Advisers could face more costs under AFCA recommendations
A review of the Australian Financial Complaints Authority (AFCA) has stated it is “performing well” but made 13 recommendations for the organisation to implement.
This was the first independent review of the organisation which was formed in November 2018 through the combination of the Financial Ombudsman Service, Credit and Investments Ombusdman and Superannuation Complaints Tribunal.
The report stated: “The overall finding of the Review is that AFCA is performing well in a difficult operating environment and a changing regulatory landscape. It has successfully brought together the three predecessor schemes – the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT) – to produce an effective dispute resolution service for consumers and small businesses.
“While this is an endorsement of its performance in its establishment phase, AFCA will need to continue to develop and improve its processes as it consolidates its place in the financial system.”
These recommendations covered five about resolving complaints in a timely manner, two about fees and funding, one about AFCA’s jurisdiction, three regarding accountability, and two ‘other matters’.
Regarding fees and funding, however, the report acknowledged some recommendations it made “may introduce additional costs for AFCA”.
“The review acknowledges that some of these recommendations may introduce additional costs for AFCA, which will ultimately be borne by its members, and these will need to be carefully considered by AFCA in designing and implementing the recommendations.”
Earlier this month, AFCA chief executive, David Locke, said the organisation was keen to ensure funding for the organisation was fair, particularly for smaller firms.
However, the review said ensuring the funding model was fair and sustainable were an “important objective” as many members felt they were not fair at present and could disincentivise them from defending complaints.
“Many financial firms consider that AFCA’s fee structure forces them to settle unmeritorious complaints. AFCA’s funding model should not disincentivise financial firms from defending complaints that they consider have no merit,” it said.
“The review also recommends that the model better take into account the circumstances of AFCA members that are small businesses. In broad terms, a fair and sustainable fee structure should incentivise early settlement of meritorious complaints without assisting unmeritorious complaints to succeed.”
Senator Jane Hume, minister for superannuation, financial services and the digital economy, said: “The Morrison Government has tabled the Review of AFCA in Parliament, and welcomes its findings that AFCA is operating effectively and meeting its statutory requirements.
“AFCA plays an important role in the financial system, providing consumers and small businesses that have complaints about their financial firms with access to an out‑of‑court dispute resolution service that is designed to be free, fast and binding. The Government is committed to ensuring AFCA is operating effectively and achieving its objectives.”
AUTHOR
Laura Dew
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