4 Positives for Brokers From the AFCA Review
The Government has released Treasury’s review of the Australian Financial Complaints Authority (AFCA) coupled with its response to the 14 recommendations set out in that review.
- AFCA review – https://treasury.gov.au/publication/p2021-219154
- Government response - https://treasury.gov.au/publication/p2021-219154-gr
AFCA was established in 2018 through the merging of the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
As part of AFCA’s set-up, an independent review was required by 31 July 2021.
The review found that AFCA is performing well in a difficult operating environment and a changing regulatory landscape. The review set out 14 recommendations, which the Government has accepted.
The Positives for Brokers
- The review stressed the need for greater transparency, timeliness in handling matters and fairness for all parties (not just complainants). AFCA needs to be impartial and not act in a manner that advantages one party (I.e. the consumer).
- Paid advocates (especially those that impact the efficiency of AFCA’s process) will be closely monitored and AFCA will have the power to exclude them.
- Complaints from sophisticated or professional investors must be excluded unless there is evidence they have been incorrectly classified.
- AFCA’s funding model (where brokers pay for AFCA's fees regardless of result) won’t stop brokers defending complaints that they consider don’t have merit. AFCA will take the circumstances of small businesses into account.
These changes will ensure a more efficient and fair process for brokers.
Issues That Require Further Consideration
- AFCA decisions still can’t be appealed. Hopefully, this is less of an issue with the above improvements.
- Credit representatives do not need an individual AFCA membership (only licensees). This may sound positive, but we’ve identified issues around PI insurance coverage and cost allocation (because that fee revenue will need to be recovered from someone). We’ve passed our questions to AFCA.
We’ll provide more details in the new year!
Group Legal Counsel