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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...

For the Customers Benefit

CLIENT BACKGROUND A small metropolitan based engineering business which was established in 1975 by the Director and currently employs 14 staff. The Business Structure comprises one company, three trusts and a superannuation fund.  The family involvement comprises the two Directors (Mum and Dad) and an adult son as GM. BROKER RELATIONSHIP The customer has been a client of the Broking Firm since 1995 with fifty seven current and completed EF facilities through eleven lenders.  Prior to this the business was a client of the Directors of the Broking Firm (when they were employed elsewhere) for many years. TRANSACTION The customer wished to acquire a new additional CNC Lathe at a cost $480,000 to expand his business.  The machine was to be supplied via a local long established manufacturer’s agent. The manufacturer of the equipment was based in South Korea. The client required assistance with the importing of the equipment and long term EF funding once it arrived. The customer called for quotes from their bank (a big 4 Bank) and from us as their Broker.  Their Bank suggested they could offer the facility required. It should be noted some of the loan structures suggested by the bank we felt were not in the benefit of the customer and as such did not quote for those structures. The initial outcome being that the Bank was asked to look at the facility.   After several weeks of going backwards and forwards the bank could not provide the facility in a reasonable fashion.  This was based around two issues – firstly they could not provide assistance with the importing of the equipment and...

Cybercrime on the rise

Did you know that 80% of CEO’s in Australia rate cybersecurity as a top investment priority? Even though Australia’s unemployment rate is increasing as a whole, the demand for I.T experts is increasing and is predicted to continue into 2018. Cybersecurity specialists are among those in high demand, which can be linked directly to the increase in cybercrime. The ACSC (Australian Cyber Security Centre) identified that between 2016 to 2017 there were 47,000 cyber security incidents — a 15 per cent increase on the previous year. Cyber Security Minister Dan Tehan told the National Press Club in October 2017, “business is booming for cyber criminals. “The days of the cyber threat being deployed by a hooded computer geek in a basement are over,” he said. “Sophisticated organised criminal networks are taking control and franchising their business model.” The ACSC found one area of focus for criminals was business email compromise through phishing emails, specifically targeting those in the SME space. Over the course of 2016-17, reports to the ACSC indicated losses of over $20 million related to business email compromises. This high cost is alarming, driving many business owners to purchase business insurance in order to protect their companies from loss of revenue, damage to equipment and reputational issues, which are just some of the damaging concerns with cybercrime. What does business insurance cover? There is no one size fits all when it comes to business insurance, with every business, insurance needs vary depending on what type of industry, trade and type they’re operating in. In fact, there are many different types of business insurance which focus on assets...

Preparing to Sell

Whether you’re just starting off, in a growth phase or winding down towards retirement, it’s important that you consider the following areas to ensure your business is in its best possible shape when the time comes to sell. In July 2016 we sold 50% of our brokerage group, and as a business we were certainly not ‘sale ready’ when we were approached by our purchaser. We learnt many lessons along the way and if we had our time over, would definitely have been better prepared. The whole process was completely foreign to us at the time and upon reflection almost 2 years post sale, there are 2 main areas I believe all businesses should devote some time to, even if an ultimate sale / exit is many years away. 1. Structuring advice: My business, like many current brokerage firms was set up a long time ago and whilst the Pty Ltd structure of our main trading entity was ok, some of our individual shareholders held shares in companies rather than trusts. This had CGT impacts for some of our shareholders and the potential to lead to higher than expected CGT costs. The correct advice years ago would have made things a lot easier but often at the time you’re not thinking about the ultimate sale of your business. We were referred to an excellent specialist tax lawyer who was able to advise us on restructuring options prior to committing to the sale. These same specialists were also able to advise the best way of dealing with all of the costs associated with the sale (accounting, legal, consultants etc) to...

Knowing our Customers

Living in the CBD for the past few years I enjoy a cosmopolitan life style. Six years ago a young husband and wife couple opened a coffee shop just down the road from our home. This was their first business they had owned and operated – all though the family had a history in the food industry”. Basically to establish this business they had to put all they had on the line. As a Finance Broker we all know how difficult it can be to raise funds for such people. Over the next four to five years they developed the business to where on some days they would serve over 2000 cups of coffee along with light meals etc. They also through this venture provided employment for up to eight staff per shift /two shifts a day seven days a week. Not an insignificant contribution to the local economy. After five years of seven days a week 15 hours a day they made the decision to sell the business. The new owners take over with the same staff, same coffee and food within a month the business had slowed substantially. The question is why? The original owners possessed that unqualified quantity that built a thriving business . The new owners took on a proven formula – did nothing particularly wrong but never the less the business slowed significantly. Whilst this article is talking about a coffee shop over the years we have seen many examples over many industries where a change of ownership (including generational change) has had a dramatic effect (both positive and negative) on the business. From...

CAFBA’s Response to the Productivity Commission

CAFBA has now put forward our second submission to the Productivity Commission, which concentrated on three key areas. CAFBA had previously acknowledged the work of the Commission in regard to distinguishing consumer and commercial finance. CAFBA particularly brought to the Commissions attention the unfavourable risk weighting currently attributed to small business lending, which could have the effect of banks recommending loan products that used the family home as security, as this provided a more favourable risk weighting. This should be addressed by APRA with APS 112, where a more favourable weighting could be attributed, particularly for equipment finance where the underlying asset has real intrinsic value. CAFBA also again highlighted the Point of Sale Exemption contained in the NCCP Act, which CAFBA believes could lead to poor consumer outcomes. CAFBA has been advocating the removal of the exemption for many years. It is pleasing that the POS Exemption was today raised at the Royal Commission into banks, and CAFBA looks forward to continuing engagement with Government, the Productivity Commission and the Royal Commission for a sensible outcome on this issue. To view CAFBA’s full response - click...