AFCA to “entrench” the big banks: CIO

by Miklos Bolza13 Sep 2017
The Federal Government’s proposed ‘one stop shop’ for external dispute resolution (EDR) has been heavily criticised by the head of the Credit & Investments Ombudsman (CIO) as a “disgrace” and a “diversion” endorsed by the big banks to avoid a Royal Commission.

These comments were made at the CIO’s Dispute Resolution Conference 2017 in Sydney yesterday (12 September) by CIO chief executive and ombudsman Raj Venga.

The ‘one stop shop’, called the Australian Financial Complaints Authority (AFCA), has been proposed by the government with the intention of merging and replacing the CIO, Financial Ombudsman Service (FOS) and Superannuation Complaints Tribunal (SCT) with operations commencing on 1 July 2018.

“I suspect that might be an optimistic target but they’re dead keen on seeing that happen,” Venga said.

With the bill not yet passed by Parliament, he questioned why the government had set up a transition team and an expert reference panel to work through the transitional process. The CIO has previously declined an invitation to join this panel.

Venga reiterated that there was “no industry representation whatsoever” on either the expert panel or the transition team.

“No doubt there will be some sort of obligatory consultation by the government on the funding, the governance and the terms of reference but I think you’d be kidding yourself to think that your input will count for much after the event.

“I think personally it’s disgraceful that industry has had no input into something that they are paying for, into something that they are being forced to join, into something that they are bound to comply with, and into something from which there will be no right of appeal.”

AFCA will create an EDR monopoly, Venga said, meaning it will be able to charge whatever fees it chooses to cover costs without being held accountable.

“The current competition between CIO and FOS has not only kept EDR fees in check but has also ensured service levels are maintained.

“AFCA will have no accountability for poor service, excessive fees, bad decisions or mismanagement and you will not be able to move to another EDR scheme if you’re not happy.”

The reason why the big banks support AFCA is that the scheme is a “diversion” to avoid a Royal Commission, Venga said.

“Other industry sectors, I’m pleased to say, oppose it. AFCA will only entrench the bank’s dominant position to the detriment of consumers, smaller financial institutions … and a more competitive financial sector.”

A joint statement written by a number of industry bodies including the Mortgage and Finance Association of Australia (MFAA) and the Customer Owned Banking Association (COBA) was released in May rejecting this one stop EDR scheme.

That consumer groups and the big banks are aligned in their support of AFCA put up some red flags, he said.

“In all my thirty years in the industry, this has got to be the only time I’ve seen the big banks and the consumer lobby on the same page. It’s a very, very odd thing indeed.”

To fight these changes, the CIO will be sending out an email so concerned financial citizens can send an automatically populated message to their local MP or Senator.

“The idea is to generate enough noise out there because the Coalition is not listening. They want this legislation to be passed desperately. This is their way of avoiding a Royal Commission. They are not listening,” he said.

Related stories:

CIO boycotts proposed EDR panel

Transition underway for one stop EDR shop

Industry bodies reject single EDR scheme