New Dispute Resolution Scheme Requirements

May 14th, 2018

 

In September, the Federal Government introduced the Treasury Laws Amendment Bill 2017 (Putting Consumers First – Establishment of the Australian Financial Complaints Authority). The purpose of this bill is to establish a single new external dispute framework for the financial sector, creating a ‘one-stop-shop’ for all financial disputes to replace three existing financial sector external dispute resolution (EDR) bodies.

The new Australian Financial Complaints Authority (AFCA) is designed to provide enhanced redress for consumers and small business, and to specifically address problems with the multiple EDR scheme framework which have caused confusion for consumers and has resulted in different outcomes between schemes for similar complaints. With the new AFCA scheme, the Government also aims to eliminate duplicate costs for the finance industry.

What will change and when?

• AFCA will commence handling all financial industry complaints (including superannuation complaints) on 1 November 2018.

• AFCA will replace the Credit and Investments Ombudsman (CIO), Financial Ombudsman Service (FOS) and Superannuation Complaints Tribunal (SCT) who will continue operating until 31 October 2018.

• AFCA will be a free external dispute resolution service, specifically for consumers and small business.

• An AFCA website is due to be released shortly and will have further details and updates.

How will this change affect you and your business?

ASIC will require all Australian Credit License holders and all Credit Representatives to maintain and comply with their existing external dispute resolution requirements until AFCA is established and commences its responsibilities on 1 November 2018. ASIC will work with us to ensure there is a smooth transition from CIO and FOS to the new scheme. Until then, please bear in mind the following:

• Prior to the commencement of AFCA, you are still obliged to maintain your membership with CIO or FOS, including paying membership and other scheme fees in full as required.

• ASIC will be supervising the transition process and has asked CIO and FOS to report any ACL holder or Credit Representative who fails to maintain their membership and meet their obligations.

• ASIC will be consulting soon on an updated Regulatory Guide 139 (REG 139), which will set out details of ASIC’s oversight of AFCA.  This will be finalised and published prior to AFCA commencing operations.

• Connective will require all members – both Credit Representatives and ACL holders – to obtain AFCA membership by 21 September 2018.

What are the next steps?

Your Compliance Team will be monitoring the situation closely and we’ll keep you updated on any developments, changes or additional requirements as soon as they become known. Please keep an eye out for our emails instructing you on how and when to join AFCA – it’s very important that your application is lodged in plenty of time before the hand-over.

Remember, prior to 1 November 2018 you must continue with your existing CIO or FOS membership, as they will continue to accept complaints from consumers up to and including 31 October 2018. Under no circumstances may you have no external dispute resolution scheme in place – this is very important.

If you have any questions, the Compliance Team is here to help. Simply click on your help icon in Mercury and select Compliance, or just email us directly at compliance@connective.com.au