As part of their compliance obligations all:
- Australian Credit Licence (ACL) holders; and
- Australian Financial Services Licence (AFSL) holders that service retail clients,
must be a member of AFCA and comply with their decisions and regulations. Additionally, they must also ensure any references to external dispute resolution on their website and disclosure documents refer to AFCA (instead of previous schemes such as FOS).
Obligations for Licensees
AFCA Membership and Notifying ASIC
If you are a credit licence holder or a retail AFS licensee, you must be a member with AFCA. Once you have received your membership with AFCA, it is mandatory that you notify the Australian Securities and Investments Commission (ASIC). AFSL holders can do this by lodging the FS20 form, while credit licensees must lodge the CL20E form.
You must also ensure your AFCA membership is kept up to date and notify ASIC of any changes to your membership, including:
- where you fail to renew your membership,
- are no longer required to be a member of AFCA, or
- AFCA has terminated your membership.
In 2021, ASIC cancelled or suspended twenty-four credit licences in a six-month period for failing to be members of AFCA.
Compliance with decisions
It is mandatory for licensees to comply with AFCA’s decisions. Those that don’t will receive serious penalties. In May 2022, the Federal Court ordered ACL holder Lightspeed Finance Pty Ltd to pay $220,000 for failing to comply with AFCA’s determination following a consumer complaint.
Reviewing Complaints Data
As part of a licensee’s ongoing obligations with AFCA, they must log in to the AFCA membership portal to validate their data prior to the release of the Datacube report each year, and make any requests for changes.
The AFCA Datacube is an online comparative tool that allows consumers to see how a licensee has responded to complaints brought to AFCA. The Datacube contains information about:
- the number of complaints a licensee has received,
- how long it takes them to resolve complaints and
- the number of times they did not respond to a complaint.
Prior to the Datacube report being published, licensees should validate the following data:
Data you can validate for the reporting period
The total number and full listing of complaints received at the Registration & Referral stage.
Non-response at Registration
The total number and full listing of complaints which were automatically progressed from registration because there was no response and there was no error in the progression.
Progressed to Case Management
The total number and full listing of complaints accepted in the Case Management stage.
Closed at Case Management
The total number and full listing of complaints closed in the Case Management stage.
AFCA Annual Assessment
Every year, AFCA members are required to complete a business assessment in the secure services portal, which involves identifying their primary business activity and size of their business, in order to calculate the AFCA membership levy. All AFCA members are required to pay an annual membership levy that is based on the size of the business. relative to other members.
Summary of AFCA
What types of disputes can be lodged with AFCA?
AFCA is able to hear a wide range of disputes, including:
- Small Business Matters;
- Small Business Primary Production Producers;
- Income Stream Policy Disputes;
- General Insurance Broker Disputes;
- Credit, Finance and Loans Complaints;
- Superannuation and Insurance Complaints; and
- Banking Deposits and Investments Complaints.
AFCA’s reporting to ASIC
AFCA has a formal obligation to report various matters to ASIC, including where they believe:
- there is a systemic issue with a licensee;
- a settlement between a Financial Service Provider and complainant requires further investigation; and
- any serious contraventions or breaches have occurred as outlined in section 1052E of the Corporations Act 2001.
AFCA is overseen by ASIC. ASIC has the power to issue directions to AFCA, approve all changes to the AFCA scheme and issue regulatory requirements regarding AFCA’s performance.
The Transition from FOS to AFCA
The Australian Financial Complaints Authority (AFCA) was established in 2018 to provide a more centralised and effective method for dealing with financial services, credit, and superannuation disputes.
In 2016, the Australian Government first proposed that the Financial Ombudsman Service Australia (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT) merge to form one major external dispute resolution scheme for the Australian Financial Services and Credit Industries. Fast forward to 2022, the Australian Financial Complaints Authority (AFCA) has dealt with more complaints than its three predecessors combined.
As of 1 November 2018, AFCA had started accepting all consumer complaints. Throughout 2018, FOS, CIO, and SCT finalised all open complaints that were not transferred to the new scheme, and by 1 November 2018, they ceased to operate. All financial service providers had until 21 September 2018 to register for membership with AFCA, while credit licensees had until 1 November 2018.
Where We Are Now – Findings of the AFCA Review
At the beginning of 2021, the Australian Government commenced a review into AFCA and its operations. By November 2021, the final report was released and it was found that “AFCA is performing well in a difficult operating environment”. Although the review found 14 areas of improvement for AFCA, the review found that overall, AFCA is more effective than its three predecessors combined.
- Review of AFCA – Final Report
- About AFCA
- AFCA responds to the Independent Review
- Lightspeed Finance to pay $220,000 for failure to give effect to an AFCA determination
- ASIC continues its Crack Down on AFS and Credit Licensees for failing to comply with AFCA Requirements
- AFCA Membership a Requirement for AFS and Credit Licensees