The Treasurer has released the Final Report of the Review into dispute resolution and complaints framework and announced the Government’s response to it, including the establishment of the Australian Financial Complaints Authority (AFCA). Background.
AFCA will be established by 1 July 2018 and will replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
AFCA will deal with all financial disputes, including superannuation disputes.
All financial firms, including superannuation funds, that deal with consumers will be required by law to be members of AFCA. AFCA will be governed by an independent board, with an independent chair and equal numbers of directors with industry and consumer backgrounds, and be funded by industry.
AFCA will commence operations with a monetary limit of $1 million and a compensation cap of no less than $500,000 for financial disputes (other than superannuation disputes). There will be no monetary limits and compensation caps for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other security over the guarantor’s primary place of residence. There will be an unlimited monetary jurisdiction for superannuation disputes.
Consultation will take place in relation to the compensation caps for disputes relating to products such as mortgages and general insurance products and the sub-limits applying to insurance products.
For small business disputes, other than credit facility disputes, AFCA will have a monetary limit of $1 million and a compensation cap of at least $500,000.
For credit facility disputes, small businesses will be able to bring a claim where a small business credit facility is of an amount up to $5 million and AFCA will be able to award compensation in an
amount of up to $1 million.
ASIC will have the power to require financial firms, including superannuation funds, to report on their internal dispute resolution activity to ASIC in a standardised form, including the outcomes for
consumers in relation to complaints raised at IDR.
Debt management firms will be required to hold EDR membership.
The Ramsay Review will report on the merits and potential design of a compensation scheme of last resort and the issues involved in providing access to redress for past disputes in the second half of 2017.