The long-awaited one-stop shop for consumer complaints about superannuation, insurance and financial services providers will open on Thursday.
Given the evidence that has so far emerged from the Royal Commission into Misconduct by the Banking, Superannuation and Insurance sectors, it is likely the new ‘ombudsman’s’ in-tray will soon begin to overflow.
Known as the Australian Financial Complaints Authority (AFCA), it is expected to be able to process at least 1000 complaints in the first week.
The authority’s chair, Helen Coonan, told Investment Magazine “some of the fallout from the royal commission”, should lead to “a big spike in complaints”.
“We’re trending to 55,000 (cases) by next year and about 38,000 members, so you can appreciate from the magnitude of those numbers that a lot of it will come out of heightened awareness from the royal commission,” Ms Coonan said.
“But we’re ready for this. We’ve done a lot of work to get our rules in place, to have our funding model right and to have a very good board.”
AFCA replaces the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
Any complaints already raised with the SCT will not be heard by the new authority, and any cases raised from 1 November must be referred to AFCA.
The authority will be funded from levies and fees from financial institutions required by law to become members of AFCA.
It told prospective members that it wanted to have sufficient funds to handle 1000 complaints in the first week of operation.
Failure to join AFCA would mean that credit and other organisations would lose their licence to trade.
Corporate watchdog the Australian Securities and Investments Commission (ASIC) is monitoring the sign-up and contacting the organisations which have not yet registered.
AFCA chief executive David Locke says the new financial ombudsman will be faster, nimbler and, more importantly, tougher than its predecessors when it opens for business on Thursday, the Australian Financial Review (AFR) reported.
“It’s hard to make generalisations but at times in the past some of the financial institutions have not taken the ombudsman as seriously as they should,” Mr Locke said.
“The new entity will have enhanced powers, a bigger remit and more resources than its predecessors,” the AFR reported. “This will enable customers with disputes over large sums to have their cases ruled on by an independent third party without the cost of going to court.
“It can also award greater compensation than the old regime. For non-super matters its threshold for the value of disputes it can review increases from $500,000 to $1 million and the compensation it can order rises from $350,000 to $500,000,” the newspaper revealed.
The authority employs more than 500 staff, has 18 ombudsmen and 14 adjudicators, dozens of lawyers, accountants and dispute resolution experts.
Mr Locke, a former assistant commissioner of the Australian Charities and Not-for-Profits Commission, told the AFR he wanted to “shrink the business, not grow it”.
He is also a supporter of a compensation scheme to help individuals who have lost their livelihoods as victims of misconduct.
“So even though we’ve concluded that there was misconduct and have reported matters to the regulators there are these people who are left without anything. And if you look back over the last eight years there’s $16.5 million in claims from 270 individuals that haven’t been settled.
“We think there is a very real need for a compensation scheme that would ensure that people in that situation do get the redress they need … Commissioner Kenneth Hayne has raised the question in the interim report and we believe strongly there should be and will be making a submission to that effect.”
Have you been waiting for the new complaints body to become established before formally making a complaint about your financial services provider?