From November, Australians with gripes about their superannuation funds and other financial institutions will have their complaints heard by a new authority in what industry insiders hail as a move towards greater transparency.
This week, Revenue and Financial Services Minister Kelly O’Dwyer announced that the Australian Financial Complaints Authority (AFCA), mooted in last year’s Federal Budget, would go live on 1 November.
Until 31 October, complaints will be heard by the Superannuation Complaints Tribunal (SCT).
The highly anticipated ‘one-stop shop’ dispute resolution body will have 10 directors, half of whom will be industry representatives and the other five, consumer directors. It will be chaired by former Howard cabinet minister Helen Coonan.
Ms O’Dwyer this week announced the four individuals she has nominated to join the AFCA board. They are financial planner Claire Mackay, lawyers Andrew Fairley and Alan Wein, and consumer advocate Erin Turner.
Remaining members of the AFCA board are Financial Counselling Australia chair Carmel Franklin, Financial Ombudsman Scheme (FOS) directors Robert Belleville, Elissa Freeman, Catriona Lowe and Johanna Turner, and National Australia Bank (NAB) general counsel for corporate governance Jennifer Darbyshire.
Complaints already lodged with the SCT will not be transferred to AFCA from November. Similarly, any complaints withdrawn from the SCT will not be allowed to be relodged with the new authority.
AFCA will replace two existing schemes – FOS and the Credit and Investments Ombudsman (CIO), in addition to the SCT.
The Australian Securities and Investments Commission (ASIC) yesterday welcomed the green light for one umbrella organisation to oversee complaints on financial matters.
“AFCA will be able to deal with complaints about financial firms including banks, credit providers, insurance companies and brokers, financial advisers, managed investment schemes and superannuation trustees,” ASIC said in a statement.
“It will operate significantly higher monetary and compensation limits for consumer and small business complainants, as well as provide enhanced access to free dispute resolution for primary producers.
“ASIC will oversee the operation of AFCA and receive reports including about systemic issues and serious contraventions by financial firms.”
Consumer Action Law Centre (CALC) chief executive Gerard Brody told YourLifeChoices that bringing all complaints of a similar financial nature under the one tribunal was long overdue.
“Previously, a financial institution could be a member of one or the other complaints body,” Mr Brody said.
“In order to retain membership numbers, the bodies would essentially do the bidding of their members when hearing complaints. There really was no incentive to do otherwise.
“With AFCA, there will be no competing body. All the tribunals and the super ombudsman come under the one wing, removing the fear that if it brings down an adverse decision, the member institution will not be able to walk away to join another adjudicator.”
Mr Brody also hailed the increase in the threshold for maximum fines where institutions were found to have breached regulations.
Awards will include compensation of up to $500,000 and the reduction or waiving of debt, according to Choice magazine.
“It will also have enforcement powers to, for instance, make sure an insurance company pays out a policy claim.”
In the six months before it starts to hear disputes, AFCA will consult publicly on new rules and a funding model. The AFCA rules will need to be approved by ASIC.
Those who agreed to sign on to the panel that will run the new Australian Financial Complaints Authority (AFCA) may be wondering if they have bitten off more than they can chew.
Possibly, when they were first approached to sit on the AFCA board, the worst of the revelations arising from the royal commission had not yet surfaced. Today, these panellists will have more than just an inkling of the load that lies ahead.
News of financial institutions with superannuation funds ripping clients off by charging fees for no service and even collecting fees from deceased estates, and so on, will likely have many Australians going through the fine print of their own policies to see if they, too, have been incorrectly charged.
Consumer Action Law Centre chief executive Gerard Brody certainly recommends it.
He says people need to ask their financial institutions what fees they have been charged and what they were for. Clients and members should be receiving regular statements from their funds listing the fees.
Those fees can be for administration, investment, performance, advice or life insurance.
Meanwhile, the choice of some of the directors to sit on the AFCA board could raise eyebrows in the wake of the banking royal commission’s damning evidence about misconduct in the financial services sector, especially by the banks.
National Australia Bank (NAB) general counsel for corporate and governance Jennifer Darbyshire is one of the directors.
NAB’s dirty linen was not on display at the inquiry to the same extent that the other members of the Big Four banks and AMP was. But it was berated at the commission for “failing to report fraudulent bankers to the corporate regulator”.
Also, late last year, ASIC entered into enforceable undertakings with NAB over what the Federal Court had declared was a failure of the bank “to do all things necessary to ensure that they provided financial services honestly and fairly’’. That was in November.
The following month, NAB said it had refunded $1.7 million to 966 home loan customers after it failed to properly set up mortgage offset accounts.
Given that each of these incidents falls under the purview of governance, should it be asked why the person responsible for corporate ethics at the bank, Ms Darbyshire, is on the board that will sit in judgement on complaints about financial institutions?
Who would you have appointed to the board of the new financial services complaints board? Will you be going through your super statements and other financial documents to see if you have been overcharged?