ASIC has welcomed the authorisation of a new single external dispute resolution (EDR) scheme for consumer and small business complaints: the Australian Financial Complaints Authority (AFCA).
AFCA will be able to deal with complaints about financial firms including banks, credit providers, insurance companies and brokers, financial advisers, managed investment schemes and superannuation trustees. It will operate significantly higher monetary and compensation limits for consumer and small business complainants, as well as provide enhanced access to free dispute resolution for primary producers. ASIC will oversee the operation of AFCA and receive reports including about systemic issues and serious contraventions by financial firms.
AFCA will replace the two existing ASIC approved EDR schemes – the Financial Ombudsman Scheme (FOS) and the Credit and Investments Ombudsman (CIO) – and the statutory Superannuation Complaints Tribunal (SCT).
All financial firms that are required to have a dispute resolution system to deal with complaints from consumers and small businesses must become members of AFCA by 21 September 2018.
ASIC will work closely with AFCA, FOS, CIO and the SCT to monitor membership compliance to ensure that consumers and small businesses retain effective access to EDR throughout the transition period. Some of the transition arrangements may differ depending on which EDR scheme a firm is currently a member of. This is set out below.
FOS and CIO members
FOS and CIO are making arrangements to transition to the new authorised operator: AFC Limited, which will then operate FOS and CIO until all outstanding complaints are finalised.
Existing members of FOS and CIO must become members of AFCA by 21 September 2018. They must also retain their existing membership of the FOS or CIO scheme until further notice.
Consumers will be able to lodge complaints with FOS and CIO up to and including 31 October 2018. AFCA then commences on 1 November 2018 and from that date complaints can be lodged with it. Complaints made to the FOS and CIO schemes before 1 November 2018 and which remain unresolved at that date will be dealt with by AFCA under the Rules/Terms of Reference that applied when the complaint was originally made.
Financial firm members must keep paying fees to the FOS and CIO schemes as and when they fall due.
If any FOS or CIO member has any questions about the transition to the new AFCA scheme or about their ongoing membership obligations, they should contact their current scheme for information in the first instance.
AFCA will shortly consult publicly on:
- New AFCA Rules; and
- Interim AFCA funding model
The AFCA Rules will be subject to ASIC approval.
ASIC recently consulted on changes to its policy guidance about oversight of AFCA. As part of this process ASIC sought feedback about the need for disclosure relief for financial firms in relation to the EDR changes. We will announce our position on this soon.
AFCA will be operated by a company limited by guarantee known as AFC Limited. The chair of AFC Limited is Helen Coonan and the minister for financial services has appointed four AFC Limited Board members as part of the authorisation process.
AFCA will start accepting complaints from 1 November 2018 and that financial firms will be required to become members of AFCA by 21 September 2018.