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When you need help to resolve a complaint and your financial services company won’t come to the party, the Australian Financial Complaints Authority may be able to help. Today we explore this route for resolution, with the help of an industry professional.
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New data released today by the Australian Financial Complaints Authority (AFCA) has shown that complaints about home loans have increased by 20 per cent in the last six months of 2019.
The data shows that CBA and Westpac have the largest proportion of complaints, with the CBA Group at 890 and Westpac Group 639 of the complaints made.
This increase has been driven by financial firms failing to respond to requests for assistance, the conversion of loans from interest only to principal and interest and issues with responsible lending.
Credit card complaints were 2,750 in the same period.
The data, which has been made freely available to the public through AFCA’s Datacube shows that between July and December last year, the financial services ombudsman received 2,201 complaints about home loans, that’s 367 per month, on average.
AFCA Chief Operating Officer Justin Untersteiner said that it was disappointing to see the increase but making the data available to the public was an important step in increasing transparency.
“Every six months, AFCA releases data which allows Australians to see how many complaints their insurer, bank, financial adviser, superannuation fund or other financial firm has received and how they have responded to those complaints,” Mr Untersteiner said.
“Rebuilding trust in the Australian financial services will be a long journey and one that requires effort across the entire sector.
“Transparency is key in this transformation and we have made significant changes in the way we report our data and decisions to make them more accessible to the public.
“The data also shows that we are getting very few complaints about financial advice, just 30 per month, and complaints against debt buyers or collectors rose by just five per cent. “Our hope by releasing this data is that we see improvements and the industry takes action to reduce the number of complaints that end up at AFCA.”
Australians in dispute with their bank, insurance provider, super fund, or other financial firms have lodged 73,000 complaints with the financial sector’s new ombudsman and have been awarded $185 million in compensation, in the first 12 months of its operation.
The Australian Financial Complaints Authority (AFCA) is celebrating 12 months since it opened its doors as the nation’s one-stop-shop for complaints about financial firms, replacing three former external dispute resolution schemes.
People made 73,272 complaints to AFCA between 1 November 2018 and 31 October 2019. This represents a 40 percent increase in complaints received compared to AFCA’s predecessor schemes, which in the 2017/18 financial year received a combined total of 52,232 complaints.
Of the complaints made, 56,420 have been resolved with the majority resolved in 60 days or less.
Research conducted in July this year showed that just three percent of Australians knew about AFCA. Yet, despite the need to raise awareness, Australians are making nearly 200 complaints a day.
AFCA Chief Executive Officer and Chief Ombudsman David Locke said AFCA was a fair, free and independent service that was fast becoming valued by the public and its members for its approach to dispute resolution.
“Every day we continue to hear from people who are dissatisfied with the way their financial firm has handled their complaint. These matters have not been resolved internally by financial firms and so the individual then brings their complaint to AFCA,” Mr Locke said.
“We take our commitment to fairness and independence very seriously, and where possible we encourage the financial firm and complainant to resolve the matter among themselves. The statistics show that this happened with 70 percent of all claims resolved in the past 12 months.
“Still, the increase in complaint numbers we are witnessing at AFCA indicates that there is still work to be done by firms to improve their practices and restore public faith in financial firms. AFCA will continue to focus on member engagement to help firms to enhance their own internal dispute resolution procedures.”
Mr Locke said he was proud of the significant milestones that AFCA and its people had achieved in its first year of operation.
“Establishing AFCA as a new organisation and handling a 40 percent increase in complaints was never going to be easy and we are still improving the way we operate,” he said.
“I am very proud of the AFCA team and what has been achieved so far. I am fortunate to work with a great team of people who are professional, passionate about fairness and independence, and who care about our customers.
“AFCA has also been in a major growth phase of staff to meet demand and has launched the first leg of a national roadshow to promote its service across the country.
“The Financial Fairness Roadshow has been a great success. So far we’ve been to 26 locations across Tasmania, Victoria, the ACT and regional New South Wales, where we’ve spoken with more than 7,000 people.
“We plan to tour the rest of the country in the first half of 2020.”
Mr Locke said AFCA had also hosted forums for small business, consumer advocates and AFCA members in 10 locations coinciding with the Roadshow’s itinerary.
The Australian Financial Complaints Authority will begin naming financial firms in its published determinations to increase transparency in the financial sector and enhance consumer confidence.
The change comes following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
AFCA undertook a public consultation and submitted an application to the Australian Securities and Investments Commission (ASIC) to change the AFCA Rules.
AFCA Chief Ombudsman and CEO David Locke said AFCA is committed to being open, transparent and accountable to the public.
“AFCA plays an important public role and we recognise that transparency in our data and decisions is essential to rebuilding trust in the financial sector,” Mr Locke said.
“We already publish decisions on our website, but we have been unable to name the financial firms involved.
“We welcome ASIC’s approval to change our Rules, which will allow us to now name financial firms in decisions we publish on our website.
“This is an important change, and the public will now be able to access increased information about the actions of financial firms.”
AFCA is working with ASIC to determine the start date for the naming of financial firms. Further updates will be provided when available.
ASIC has approved changes to the Australian Financial Complaints Authority (AFCA) Rules to allow the scheme to name financial firms in published determinations.
In its first six months, AFCA received 35,263 complaints. About 4,500 to 5,000 complaints are currently expected to be finalised each year by way of determination. While the publication of determinations has been a longstanding feature of the external dispute resolution schemes in Australia, the names of firms involved in financial services, superannuation and credit complaints have not been published to date.
AFCA applied for approval to change their Rules to enable identification of firms following public consultation. Consumers who are party to a complaint will continue to be anonymised in all determinations.
In approving this change ASIC took into account stakeholder feedback to AFCA’s public consultation and the statutory approval criteria.
ASIC’s view is that naming firms in determinations can help identify conduct or market problems within firms or affecting specific products or services, as well as highlighting where firms have done the right thing. It will also enhance transparency and accountability of firms’ performance in complaints handling and of AFCA’s own decision-making.
To support the new Rules, AFCA will shortly be issuing updated operational guidelines which set out examples of the circumstances in which a determination naming a financial firm would not be published. This includes where naming may expose confidential information about a firm’s systems or policies.
Naming firms in AFCA determinations is part of a broader set of reforms aimed at increasing transparency in financial services. This includes Parliament giving ASIC power to collect and to publish internal dispute resolution (IDR) data at firm level. The UK Financial Ombudsman Service has been naming firms in published determinations since 2013
ASIC has welcomed the authorisation by the Minister for Revenue and Financial Services of the operator of the new single external dispute resolution (EDR) scheme for consumer and small business complaints: the Australian Financial Complaints Authority (AFCA).
AFCA will be able to deal with complaints about financial firms including banks, credit providers, insurance companies and brokers, financial advisers, managed investment schemes and superannuation trustees. It will operate significantly higher monetary and compensation limits for consumer and small business complainants, as well as provide enhanced access to free dispute resolution for primary producers. ASIC will oversee the operation of AFCA and receive reports including about systemic issues and serious contraventions by financial firms.
AFCA will replace the two existing ASIC approved EDR schemes – the Financial Ombudsman Scheme (FOS) and the Credit and Investments Ombudsman (CIO) – and the statutory Superannuation Complaints Tribunal (SCT).
Joining AFCA
All financial firms that are required to have a dispute resolution system to deal with complaints from consumers and small businesses must become members of AFCA by 21 September 2018. This includes trustees of regulated superannuation funds who are currently subject to the SCT.
ASIC will work closely with AFCA, FOS, CIO and the SCT to monitor membership compliance to ensure that consumers and small businesses retain effective access to EDR throughout the transition period. Some of the transition arrangements may differ depending on which EDR scheme a firm is currently a member of. This is set out below.
FOS and CIO members
FOS and CIO are making arrangements to transition to the new authorised operator: AFC Limited, which will then operate FOS and CIO until all outstanding complaints are finalised.
Existing members of FOS and CIO must become members of AFCA by 21 September 2018. They must also retain their existing membership of the FOS or CIO scheme until further notice.
Consumers will be able to lodge complaints with FOS and CIO up to and including 31 October 2018. AFCA then commences on 1 November 2018 and from that date complaints can be lodged with it. Complaints made to the FOS and CIO schemes before 1 November 2018 and which remain unresolved at that date will be dealt with by AFCA under the Rules/Terms of Reference that applied when the complaint was originally made.
Financial firm members must keep paying fees to the FOS and CIO schemes as and when they fall due.
If any FOS or CIO member has any questions about the transition to the new AFCA scheme or about their ongoing membership obligations, they should contact their current scheme for information in the first instance.
Superannuation trustees
Superannuation members and other eligible complainants will be able to lodge complaints with the SCT up to and including 31 October 2018.
The SCT will continue to operate beyond 1 November 2018 to resolve the complaints it has on hand at that date. Superannuation trustees will need to continue to deal with any existing complaints they have with the SCT.
Superannuation trustees will also need to ensure that they have joined the AFCA scheme by 21 September 2018. Superannuation trustees will then deal with the AFCA scheme in relation to complaints lodged with it on or after 1 November 2018.
Complaints that have been lodged with the SCT before 1 November 2018 will not be able to be transferred to AFCA.
The Treasury has put together a fact sheet to assist people who have already lodged a complaint with SCT, or who are thinking about making a complaint in the future. The fact sheet may be accessed here
Next steps
AFCA will shortly consult publicly on:
- New AFCA Rules; and
- Interim AFCA funding model
The AFCA Rules will be subject to ASIC approval.
ASIC recently consulted on changes to its policy guidance about oversight of AFCA. As part of this process ASIC sought feedback about the need for disclosure relief for financial firms in relation to the EDR changes. We will announce our position on this soon.
ASIC welcomes the passage through Parliament of the Bill to establish the Australian Financial Complaints Authority (AFCA).
AFCA will be the culmination of more than 20 months of public consultation and inquiry, commencing with the review of the dispute resolution framework by an independent panel led by Melbourne Law School’s Professor Ian Ramsay.
ASIC Deputy Chair Peter Kell said, ‘Fair, timely and effective dispute resolution is a cornerstone of the financial services consumer protection framework. The combination of firms’ internal dispute resolution procedures and access to a free independent external scheme currently provides redress for many tens of thousands of Australians each year. Strengthening these dispute resolution requirements will help deliver higher standards and better outcomes in the financial services market.’
‘The establishment of a single scheme for all financial services and superannuation complaints is a very positive development, building on the outcomes achieved over many years by the existing three schemes: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal.’
Higher monetary limits and compensation caps, including for primary production businesses, will give more consumers and small businesses access to a free and independent forum to resolve their complaints.
ASIC will work with Government and scheme stakeholders to ensure that the transition to the commencement of AFCA is as smooth as possible. In the interim, ASIC will retain direct oversight of the two ASIC-approved schemes – FOS and CIO – which will continue to provide high levels of service to consumers and firms. Separate arrangements are in place for the ongoing operation of the SCT to enable it to deal with existing complaints.
Important information about transition
- AFCA will start accepting complaints no later than 1 November 2018
- The operator of the scheme will be authorised by the Minister, and the scheme will be subject to ongoing oversight by ASIC.
- In order to maintain access to external dispute resolution for consumers in the lead up to commencement of AFCA, ASIC will monitor member compliance with existing EDR scheme requirements as well as the effectiveness of scheme operations.
- Members of each of CIO and FOS – including licensees and credit representatives – must continue to maintain their EDR membership through this period, including paying membership and other scheme fees in full as required. ASIC has asked the two schemes to report any failure of members to do so.
- A memorandum of understanding between CIO and FOS will prevent members inappropriately moving between the schemes in the transition period.
- ASIC will be consulting soon on updated Regulatory Guide 139 (REG 139), which will set out details of ASIC’s oversight of AFCA. This will be finalised and published when AFCA commences operations.
- ASIC will also publicly consult on new IDR standards and the mandatory IDR reporting requirements that are also contained in the AFCA Bill – but this consultation will not take place until afterAFCA commencement.
- Current legislative IDR requirements for superannuation trustees and retirement savings account providers (including 90-day timeframes and requirements for written reasons) will continue to apply in their current form until ASIC consults on and then issues updated IDR policy (RG 165).