If you have lost money because of a bank or financial advisor, or feel you have been unfairly treated by an insurer or superannuation fund, you may be entitled to compensation through the Australian Financial Complaints Authority (AFCA).
The AFCA commenced operations on 1 November 2018 as a ‘one stop shop’ (replacing the Financial Ombudsman Service, Superannuation Complaints Tribunal and Credit and Investments Ombudsman) to manage complaints and resolve disputes between consumers or small businesses and financial firms.
In its first year of operation, the AFCA reported having received 73,272 complaints (3,869 from small business) resulting in awards of compensation totalling $185 million.
What does the AFCA do?
The AFCA is an independent institution governed by rules approved by the Australian Securities and Investments Commission in accordance with the Corporations Act 2001 (Cth). The AFCA considers a range of complaints and can help resolve disputes between consumers or small businesses and financial firms.
If a dispute cannot be resolved, the AFCA can make a decision that is binding on the financial firm involved. A settlement or determination may include an award of compensation for loss, the waiver or variation of a debt or fee paid, the reinstatement, variation or setting aside of a contract, an order to meet a claim under an insurance policy, and other remedies for superannuation complaints.
The AFCA is not a government body and does not regulate or penalise financial firms.
Who is covered under the AFCA Scheme?
The AFCA considers complaints about financial firms from eligible complainants which include consumers (individuals), small businesses (sole traders, partnerships or companies with less than 100 employees), registered charities regardless of the number of employees, and clubs with less than 100 employees.
The complaint must be about a financial firm that is an AFCA member. All financial services licensees must be an AFCA member, so a financial firm generally includes banks and other credit providers, financial planning firms, superannuation funds, general and life insurers, insurance broking firms, stock broking firms, retirement savings account providers and fund management companies.
Complaints must fall within the Scheme’s rules and guidelines and the AFCA may decline to determine matters that do not fit within these constraints.
Essentially, complaints must be lodged within the required timeframe which is generally six years of becoming aware of the loss suffered or, where a complaint has already been made directly to the financial firm, within two years of receiving its response. A claim must also fall within the monetary jurisdiction, which varies depending on the complainant and issue involved. Generally, claims are limited to $1 million for consumers and $5 million for small business, unless they concern the home of a borrower or guarantor that is used as security. There is no monetary limit for superannuation claims.
Compensation payable is also capped depending on the complainant and category of complaint.
What sort of complaints does the AFCA determine?
The AFCA deals with a range of complaints concerning various types of financial firms and products, for example:
- Credit, finance and loan providers – issues relating to credit reporting, responsible lending, mistakes in fees and charges, misleading product and service information.
- Life and general insurance – complaints regarding claim amounts, delays in processing claims, denial of claims based on exclusions and / or conditions, incorrect premiums and policy cancellations.
- Banks – unauthorised transactions, mistaken internet payments, failing to follow instructions and interpretation of product terms and conditions.
- Superannuation policies – incorrect fees and charges, delays in processing claims, administration errors, denial of claims and incorrect claim amounts.
- Payment systems – unauthorised transactions, mistaken internet payments, incorrect fees and charges.
- Investment and financial advisors – inappropriate / insufficient advice, failure to follow instructions or to act in a client’s best interests, misleading product / service information.
The dispute resolution process
The AFCA will determine a matter based on an opinion that is fair and reasonable having regard to the circumstances, legal principles and relevant industry codes and practice.
After lodgement, complaints are referred for review. The resolution process adopted depends on the nature and complexity of a matter. Simple matters may be fast tracked for early resolution or determination, while more complicated matters and those involving significant financial complexity will be case managed.
For most disputes, informal processes such as negotiation and conciliation are first used to try to resolve and settle the matter. The AFCA will facilitate this process and may provide guidance by suggesting the type of outcome that may eventuate if the matter is not resolved and proceeds to determination. The parties may engage in informal conciliation conferences and exchange settlement offers.
The AFCA will determine a matter if informal negotiations do not achieve a result or if it considers the matter warrants determination without negotiation between the parties.
In some cases, an immediate binding decision will be made and in others, a preliminary assessment is provided. The assessment will include an overview of the facts and issues raised in the complaint and an opinion on how the AFCA considers the matter should be resolved. The parties are then given a timeframe within which to resolve the dispute in line with the assessment, otherwise a determination will be made.
Determinations are made in writing, setting out the AFCA’s remedy including any award of compensation. If the consumer or business accepts the AFCA’s determination, then the financial firm must comply within the stipulated timeframe.
A complainant need not accept a determination regarding a non-superannuation matter and may pursue the claim through Court processes.
Different rules apply for superannuation complaints. An AFCA determination need not be accepted by a consumer and is effective once it is made.
How your lawyer can help
The services offered by the AFCA are free for eligible consumers and small businesses and may be used instead of other tribunals or going to Court.
Once a complaint is made a financial firm may not initiate legal proceedings against the complainant, seek or enforce a judgment to pursue a debt or list a default on the complainant’s credit file, until the dispute resolution process concludes.
As with any dispute, navigating the relevant resolution process can be confusing particularly if the issues are complex and / or involve significant loss. In such cases it can be beneficial to engage an experienced lawyer to assist in preparing your complaint and negotiating on your behalf.
A lawyer can explain legal concepts and the processes involved under the AFCA Scheme, identify key issues so the complaint can be properly articulated, arrange and collate appropriate evidence to support your claim, and calculate and quantify the loss claimed or remedy sought.
The AFCA is governed by Rules and Guidelines which have already been updated several times in its short history of operation. Lawyers can also assist by ensuring their clients are familiar with the current Rules and advising on ‘grey’ areas, such as whether an exception to relevant timeframes may be sought and exploring the merits of rejecting an AFCA determination and pursuing a matter in Court.
If you or someone you know wants more information or needs help or advice, please contact us on 0401 234 710 or email [email protected].