Today, the legislation establishing a new one-stop shop for financial and superannuation complaints passed the Federal Parliament. The new Australian Financial Complaints Authority will replace the Financial Ombudsman Service (FOS), Credit & Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT).
Consumers advocates have long supported the move to a single ombudsman-style scheme that implements the considered and sensible recommendations of the Ramsay EDR Review. Industry ombudsman schemes have been a hallmark of consumer protection, and AFCA will now adopt the principles of these schemes, including accessibility, independence and fairness. The legislation also confirms that accessing AFCA will be free of charge, and its determinations will be binding on banks, insurers and super funds.
The Government has announced increased compensation caps that will apply to specific disputes, including to third party motor vehicle insurance claims. The existing cap of $5,000 is too low given the rising costs of car repair. Uninsured drivers are often a vulnerable group of consumers with many experiencing financial hardship when their car is damaged. Increasing this cap to $15,000 at AFCA provides an alternative to court-based dispute resolution which can be costly for both insurers and the uninsured driver
Quotes attributable to Gerard Brody, CEO
- “We’re pleased to see that the Government has adopted the Ramsay Review recommendation to establish an ombudsman-style body for financial complaints. The ombudsman model allows free, fair and fast dispute resolution without the risk and stress of going to a court or tribunal.”
- “It’s important that there now be a smooth transition to AFCA. Expertise from the existing schemes must be the backbone of the new Australian Financial Complaints Authority. There must be no disruption to the quality of dispute resolution for the 50,000 new disputes each year and must be carefully managed through the transition period.”
- “It’s essential to get AFCA’s rules and operating guidance right. There are many good features of FOS and CIO that have resulted from years of continuous improvement. This includes requiring financial firms to put a stop to enforcement or collections activity once a complaint is lodged. This prevents a dodgy lender or debt collector from repossessing your car while you have a dispute about your car loan.”