New dispute resolution body commencement confirmed
The government has confirmed the commencement date of the new Australian Financial Complaints Authority (AFCA), as it seeks to create a one-stop shop dispute resolution scheme.
The AFCA, which will commence on 1 July 2018, will replace the three existing schemes- the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
The new bill — Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017, previously known as the Treasury Laws Amendment (External Dispute Resolution) Bill 2017, will feature a number of changes according to Minister for Revenue and Financial Services Kelly O’Dwyer.
AFCA’s monetary limit of $1 million and compensation cap of $500,000, which is almost double the existing limits, will significantly enhance access to redress for consumers and small businesses who wrongfully suffer losses.
Further, in the case of small business credit facility disputes, a small business will be able to lodge a dispute where the credit facility is of an amount up to $5 million and will be able to receive compensation of up to $1 million — almost triple the existing monetary limit and compensation cap.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell welcomed the move, following a recommendation from her office’s work in conducting the Small Business Loans Inquiry.
“Small businesses do not have the money or time to challenge banks through the court system and there is a significant power imbalance between banks and small businesses,” Ms Carnell said.
“Small businesses do not have the financial capacity to hire expert legal advice to help them overcome this disadvantage.
“The government’s proposed model will provide a genuine alternate dispute resolution option in a forum where the needs of small business are understood,” she said.
“It will save time and money by significantly reducing the need for litigation.”
Similarly, the Institute of Public Accountants has thrown its support behind the new scheme, believing that dispute resolutions will be more efficient under one umbrella body.
The transition to the AFCA will be led by Dr Malcolm Edey, who will undertake stakeholder consultation in order to develop AFCA’s terms of reference, governance and funding arrangements.
The FOS and CIO will be maintained for up to 12 months following the AFCA’s commencement on 1 July 2018 to enable the orderly resolution of their outstanding disputes prior to cessation of the two schemes.
All new superannuation complaints will be lodged with the AFCA from 1 July 2018, while the SCT will continue to operate until 30 June 2020 in order to resolve its backlog of legacy complaints.