obligations of independence and impartiality,” she said.

“These consistent results should give consumers and industry full confidence that AFCA interprets and applies its fairness jurisdiction appropriately and in accordance with its remit.”

Resolving cases at AFCA has proven costly as it hires more staff in a bid to catch up to a spiralling case load.

Parties before AFCA are slugged for each case, starting at $105.81 for a matter to be registered and up to $10,234 for a final decision.

As revealed in The Australian, AFCA has been warning many complainants it would take up to six months to assign them case managers.

AFCA chief executive and lead ombudsman David Locke told The Australian in February he was “mortified” over the delays.

AFCA has also been hampered by financial institutions poaching from its ranks, with ANZ recruiting its former banking lead Evelyn Hall as “customer fairness advisor” in March 2022.