Bad-actor complaint firms can be banned in AFCA review
The government has tabled the long awaited review of the Australian Financial Complaints Authority, with 14 changes proposed.
Paid advocates would be banned from lodging complaints – as could sophisticated investors, a Treasury review of the nation’s financial services ombudsman has recommended.
The Treasury report, made public on Wednesday, found the Australian Financial Complaints Authority was “performing well in a difficult operating environment and a changing regulatory landscape”.
“The review identified some shortcomings in the timeliness of AFCA’s resolution of complaints and recommends AFCA better manage users’ expectations around time frames, as well as focusing on improving the timeliness of complaints that remain unresolved beyond 12 months,” the report reads.
The AFCA was established in 2018 with the merger of the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
The Treasury review made 14 recommendations. They include addressing “poor conduct by paid advocates affecting the efficiency of the scheme, such as by amending its rules to allow it to exclude certain paid advocates from involvement in the complaints process”.
“AFCA should exclude complaints from sophisticated or professional investors, unless there is evidence that they have been incorrectly classified,” the report reads.
“Many financial firms consider that AFCA’s fee structure forces them to settle unmeritorious complaints.
“AFCA’s funding model should not disincentivise financial firms from defending complaints that they consider have no merit. The review also recommends that the model better take into account the circumstances of AFCA members that are small businesses,” it reads.
Releasing the Treasury report, Financial Services Minister Jane Hume said the review confirmed that AFCA was “working well”. “It means access to justice for consumers and SMEs without lengthy and expensive court proceedings,” she said.
Compensation provided on closed complaints in the first two years of AFCA’s operation totalled $477.4m and remediation on closed systemic issues totalled $202.2m, the government said.
In responding to the review, Treasury said it supported 13 recommendations for AFCA to action and agreed with one recommendation which requires legislative amendment.
That change would mean authorised credit representatives would no longer need to be a member of AFCA.
“The government notes that the requirement for authorised credit representatives to be members of AFCA does not enhance consumer protection or access to redress as the obligation to pay compensation awarded by AFCA remains the responsibility of credit licensees,” Treasury wrote in its response.
David Locke, AFCA’s chief executive, said the review was “a very positive report card”.
“We know there are areas where we can improve as we move out of our establishment phase, and some of these have been identified in the review,” he said. “We have a number of important projects under way … along with a review that is looking at ways to modernise our interim funding arrangements.
“We will use the insights and analysis from the review to further inform this work,” he said.
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