Government establishes ‘one-stop shop’ for small business financial services complaints

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Australian small and family enterprise ombudsman Kate Carnell.

Small businesses will soon have access to a new financial complaints authority, with the federal Parliament this week successfully passing legislation to establish the Australian Financial Complaints Authority (AFCA).

The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill, passed the Senate on Wednesday.

The AFCA will be an amalgamation of the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT) and will hear complaints around products and services offered by financial firms, such as bank loans, insurance and superannuation.

The new body is expected to begin receiving complaints from November 1 this year. In the meantime, the three services will continue to operate but progressively transition over time.

The decision comes after months of consultation and review. The Review of the Financial System External Dispute Resolution (EDR) and Complaints Framework, also known as the Ramsay Review, was handed down in April, 2017. The Ramsay Review found reform of the current financial complaints procedure is necessary as the multiple external dispute resolution bodies have overlapping jurisdictions.

“It is difficult to achieve comparable outcomes for consumers with similar complaints; it is more difficult for consumers to progress disputes involving firms that are members of different schemes; and there is an increased risk of consumer confusion,” the panel said in the review.

The government first announced the establishment of a ‘one-stop shop’ for all financial complaints during the 2017 federal budget. In a budget press conference, Treasurer Scott Morrison said it was necessary to “ensure consumers have access to free, fast and binding dispute resolution services”.

In the explanatory memorandum attached to the bill, Treasury has said the AFCA determinations will be binding and relieve the stress for consumers or businesses that comes with involving the courts.

“The new EDR framework will ensure that consumers and small businesses are able to access an EDR scheme that provides fast and fair resolution of financial complaints in a way that is binding on financial firms,” Treasury said.

In a joint statement, Minister for Revenue and Financial Services Kelly O’Dwyer and Minister for Small and Family Business Craig Laundy, said small businesses that go through the new complaints procedure will have access to compensation of up to $2 million for disputes around credit facilities of up to $5 million.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell tells SmartCompany the establishment of the complaints body has been a long time coming, and the current dispute resolution options on offer didn’t satisfy the amount of compensation sought by businesses.

“With the old Financial Ombudsman Service, the dilemma with it was it worked okay for consumers, but the compensation levels for the loan were too low. You could get up to $3000 in compensation,” she says.

“It does bring together the banks, superannuation and credit facilities with a $5 million cap and a $1 million compensation and $2 compensation if it happens to be a agricultural loan.”

The AFCA legislation also redefines the size of the small businesses that can lodge complaints as entities with 100 employees or fewer, which Carnell says will cover the vast majority of SMEs.

Initially it was fewer than 20, but moving the definition to fewer than 100 brings in probably ninety-nine percent of small businesses in Australia,” she says. 

However, Carnell says it will be important for the business community to keep an eye on how quickly the AFCA can resolve complaints.

“Obviously the implementation phase is going to be really important. It’s important that AFCA has really tight time frames around complaints. We’ll be certainly continuing to press for really timely resolution.”

NOW READ: The small business wish-list for the royal commission into banks


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Michael Ratner
Michael Ratner
3 years ago

Amazing ….. there are people who understand the problem appealing to people who wouldn’t have a clue.
Definitive calls to action with penalties taking into account the knifes edge most small business operate under.
There have to be penalties for inaction or communication. Worst case scenario banks profits might drop because of the need for additional service.
Too many organ grinders I suppose and not enough efficient monkeys with decision making power.

Ray Borradale
Ray Borradale
3 years ago

“It’s been quite a tortuous process to get here and this is a far-from-perfect piece of legislation. This is a piece of legislation which was designed by the government to avoid the need for a royal commission into the banking and financial services sector, which didn’t quite work out for the government. They’ve tried all the tricks to try to avoid a royal commission and they were dragged kicking and screaming into holding a royal commission in the end.

In October 2016, in an attempt to distract attention from the urgent need for a royal commission into banking and financial services, the Prime Minister promised that we would get:

… a low-cost, speedy tribunal to deal with these types of consumer complaints, customer complaints against banks, and this will be real action …

But a little while later, the Minister for Revenue and Financial Services, who is at the table, had to walk back from this and argue that the Prime Minister had really only meant. ‘A little T tribunal; not a big T tribunal,’ a distinction which failed to register with observers around the country, who really, with all due respect, had no idea what the minister was talking about.

Now, of course, we also have the 2017 budget announcing that the new body would be called the Australian Financial Complaints Authority—it’s true, it’s not a tribunal; the minister’s right there. But this is also a misnomer, because the minister in the Senate confirmed that AFCA will be just another ombudsman scheme in the form of a private company limited by guarantee, so it’s not really an authority. There are already, of course—and this is the key point—two of these services in existence for financial services disputes, the Financial Ombudsman Service and the Credit and Investments Ombudsman. So any suggestion that this bill is a groundbreaking reform which finally gives consumers rights that they previously did not have is simply not the case. This is simply a piece of administration. This is simply a piece of tidying up.

The bill abolishes three existing financial sector complaints-handling bodies: the Financial Ombudsman Service, the Credit and Investments Ombudsman and also the Superannuation Complaints Tribunal. For the first of these three bodies, the bill is in many respects just a merger and a rebranding—that’s all it is. There is no, or very little, improvement in consumer outcomes contained in this bill.”