ASIC Continues its Crack Down on AFS and Credit Licensees for Failing to Comply with AFCA Requirements

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All Australian Financial Services (AFS) licensees providing services to retail clients, Australian Credit Licensees, authorised credit representatives and superannuation trustees are required by ASIC to be a member of the Australian Financial Complaints Authority (“AFCA”) as part of their licensing conditions and cooperate with the scheme.

Importance of Complying with AFCA Requirements

ASIC has continued its efforts in taking action against AFS and credit licensees who are failing to comply with their dispute resolution obligations.

In the last 12 months, ASIC has cancelled or suspended thirty-two (32) credit licences for failing to become members of AFCA. Further, ASIC has commenced legal proceedings in the Federal Court against two (2) credit licensees for disrupting AFCA’s complaints handling and investigation processes and undermining the effectiveness, efficiency and fundamental principles of the AFCA Scheme.

ASIC has claimed it will continue to work closely with AFCA to identify AFS licensees and credit licensees that are not complying with their dispute resolution obligations and will take formal action including cancelling or suspending their licence or legal proceedings where an entity fails to comply.

Next Steps

If you are not a member of AFCA, and you are a retail AFS licensee, credit licensee, authorised credit representative or superannuation trustee, you should sign up with AFCA immediately. You will also need to consider the appropriate breach reporting which should be conducted, given AFCA membership has been required by law since 1 November 2018.  Once your ACFA membership has been received, you will need to ensure you update ASIC’s Professional Register by lodging the appropriate form to notify ASIC of your AFCA membership.

All AFCA members should login to AFCA’s secure services portal and complete their annual assessment as soon as possible. It is also worthwhile checking your entity and contact details are correct, and that you have nominated the appropriate people within your entity as the External Dispute Resolution contact to ensure correspondence relating to all complaints is received and dealt with promptly.

AFS and credit licensees should ensure they have the appropriate policies and procedures in place to identify and classify complaints and ensure that all client complaints are dealt with promptly, fairly and consistently as required by their licensing obligations.

Notifying ASIC of Changes to your AFCA Membership

In addition to having a membership with AFCA, any changes made to your membership must be provided to ASIC in writing.

This includes circumstances where:

  • you fail to renew your AFCA membership,
  • you no longer require AFCA membership; or
  • AFCA has terminated your membership of the scheme.

Background

AFCA is an impartial and independent body that offers dispute resolution services to resolve complaints about financial products and services.  They do not act for either party and their decisions are binding on the financial service provider, where the complainant accepts the decision.

The areas of complaints they consider include:

All AFCA members are required to complete an Annual Assessment to ensure they are invoiced correctly, if not AFCA will make the assessment on their behalf. The annual membership levy paid by AFCA members is based on the size of the business relative to other AFCA members, with a minimum levy amount payable. AFCA members are required to complete the business assessment, which includes identifying their primary business activity and size of their business, in order to calculate the AFCA membership levy.

Further Reading

For more information on how to complete the Annual Assessment please visit AFCA.

About The Author

Ivana

Ivana Josic

Ivana is responsible for all Marketing activities for Sophie Grace and assists both the Compliance and Legal teams with a particular focus on Compliance services. Ivana focuses on website development, management and ensures clients receive the latest regulatory updates through Sophie Grace social media channels, the newsletter and website blog page. Ivana also assists the Compliance team with drafting and amending compliance documentation, preparing AFSL and ACL Applications and implementing ongoing compliance solutions.