The Australian Financial Complaints Authority (AFCA) has addressed the Independent Review’s recommendations and pushed for greater internal dispute resolution.
At its member forum, chief executive and chief ombudsman, David Locke, noted the AFCA had made progress on the 12 recommendations made by the Treasury in 2021.
Locke reported four of the recommendations had been completed already, which included:
- ensuring the funding model design did not disincentive firms from defending complaints;
- improving transparency of AFCA fees and the services they fund;
- improving visibility of the Independent Assessor to all parties to a complaint; and
- improving transparency of systemic issues in public reporting.
He noted it was the most significant review of AFCA’s rules and guidelines since the scheme was first established in November 2018.
“Following a comprehensive review, we have developed a proposed package of rule
and operational guideline changes on which we will consult with our stakeholders [and] members,” Locke said.
Complaint volumes
Issues relating to increased scam activity, natural disasters and higher mortgage rates meant 2023 was “set to be another big year for AFCA,” said Locke.
In this financial year alone, the body had received over 60,000 complaints, meaning it could reach up to 100,000 by the financial year’s end.
With this increasing volume and consequent delays, internal dispute resolution was “the first port of call” and would ensure better outcomes for consumers and industry alike, Locke reminded members.
Complaints related to investment and advice were up by 72% for FY23, largely due to the collapse of Dixon Advisory.
In 2022, over 2,200 complaints were made regarding financial advice, a 131% increase from the previous year.
When AFCA excluded Dixon Advisory complaints, only 483 advice complaints were made, representing a 47% decrease from the year prior.
Shail Singh, lead ombudsman at AFCA, observed that the decline was “really pleasing to see”.
He added that the financial advice industry was “doing really well right now”.
Singh attributed the decrease to the number of advisers exiting the industry as well as higher standards in the financial adviser exam and qualifications.
Compensation Scheme of Last Resort
In consideration of the Federal Government’s Compensation Scheme of Last Resort (CSLR), the chief ombudsman relayed that AFCA had “long supported” the legislation.
“We believe Australia needs a compensation scheme for people who have the right to
a remedy for financial misconduct but are left without redress when a financial
firm becomes insolvent,” he added.
In addition, the establishment of a CSLR would support ongoing confidence in the financial system’s dispute resolution framework.
The AFCA had been asked by the government to set up a separate and independent entity that would operate the CSLR, if passed by Parliament, Locke affirmed.
I missed the article from MM where AFCA Chief David Locke blames the industry for their failure to handle the case load (I note, under FOS that were nearly as slow at times). On one hand, he cites scam, natural disasters, rates as contributing, yet still blames insurers for not doing enough in claims handling. Hey David, there are huge amount of “scam” claims in GE, and that is often claimants adding fake amounts to an otherwise legitimate claim. Never introspection from AFCA – maybe bat away the frivolous complaints and firms will more time for legitimate claims matters.
Our complaints down by 47% without Dixon, why are we even being drawn into this mess. Kick the soft target around, while FPA/AFA play with each other.