AFCA lead ombudsman Philip Field explains how AFCA will change the regulatory landscape
How will the formation of AFCA help to restore consumer confidence in the financial services industry?
Many people who use the financial services industry for both business and personal reasons have strong and successful relationships with their financial firm, be that their bank or finance broker. When things go wrong, this can take a toll.
This is something seen daily at the Financial Ombudsman Service, with more than 40,000 disputes received last year and over 235,000 calls to the 1800 number. As can be expected, resolving a financial complaint can be a complex and stressful process for consumers. The Australian Financial Complaints Authority (AFCA) is the culmination of an exhaustive review into complaints resolution that commenced in 2016, the Ramsay Review.
One of the ways AFCA will ensure that consumers get fair redress for their complaints is by helping financial firms to enhance their internal dispute resolution processes. This is based on one of the approaches that is already working effectively under the existing Ombudsman schemes – referring disputes back to the financial firm in the first instance, to set their internal dispute resolution process in motion and attempt to resolve the complaints directly with the complainant before the scheme begins investigating the matter. This has proven to be an efficient and effective means to resolve disputes quickly.
AFCA will build on this approach by working with financial firms to improve their internal processes so that individuals with a complaint can get it resolved without needing to approach AFCA.
AFCA will also identify and work with financial firms to address and resolve any systemic issues that arise in any matters we deal with.
What could be the potential implications for the lending sector?
AFCA will be able to consider disputes with higher monetary limits for both consumers and small businesses. This means that if financial firms have carried out their internal dispute resolution process but have not managed to resolve the complaint to the satisfaction of both parties, consumers and small businesses can approach AFCA to resolve their complaints, instead of resorting to legal action that will be costly for both parties.
AFCA will use existing methods such as negotiation and conciliation to resolve complaints. We hope that the use of these informal methods leads to a reduction in the number of complaints that proceed to a formal determination, resulting in a timely outcome for both financial firms and consumers.
In terms of customer outcomes, industry standards and the customer experience, what will be the overall impact on finance brokers?
AFCA aims to provide timely outcomes by dealing with complaints involving both lenders and finance brokers simultaneously. This will provide timely and fair outcomes for all parties involved in a complaint. For the first time, disputes involving both a broker and a lender can be dealt with in one place at the same time.
We intend for AFCA to be known for providing a fair, impartial and timely service to consumers, small businesses and financial firms. AFCA will therefore play a dual role in complaint resolution: firstly, by helping consumers and small businesses to solve their problems and get on with their lives; and secondly, by assisting financial firms by providing clarity and certainty. Ultimately, we will be helping the industry to avoid complaints in the first place.