Consumers will have better access to the financial ombudsman following the Government’s introduction of regulations that require financial service providers to co-operate with the dispute body.
Holders of Australian Financial Services Licences, Australian Credit Licences and Registrable Superannuation Entities must be members of the Australian Financial Complaints Authority, just as they were required to be members of one of its predecessor organisations.
But they have not always co-operated with its predecessor organisations’ investigations, complied with their orders or paid the compensation awarded.
Treasurer Josh Frydenberg announced on Saturday that the new regulation would compel AFCA members to co-operate with it to resolve complaints. His media release was the 14th using the headline “Taking action on the Banking, Superannuation & Financial Services Royal Commission” since the release (eight weeks ago) of Kenneth Hayne’s final report, and there are now only days until the caretaker conventions and the election gives the industry a break from this micro-policy blitz.
Under Frydenberg’s newest regulation, financial services companies will have to provide all relevant documents and records relating to complaints. They will have to reply promptly and fully to all requests from the ombudsman.
AFCA chief ombudsman and chief executive David Locke welcomed the regulation, saying: “If we see any failure to co-operate fully and honestly with AFCA we will call this out in the strongest possible terms and work with regulators to see appropriate regulatory action taken”.
This is the second time this year AFCA’s hand has been strengthened. In February, the Government gave AFCA authority to deal with complaints dating back to 2008.
Under normal circumstances, AFCA can only deal with matters that have occurred within the past six years. When a complaint has been through a financial service provider’s internal complaints process, the timeframe is reduced to two years.
The Government has extended its mandate for 12 months to allow it to deal with cases where consumers did not have access to redress. The royal commission examined cases of financial misconduct dating back to 2008.
AFCA was launched in November last year, replacing the Financial Ombudsman Service, the Credit & Investments Ombudsman and the Superannuation Complaints Tribunal. The new service includes higher monetary limits on disputes and higher compensation payments.
The old dispute resolution schemes were generally limited to dealing with disputes on loans up to A$500,000, with a compensation cap around $320,000.
Under AFCA’s rules:
• for small business loans, a credit facility must not exceed $5 million and the compensation limit is $1 million;
• the old dispute services were limited to dealing with small businesses that had 20 or fewer employees, now that limit has been increased to 100;
• if the business is a primary producer, the credit facility limit is the same ($5 million) but the compensation limit is $2 million;
• for credit facilities provided to “someone other than a small business or primary producer” the loan limit is $1 million and the compensation cap is $500,000;
• if the disputes involves a guarantor’s principal place of residence there is limit on the loan amount or the compensation cap; and
• disputes involving superannuation accounts are unlimited.