New financial and superannuation complaints authority
Legislation has now been introduced to establish a new external dispute resolution (EDR) framework and an enhanced internal dispute resolution (IDR) framework for the Australian financial system.
The new EDR framework is designed to ensure that consumers have easy access to a single EDR scheme, known as the Australian Financial Complaints Authority (AFCA), which will resolve disputes about products and services provided by financial firms. The AFCA scheme will replace the Superannuation Complaints Tribunal (SCT) and the existing EDR schemes approved by the Australian Securities and Investments Commission (ASIC); that is, the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO).
Certain firms that provide financial and credit services to consumers will be required to be members of AFCA. This requirement will cover Australian financial services licensees, unlicensed product issuers, unlicensed secondary sellers, Australian credit licensees and credit representatives, regulated superannuation funds (other than SMSFs), approved deposit funds, retirement savings account providers, annuity providers, and life policy funds and insurers.
AFCA will be required to provide particulars to ASIC, the Australian Prudential Regulation Authority (APRA) and/or the ATO if it becomes aware that any of the following matters may have occurred in relation to a complaint:
• a serious contravention of a law;
• a contravention of the governing rules of a regulated super fund or of an approved deposit fund;
• a breach in the terms and conditions relating to an annuity policy, a life policy or a retirement savings account; or
• a refusal or failure by a party to a complaint to give effect to an AFCA determination.
If a complaint made under the AFCA scheme is settled between the parties, AFCA may also give the particulars of the settlement to APRA, ASIC or the ATO if AFCA believes that the settlement requires further investigation by those agencies.
Key features of the SCT’s complaints handling model, including the requirements for handling death benefit complaints, the decision-making test and the unlimited monetary jurisdiction, will be legislated into the new arrangements to provide certainty for stakeholders.
AFCA’s monetary limit of $1 million and compensation cap of $500,000 are almost double the existing limits. These increased amounts for both small business credit facility and other non-superannuation disputes will be set out in AFCA’s operating rules.
Before AFCA will consider a dispute, it will refer all complaints back to the financial firm for a final opportunity to resolve the dispute in a defined timeframe, to ensure that the IDR process has the opportunity to work.
AFCA will also have an independent assessor to investigate complaints regarding the ways disputes are handled. This measure aims to ensure procedural fairness.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 14 Russell Street Toowoomba.