The Financial Ombudsman Service (“FOS”), the Credit and Investments Ombudsman (“CIO”) and the Superannuation Complaints Tribunal (“SCT”) dispute resolution schemes will be replaced by the Australian Financial Complaints Authority (“AFCA”) from 1 July 2018.
Parliament approved a new one-stop shop dispute resolution scheme for financial disputes in Australia. ASIC has indicated in its recent media release that the AFCA will start accepting complaints no later than 1 November 2018.
AFCA will have a higher monetary limit ($1 million) and compensation cap ($500,000) which is almost double the existing limits. AFCA will also hear a wider range of disputes then was originally envisaged. The Minister for Revenue and Financial Services, The Hon Kelly O’dwyer stated that in line with the recommendations of the AFCA Transition Team, complaints AFCA will be empowered to deal with have been broadened to include:
- Small Business Matters: Businesses with fewer than 100 employees will qualify.
- Small Business Primary Production Producers can apply to AFCA concerning disputes about credit facilities of up to $5m, with a maximum compensation of $2m available.
- Income Stream Insurance Policy Disputes. The cap on these disputes will increase from the current $8,300 to $13,400 per month.
- Uninsured Third-Party Motor Vehicle Claims Disputes. The cap on these disputes will increase from $5,000 to $15,000.
- General Insurance Broker Disputes. The cap on these disputes will increase from $174,000 to $250,000.
Minister O’Dwyer commented that the changes, including; redefining a small business as any business with fewer than 100 employees and lifting the compensation available to those small businesses that are primary producers to $2 million, will enhance access to AFCA.
ASIC remains the main supervising body for the scheme and will soon be consulting on an updated Regulatory Guide 139, which will set out details of ASIC’s oversight of AFCA. The updated guide will be published when AFCA commences operations.
Transition to AFCA
Financial service providers who are existing members of FOS or the CIO are required to maintain their membership with these schemes for up to 12 months following AFCA’s commencement on 1 July 2018. The purpose of this is to enable the orderly resolution of any outstanding disputes prior to the cessation of these two schemes. ASIC has also emphasised this point by asking FOS and the CIO to report any failure of members to pay membership and other scheme fees in full and on time.
A memorandum of understanding will be put in place between the CIO and FOS to prevent members inappropriately moving between the schemes in the transition period.
In relation to superannuation disputes, from 1 July 2018, all new superannuation complaints will be lodged with AFCA, and SCT will continue to operate until 30 June 2020.
The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (“Bill”) passed both Houses on 14 February 2018.
Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.