AFCA will influence reform in financial services by raising standards and improving internal practices to reduce and resolve disputes, said the body’s independent chair Helen Coonan.
AFCA (the Australian Financial Complaints Authority) opened for business on Thursday (1 November) and is now ready to start taking complaints from consumers and small businesses.
Australia’s Parliament has passed a bill to establish the new dispute resolution body in February. In May, it was authorised by the government and started receiving registrations from financial firms, required by law for all firms providing financial services to consumers and small businesses, including businesses operating in the regulatory sandbox.
AFCA takes over from the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal, which lacked the two-way flow of information with regulators needed to ensure action was taken even when poor behaviour was identified. The new body will provide reports to ASIC (Australian Securities and Investments Commission) about systemic issues and serious breaches by financial firms.
As a ‘one-stop shop’ for financial services dispute resolution, AFCA will independently investigate unresolved complaints about all financial products and services, whether related to banks, credit providers, insurance companies or superannuation funds. It will work with complainants and financial firms to reach timely and fair outcomes, where any determination made by AFCA, if accepted by the consumer or small business, is binding on the financial firm involved.
“AFCA will play an important role in restoring trust in Australia’s financial institutions in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry,” said the body’s independent chair Helen Coonan. “We will influence reform in the financial services sector by raising standards and improving internal practices to reduce and resolve disputes.”
For consumer disputes, AFCA will hear complaints where the value of the dispute is up to AUD 1 million, compared with a AUD 500,000 threshold in predecessor schemes. It has the power to award compensation of up to AUD 500,000.
For small businesses, AFCA will hear complaints relating to credit facilities of up to AUD 5 million, and can award compensation up to AUD 1 million, tripling predecessor limits. In the case of a small business primary production dispute, it can award compensation of up to AUD 2 million.
The ABA (Australian Banking Association) welcomed AFCA’s launch, saying it will significantly reduce the need for litigation: “A fast, free and binding service which deals with disputes outside of court is the best way for a customer’s issue to be heard and quickly resolved,” said ABA CEO Anna Bligh in a statement.