New dispute resolution body introduced
As announced in the 2017 Federal Budget, the Government has created a new dispute resolution body – the Australian Financial Complaints Authority (AFCA) which will come into force by 1 July 2018.
The AFCA will merge the Financial Ombudsman Service (FOS) with the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
AFCA’s objective is to provide a ‘one-stop shop’ for external dispute resolution for all financial disputes. The establishment of AFCA comes following the recommendations of the Ramsay Review of the financial system, external dispute resolution and complaints framework.
Consumers will be able to bring a complaint to AFCA without cost and can litigate their claims if they are not satisfied with the AFCA’s outcome. A $1 million limit will be imposed on the size of non-super consumer disputes and a minimum $500,000 compensation cap for non-super consumer disputes.
The AFCA will award a compensation of up to $1 million for small business disputes (a 224 per cent increase on the current cap) and a $5 million small business credit facility limit (a 250 per cent increase to the current limit).
The reforms give the Australian Securities and Investments Commission (ASIC) a greater role in overseeing AFCA with a $4.3 million budget to monitor the development of AFCA over four years.
Financial firms will be required to be members of AFCA and must report to ASIC on internal dispute resolution outcomes.