- Australian Financial Complaints Authority (AFCA)
- By Tony Ibrahim
- Contributed by: Philip ( 1 article in 2018 )
New authority to handle financial disputesThree out-of-date regulators will be replaced by a new dispute handling body launching in November.
- Australian Financial Complaints Authority to launch in November
- New "one-stop shop" will streamline complaints process for consumers
- Rulings will be legally-binding
Unhappy home loan, car finance and credit card customers will be able to escalate their complaints to a free, fast and legally-binding authority once it begins handling financial disputes come November 2018.
The Australian Financial Complaints Authority (AFCA) is the result of a gruelling 22-month consultation process and will replace three current dispute handling bodies. It comes at a time when the banking sector is under the magnifying glass of a royal commission.
Awards will include compensation up to $500,000 and the reduction or waiving of debt. It will also have enforcement powers to, for instance, make sure an insurance company pays out a policy claim.
The rulings will be legally-binding. All financial firms, including superannuation funds, will be required by law to be members of AFCA.
Wronged consumers will finally be able to hold banks and other financial businesses to account, says Kelly O'Dwyer, Minister for Revenue and Financial Services.
"AFCA will provide a one-stop shop to ensure consumers get a fair deal in resolving disputes with banks, insurers, super funds and small amount credit providers, without the expense, inconvenience, and trauma associated with going to court," she says.
"Where [community] expectations are not met and consumers wrongfully suffer a loss, it is critical that those who have been wronged have access to redress in a timely manner."
AFCA will be akin to an ombudsman for the financial sector, though it will be bolstered with some added statutory powers.
Its introduction comes after a 2016 review described the current dispute handling framework as out of date and in need of reform. Of the 11 recommendations made, all of which were accepted by the government, its formation was the linchpin.
The government has pledged the body will begin hearing disputes no later than November 2018, when it will then replace the Financial Ombudsman Service (FOS), Credit and Investment Ombudsman (CIO) and Superannuation Complaints Tribunal.
AFCA will be an independent body operating as a nonprofit. It will receive funding from the businesses populating the financial services industry, such as banks and superannuation companies, and its board will comprise of an independent chair, with its directors split equally between those with industry and consumer backgrounds.
Both regulatory bodies and members of the financial industry welcomed the passage of its legislation through the lower house of parliament.
Peter Kell, deputy chair of corporate regulator ASIC, says AFCA's formation will provide redress for tens of thousands of Australians each year.
"Fair, timely and effective dispute resolution is a cornerstone of the financial services consumer protection framework," he says.
Anna Bligh, chief executive of the Australian Bankers' Association, says the legislation would streamline the complaints process for consumers.
"A quick resolution of any dispute between a customer and financial institution is in everyone's best interest," she says
"When a complaint needs to go further, it's important the process is simple, fair and results in a speedy outcome."
The government is currently seeking a proposal for a nonprofit company to operate AFCA with a deadline of 15 March 2018. It has committed to have the dispute handling body operating by November of this year.
CHOICE chief executive Alan Kirkland was part of the independent expert panel appointed in 2016 to review the framework for external dispute resolution and complaints in financial services.