The Australian Securities and Investments Commission (ASIC) has recently cancelled or suspended a number of Australian credit licences on the basis that the licence holders had failed to become members of the Australian Financial Complaints Authority (AFCA).
Australian credit licence holders are required by law to join AFCA, which was established to sort out complaints between financial firms that are members and their small business and consumer customers that are unable to resolve matters themselves.
Under the law and existing regulations, if a finance provider that is an AFCA member can’t resolve a complaint directly with a customer, including a small-business customer, AFCA decides what a fair and appropriate outcome is and the decision is binding on the financial firm.
ASIC reported that from 1 January 2021 to 30 June 2021, 24 licences have been cancelled by the body.
The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, has welcomed ASIC’s announcement.
“AFCA provides free, fast and binding dispute resolution to small businesses, saving them time and money by significantly reducing the need for litigation,” Billson said. “Small businesses do not have the time or the money to hire lawyers and challenge banks and other financial institutions through the court system to get a fair outcome to a financial complaint.
“This is a really important service as finance is the oxygen of enterprise, yet too often small and family businesses feel powerless in sorting out complaints they may have with finance providers,” Biullson added. “This move by ASIC serves as a timely and critical reminder to small businesses to ensure the lender or financier they are considering dealing with is an AFCA member.”
The ASBFEO highlighted the fact that small-business borrowers can only access AFCA’s free and independent dispute resolution ‘umpire’ process for their financial complaints if the lender is an AFCA member. And, while the ASBFEO can help facilitate a resolution via mediation for small businesses, it is unable to determine and impose a fair outcome that the AFCA can provide when dealing with an AFCA member.
“Not all lenders are AFCA members – in fact, many are not – and small businesses need to be aware of the risks and inability to reach out to AFCA to decide a matter,” Billson said. “My tip is to always check out your financing options with an AFCA member for your own piece of mind.”
