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AFCA Determinations not Optional

Friday 27 January 2023

Last year Australian Financial Complaints Authority Deputy Ombudsman Dr June Smith told attendees of the Annual GRC 2022 Conference that the complaints body would improve communication concerning handling complaints. This approach to communication should facilitate a higher turnover for resolved complaints.
However, this only works with the cooperation of member organisations.
Two Australian Financial Complaints Association (AFCA) members have to pay $150 0000 in penalties for failing to cooperate with the financial complaints body.

That General Commercial Group and Eden Capital will each have to pay $50 000. General Commercial director Dale Heremaia will have to pay $30 000, and Eden Capital director Dale Heremaia will have to pay $20 000.
In an official statement, AFCA Chief Ombudsman David Locke said, "The vast majority of the members of our external dispute resolution scheme do work in partnership with us, and this is to the benefit of firms as well as consumers".

ASIC highlighted specific areas where the ASIC-regulated AFCA members failed to cooperate with the financial complaints authority:

  • Failed to pay an AFCA determination of $11 492.71.
  • Commenced legal proceedings against an AFCA staff member after that staff member requested documents related to a complaint
  • Threatened AFCA complainants with legal proceedings unless they withdrew their complaint, and
  • Along with Eden Capital, commenced legal proceedings, via its parent company, Miravo Pty Ltd, against AFCA complainants in the Queensland Civil and Administrative Tribunal.
The importance of AFCA Membership
At the end of the last year, the securities and investment regulator announced that they had cancelled 21 credit licenses because the ASIC-regulated entities failed to maintain their AFCA memberships.

ASIC said in an official statement, "ASIC works with AFCA to identify financial services licensees and credit licensees that do not comply with their obligation to maintain their AFCA membership. Where an entity fails to comply, ASIC will take action to cancel or suspend their credit licence".

The requirement of membership is one of the reforms that came out of the Royal Commission into financial services in 2018.

The regulator also called on superannuation trustees to improve the internal dispute resolution (IDR) schemes. The poor internal dispute resolution had a knock-on effect on external dispute resolution.

RG 271: Internal Dispute Resolution highlights that entities have a maximum of 45 days.

ASIC highlighted several concerns when it comes to the impact of delayed internal complaints handling:

  • This could delay complainants exercising their right to go to the Australian Financial Complaint Authority (AFCA).
  • Too many written responses to complaints omitted mandatory content related to a consumer's right to take their complaint to AFC

EDR Complaints data so far
From July 2021-June 2022, the complaints body received almost 70 000 complaints, with just over 35 000 marked resolved and $194 million paid in compensation.

However, June 2019 to July 2020 is still the most significant period for financial complaints, with almost 77 000 complaints, with just over 36 000 of those resolved and $246 million paid in compensation to complainants.