As part of the 2017 Federal Budget, the Australian Government announced the introduction of the new Australian Financial Complaint’s Authority (AFCA), a one-stop shop financial resolution scheme.
What are the new changes?
The new complaints authority will combine the responsibilities of three current bodies, the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal into a single industry ombudsman scheme that will hopefully reduce confusion, and inconsistent outcomes currently caused by gaps or overlaps between the schemes.
There will be increased monetary limits, such as $500,000 for consumer disputes, $1million for small business disputes, and have unlimited jurisdiction for disputes relating to Guarantees and Superannuation, which provide the authority with the power to redress wronged Australians, according to the Minister responsible for Revenue and Financial Services.
The Act implementing the changes will include transitional arrangements from the current three-bodied system to the new one (which will be complete by 1 July 2018), the enshrinement of existing super complaints processes and features, and the ability for the Minister to appoint a minority to a group’s board, to ensure the appropriate experience when it commences.
The external dispute resolution is an important alternative to the Court system, as it is free for customers to use and they do not require formal legal representation.
Will the AFCA work?
Despite many welcoming the changes, there has also been an outcry over the new Australian Financial Complaints Authority by six industry associations as reported by the Australian Financial Review. The six associations, including the Mortgage & Finance Association of Australia, and the Customer Owned Banking Association (COBA) to name a few, said they were extremely concerned by the one-stop shop and called the Government to abandon their plans.
The industry associations believe that the review which was undertaken by Ian Ramsay, ‘paid too much attention to the views presented by consumer advocates and failed to recognise that a single, monopoly scheme may not be able to deliver fast and effective resolution of disputes for the small end of town’.
It will be interesting to see how the new authority will affect the financial industry, and whether it will facilitate dispute resolution, or just make it better for the big banks, as it has been alleged.
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