Put AFCA on ice until after Royal Commission says CIO
The Government has been urged to place the establishment of the Australian Financial Complaints Authority (AFCA) on hold because of the implications which might flow from the Royal Commission into the Banking and Financial Services industry.
Credit and Investments Obudsman, Raj Venga said the announcement of the Royal Commission represented an implicit acknowledgement that the AFCA was not fit for purpose because it could not address past, or prevent, future financial scandals.
He said that despite this, the Prime Minister was maintaining that the Royal Commission should not defer or limit any legislation that has already been proposed for the sector, including the AFCA Bill.
“Given the Royal Commission’s terms of reference expressly refer to ‘the effectiveness of mechanisms for redress for consumers of financial services’, it is not clear at all why AFCA should not be shelved until the findings of the Royal Commission are known,” Venga said. “AFCA is, after all, a mere rebranding of the existing dispute resolution bodies (CIO, Financial Ombudsman Service (FOS) and the Superannuation Complaints Tribunal(SCT)), with a few bells and whistles attached.”
“It would be entirely irresponsible and reckless for the Government to establish AFCA without taking into account the findings and recommendations of the Royal Commission. These are likely to suggest what powers, jurisdiction, governance and funding a dispute resolution body needs to provide effective consumer redress in the wake of financial scandals,” he said. “‘AFCA will also be a very disruptive upheaval for consumers and small businesses, and won’t deliver benefits in the short-term. In all likelihood, the Royal Commission will find that AFCA will need to be unwound or otherwise significantly reshaped.”
“CIO, FOS and the SCT collectively have about 500 staff who service 48,000 consumers and 39,000 financial providers per year,” Vegan said.
“The overwhelming number of complainants are Mum and Dad consumers and the vast majority of financial providers are sole traders or small businesses. Every one of these will be significantly impacted by the introduction of AFCA. And for no good reason,” he said.
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
