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The federal government has passed legislation to establish the new Australian Financial Complaints Authority, with an increase in monetary limits and compensation caps for small businesses.
After a lengthy consultation and inquiry process, AFCA will start receiving disputes no later than 1 November 2018, a delay from its previously stated 1 July commencement date.
Recommendations of the AFCA Transition Team, chaired by Dr Malcolm Edey, have seen the definition of small business relaxed, with any business with fewer than 100 staff able to access AFCA.
Further, small business primary production producers – defined in accordance with the Income Tax Assessment Act 1997 – will have access to compensation of up to $2 million for disputes about credit facilities of up to $5 million.
"AFCA will provide a one-stop shop to ensure consumers get a fair deal in resolving disputes with banks, insurers, super funds and small amount credit providers, without the expense, inconvenience, and trauma associated with going to court," Minister for Revenue and Financial Services Kelly O'Dwyer said.
ASIC deputy chair Peter Kell welcomed the passage, saying it would give more consumers and small businesses access to a free and independent forum to resolve their complaints.
“Fair, timely and effective dispute resolution is a cornerstone of the financial services consumer protection framework,” said Mr Kell.
“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.”
Likewise, Australian Small Business and Family Enterprise Ombudsman Kate Carnell said she was particularly pleased with the more flexible definition of a small business as fewer than 100 employees.
“It is good to see that a small business will be able to seek resolution of a dispute where the credit facility is up to $5 million and potentially receive compensation of up to $1 million,” Ms Carnell said.
“Small businesses do not have the time or the money to hire lawyers and challenge banks and other financial institutions through the court system.
“This will significantly improve small businesses access to justice, which we raised in our Small Business Loans Inquiry last year.”