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Australian Financial Complaints Authority – AFCA

Australian Financial Complaints Authority – AFCA

Transitional Information

1.            Overview

As CAFBA members know, the Australian Financial Complaints Authority (AFCA) will replace the Credit and Investments Ombudsman (CIO), Financial Ombudsman Service (FOS) and Superannuation Complaints Tribunal (SCT) from 1 November 2018.

CAFBA members with FOS membership should have been registered with AFCA already.  AFCA is currently contacting CIO members directly to arrange registration by 31 August.  Registration is also dependent on CIO membership renewal being completed by 31 August, with all fees paid by that date.

However, CAFBA members with CIO membership must also maintain their existing CIO membership during the transition period.

Disputes in progress, or lodged, with an existing EDR Scheme prior to 1 November 2018 will be managed under the Rules of that Scheme.  From 1 November, all complaints must then be lodged with AFCA and dealt with under its Rules.

Further details of AFCA’s broader jurisdiction and the transition process are set out below to assist Members understand AFCA’s scope and the timing of key obligations, including the changes of EDR details on documents and websites.

2.            AFCA - EDR Schemes - Mergers

AFCA will largely be a merger of the three existing EDR Schemes – Financial Ombudsman Scheme (FOS), Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT).  FOS is already involved in the transition process, with most of its members registered with AFCA.  CIO and its members are yet to transition.

All new disputes lodged after AFCA has started will be handled under the new AFCA Rules, which will incorporate new claims limits and compensation caps. Disputes lodged with AFCA will be called complaints.

A memorandum of understanding between CIO and FOS will prevent Members moving between the schemes in the transition period. The only exception is where a credit representative requires membership from the other scheme because its new licensee is a member of that other scheme.

3.            ASIC Oversight

ASIC will have oversight of the AFCA scheme and will maintain separate oversight of FOS and CIO until the schemes are fully integrated.

Members, including Australian Credit 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 CIO and FOS to report any failure of Members to do so.

4.            Broader jurisdiction, new monetary limits, and compensation caps

AFCA has a broader jurisdiction than either FOS or CIO, with higher monetary limits and compensation caps.

The key changes are:

·        the new definition for small business is any business with fewer than 100 staff

·        a monetary limit of $1m and a compensation cap of $500,000 will apply for most non‑superannuation disputes;

·        an unlimited monetary jurisdiction will apply for superannuation disputes;

·        no monetary limits and compensation caps will apply for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other security over the guarantor’s primary place of residence;

·        a monetary limit of $5m and a compensation cap of $1m will apply for small business credit facility disputes;

·        increased compensation caps will apply for small business primary production producers

o   with access of up to $2m in compensation for disputes about credit facilities

AFCA will also have new sub-limits caps:

·        $13,400 per month for income stream insurance product disputes;

·        $15,000 for uninsured third party motor vehicle claims; and

·        the separate compensation cap for general insurance broker disputes will increase to $250,000.

5.            Key dates and obligations

For Members, the key dates and associated obligations are set out in the table below.

Key Dates

Member Obligations

31 August 2018

FOS has already arranged for its members to be directly registered with AFCA – if not, registration should be completed ASAP, either by contacting FOS or AFCA directly.

From 7 August, AFCA is contacting CIO members to arrange membership – this process, which is dependent on CIO membership renewal being completed as well, must be completed by 31 August.

All members of both FOS and CIO should be registered with AFCA by that date and must also complete online their AFCA annual assessment.

When applying for AFCA membership directly, Members can complete it online through:

·        http://www.afca.org.au/apply-for-membership/

AFCA cannot approve applications from CIO members whose CIO membership has not been renewed by 31 August 2018, or if there are any outstanding CIO fees, e.g. membership, complaint etc

Members must also retain their existing membership of CIO or FOS until further notice & continue paying CIO and/or FOS fees as and when they fall due.  AFCA, however, will invoice FOS fees as part of its invoicing arrangements.  This will not apply to CIO fees which must be paid to CIO.

31 October 2018

Last day when a dispute can be lodged with CIO or FOS

Disputes lodged with either Scheme at this time will continue to be managed under their Rules

1 November 2018

AFCA commences taking complaints – new claims limits and caps etc will apply

AFCA Rules will apply to all complaints lodged with it

1 July 2019

Members must by then have updated their EDR scheme details with AFCA’s contact details on all relevant documents and websites

6.            Transitional Considerations

Given AFCA’s broader jurisdiction, monetary limits and compensation caps, customers/clients with disputes/complaints may choose to wait lodging a complaint until AFCA commences operations.  Members should be aware of this potential when managing the transition period.

AFCA’s Rules may also make it possible a complaint previously lodged with FOS, CIO or the SCT may be able to be considered under its jurisdiction. However, if a complaint has already been ‘dealt with’ by one of those EDR schemes (e.g. resolved by agreement or a decision on the merits of the dispute was made), AFCA is not likely to be able to deal with it a second time.  The grounds on which AFCA could accept a complaint that has previously been lodged with another EDR scheme are not yet known as AFCA’s Rules are in a consultation period at this time.

AFCA’s Rules are also likely to contain a number of time limits that might affect a customer dispute but, as the Rules are not yet finalised, none of these areas are clear.  AFCA expects the Rules to be finalised in September.  CAFBA will provide an update once that occurs.

7.            AFCA Contact Details

AFCA website – www.afca.org.au

Postal address (same as FOS):      GPO Box 3, Melbourne VIC 3001

Phone number:  1300 565 562 for Membership inquiries

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