What's New? June 2017 Edition 27 Jun 2017 Federal Budget

Creating a one-stop shop for all financial disputes

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In the Federal Budget handed down on 9 May 2017, the Government announced that it will create a “one-stop shop” for all financial disputes – the Australian Financial Complaints Authority (AFCA) – by 1 July 2018 to replace the Financial Services Ombudsman, Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Since May 2016, the independent expert panel chaired by Professor Ian Ramsay has been reviewing the existing external dispute resolution and complaints framework (Ramsay Review). The “integrated package of reforms” recommended in its Final Report, all of which have been accepted by the Government, are expected to radically overhaul how financial disputes are dealt with in Australia. The key elements of the proposed new framework would appear to be:


  1. Independent and industry-funded: AFCA will be funded by industry and governed by an independent board comprising an independent chair and equal numbers of directors with industry and consumer backgrounds.
  2. Broad remit with necessary powers: new legislation will require financial firms that deal with retail clients, including superannuation funds, to be members of AFCA and comply with its determinations. Under the new framework, AFCA will be provided with the powers necessary to handle all financial disputes and bind AFCA members.
  3. Increased access to redress: for most disputes, significantly higher monetary limits and compensation caps will increase access to external dispute resolution for consumers and small businesses. AFCA will commence operations with a limit of $1m and a cap of $500,000 for financial disputes (other than superannuation disputes), subject to regular indexation and review. Government will consult about whether a higher cap of $1m should apply to disputes involving mortgages and general insurance products, and whether current sub-limits for different insurance products are warranted. Special treatment is to be afforded to consumer disputes about superannuation and setting aside a guarantee (where a mortgage/security supports the guarantee) and small business disputes about credit facilities.
  4. Enhanced accountability and oversight: AFCA’s accountability will be enhanced by several mechanisms, including frequent independent reviews and reporting and an independent assessor to review complaints about AFCA’s handling of disputes. ASIC will also receive $4.3 million over four years (from 2017-18), be provided with stronger powers to oversee AFCA and require financial firms to report on internal dispute resolution (IDR) activity.
  5. Strengthened IDR: In addition to increased reporting on IDR, AFCA will refer all complaints that it receives back to the AFCA member to provide a final opportunity to resolve disputes within a defined timeframe. This mechanism will ensure that IDR is the primary avenue for aggrieved consumers and a gateway to external dispute resolution. Referred complaints will be registered and tracked, and AFCA will retain a discretion to exempt certain cases from the referral process.

A further report from the Ramsay Review is expected by the end of June 2017, which will make recommendations on the establishment, merits and design of a last resort compensation scheme and consider whether the scheme should apply to past disputes. 

Banking Executive Accountability Regime 

The Government has also announced its plans to introduce proposed reforms to increase the accountability of senior management in the banking industry. 

Our Financial Services Update from 21 March 2017, identified the key elements of the Banking Executive Accountability Regime (BEAR) including a requirement for all senior executives and directors to register with APRA; APRA disqualification powers, new misconduct rules and civil penalty regime, deferred senior executive remuneration and increased APRA funding to implement these proposals. Our update also sets out our initial thoughts on the package and other implications the BEAR may have on banks’ business operations and processes.

We expect to see further details of the BEAR fleshed out later this year and proposed changes implemented through legislative amendments, APRA’s prudential standards and other APRA guidance.



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The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying it to specific issues or transactions.

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