The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 establishing an Australian Financial Complaints Authority (AFCA) has been passed by Parliament and is awaiting Royal Assent. It will be in operation no later than 1 November 2018. Background.
UPDATE: Royal Assent given on 5 March 2018.
According to the Minister for Revenue and Financial Services the transitional provisions will include:
- the definition of a small business will be relaxed, so that any business with fewer than 100 staff can access AFCA;
- small business primary production producers – defined in accordance with the Income Tax Assessment Act 1997 – will have access to compensation of up to $2 million for disputes about credit facilities of up to $5 million;
- the cap on income stream insurance product disputes will be increased from $8,300 to $13,400 per month;
- the cap on uninsured third party motor vehicle claims will increase from $5,000 to $15,000; and
- the separate compensation cap for general insurance broker disputes will be increased from $174,000 to $250,000.
AFCA will start accepting complaints from no later than 1 November 2018.
The Government is seeking a proposal for a not-for-profit company to operate the AFCA scheme to be lodged with Treasury by 15 March 2018. The scheme will be subject to ongoing oversight by ASIC.
In order to maintain access to external dispute resolution for consumers in the lead up to commencement of AFCA, ASIC will monitor member compliance with existing EDR scheme requirements as well as the effectiveness of scheme operations.
Members of each of CIO and FOS – including licensees and credit representatives – must continue to maintain their EDR membership through this period, including paying membership and other scheme fees in full as required. ASIC has asked the two schemes to report any failure of members to do so.
A memorandum of understanding between CIO and FOS will prevent members inappropriately moving between the schemes in the transition period.
ASIC will be consulting soon on updated Regulatory Guide 139 (REG 139), which will set out details of ASIC’s oversight of AFCA. This will be finalised and published when AFCA commences operations.
Current legislative IDR requirements for superannuation trustees and retirement savings account providers (including 90-day timeframes and requirements for written reasons) will continue to apply in their current form until ASIC consults on and then issues updated IDR policy (RG 165).