The establishment of a single external dispute resolution (EDR) and complaints framework will not provide better consumer outcomes nor will it be able to address past, or prevent future, financial scandals.
Using its submission to Treasury on the exposure draft bill of the creation of the Australian Financial Complaints Authority (AFCA), the Credit and Investments Ombudsman (CIO) said there was also no economic basis for the body and that it essentially had the same powers and jurisdictions as CIO, the Financial Ombudsman Scheme (FOS), and the Superannuation Complaints Tribunal (SCT).
CIO said AFCA was not equipped to weed out poor entrenched corporate culture or address the string of financial scandals that regularly graced the pages of newspapers, and AFCA would be powerless to prevent their reoccurrence to the detriment of consumers as they would not be able to investigate the root cause of the scandals.
“AFCA’s efficacy is further stymied by its inability to subpoena a third party to attend as a witness or produce documents, join third parties, cross-examine witnesses, take evidence on oath, investigate criminal fraud or impose penalties. Only a court or statutory tribunal can do this,” the submission said.
“Not having statutory powers, AFCA will not able to redress the power imbalance between big banks and small businesses or deal effectively with small business claims against banks, even with expanded monetary limits and compensation caps.”
CIO noted that AFCA would not be able to enforce its own decisions and consumers would not be able to enforce AFCA’s decisions or seek a judicial review of an unfavourable AFCA decision.
The submission also noted that while the Ramsay Report said that multiple EDR schemes resulted in increased costs for the regulator, the AFCA proposal led to the Government to announce an additional $9.2 million to be made available to the corporate regulator and Treasury to ensure they could implement appropriate law and regulatory reform.
