Treasury has released a draft Treasury Laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017 for consultation.
The Australian Financial Complaints Authority (AFCA) will be based on an ombudsman model and will replace the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
It will be established as a company limited by guarantee and is expected to commence operations from 1 July 2018.
The financial firms that will be required to participate in the new EDR framework are Australian Financial Services licensees, unlicensed product issuers, unlicensed secondary sellers, credit providers and credit representatives, regulated superannuation funds (other than self-managed superannuation funds), approved deposit funds, retirement savings account (RSA) providers, annuity providers, life policy funds and insurers (financial firms).
Financial firms will be required to be members of AFCA as a condition of their licence. AFCA members will be contractually bound to comply with the AFCA’s terms of reference which will apply to the operation of the EDR scheme by AFCA.
AFCA will deal with all new complaints from 1 July 2018.
The existing dispute resolution bodies will continue to operate after 1 July 2018 to work through their existing complaints.
Consumers will have the option to transfer their complaint to AFCA if they wish to do so.
The SCT will continue to operate until 1 July 2020 to resolve disputes lodged before 1 July 2018.
The AFCA board will be responsible for determining how much funding it will require and how it will be funded.
AFCA will have flexibility in how it resolves disputes, including use of mediation, conciliation or determination.
ASIC will have the power to issue regulatory requirements that AFCA, in operating the scheme, must comply with.
AFCA will commence operations with:
- unlimited monetary jurisdiction for superannuation disputes;
- $1 million limit on the size of non-superannuation consumer disputes ;
- a minimum $500,000 compensation cap for non-superannuation consumer disputes ;
- $5 million small business credit facility limit ;
- $1 million compensation cap for small business disputes ; and
- no monetary limits or compensation caps for disputes relating to guarantees supported by a mortgage or other security over the guarantor’s primary place of residence.
In addition, Treasury has also released a consultation paper to seek additional feedback on a range of matters, including:
- whether the compensation caps for certain financial products, such as mortgages and general insurance products, should move immediately to $1 million upon commencement of AFCA;
- the implications of removing the requirement for credit representatives to be members of AFCA.