The Australian Financial Complaints Authority wants to increase its compensation cap for non-financial loss, extend its jurisdiction over small business insurance complaints and have greater power in dealing with fee-for-service representatives.
It also plans to enhance its process for dealing with systemic issues, reduce the time it takes to resolve disputes and it has raised questions about its funding formula.
These are among the issues AFCA raises in its submission to a Treasury review of the ombudsman service. The legislation establishing AFCA, which commenced operation in November 2018, requires an independent review after 18 months of operation.
AFCA has received 153,000 complaints and finalised 146,000 of them since its launch. It has also cleared up around 10,000 matters that carried over from its predecessor organisations.
AFCA said in its submission that this high take-up rate indicated that it was delivering on its statutory objectives. It said that its dispute resolution approach and capability are producing consistent, predictable and quality outcomes.
It said this view is supported by independent reviews of its determinations, customer survey results and other stakeholder feedback.
AFCA proposes to increase the compensation cap for non-financial loss, which compensates complainants for harm, stress and inconvenience caused by the conduct of a financial firm. The current cap is A$5400.
It said the current limit does not always provide sufficient compensation. It pointed out that the Office of the Australian Information Commissioner may make awards of up to $20,000 for non-economic loss and there are tribunals that award up to $100,000 for similar compensation.
It wants its rules changed so it can deal more effectively with recurring inappropriate behaviour by some fee-for-service representatives, such as credit repair companies.
“While there are existing provisions in AFCA’s rules that enable AFCA to discontinue dealing with fee-for-service representatives when they are engaging in inappropriate conduct, these provisions are currently more limited to dealing with such conduct on a case-by-case basis. AFCA would like to be able to deal with the sector on a more systemic basis,” it said.
And it would like its jurisdiction for small business insurance complaints expanded to cover all insurance products purchased by small businesses for claims up to $1 million.
It wants to enhance its process for dealing with systemic issues, which are complaints that have a wider impact than on the complainant.
In its first two years AFCA carried out detailed investigations into 508 possible systemic issues and serious contraventions of the law. The 193 definite systemic issues identified and 40 definite contraventions affected more than 3.9 million people.
It has already started work with an external consultant to transforms its systemic issues function, with a greater focus on data and trend analysis to inform real-time identification, investigation, remediation and reporting.
AFCA has recommended that its fee structure be reviewed. Its concern is that insolvent member firms don’t pay their fees and “this places an unfair burden on other members and the scheme, and may impact the sustainability of the fee model”.
Another concern is that fees incurred for handling some very low-value complaints, such as credit reporting complaints, can be higher than the value of the claim itself. AFCA said this leads to some distorted resolution practices which can be exploited by fee-for-service representatives who pursue their pecuniary interests ahead of their clients’ best interests.