Today marks a significant milestone for small businesses across Australia, who are now able to lodge complaints with the Australian Financial Complaints Authority (AFCA).
AFCA replaces the Financial Ombudsman Service, the Credit and Investments Ombudsman, and the Superannuation Complaints Tribunal, acting as a one-stop shop for complaints about financial products and services.
The authority is committed to providing fair, independent and effective External Dispute Resolution (EDR) for small businesses and providing a forum where their needs are understood, and will work with financial firms to resolve problems at the source.
AFCA has an expanded jurisdiction and our increased monetary and compensation limits are higher than predecessor schemes. This means more small businesses can access fair, independent, and effective solutions for financial disputes by bringing their complaint to AFCA, instead of having to go to court.
AFCA was formed following a federal budget recommendation to review external dispute resolution in financial services. The Ramsay Review, commissioned by the government in 2016, recommended a simplification of the existing EDR system, which resulted in AFCA’s establishment.
The opening of AFCA’s doors comes in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and the many instances of misconduct it uncovered. The public, including many small-business owners, are now cautious of the financial services sector and those who operate within it.
AFCA will play an important role in restoring trust and confidence in Australia’s financial services. Small-business owners should know that if they have a dispute with a financial firm and are experiencing trouble resolving the issue with that firm, they can come to us – a free, fair and independent single scheme – to assist with their complaint.
AFCA will significantly improve small businesses’ access to justice. We understand that small businesses require fast access to effective dispute resolution, with the cost of court proceedings making court an untenable option.
In addition to AFCA considering a small business as any business with fewer than 100 employees, the limit for a small business credit facility that can be considered has increased from $2 million to $5 million, and the compensation cap has more than tripled from $323,500 to $1 million, with a higher cap of $2 million for primary producers.
We will build on the work of our predecessor schemes by focusing on external engagement with both members and small business representatives. AFCA will also be proactive in terms of providing education and training to our members and the wider financial services sector.
To ensure that we cater to the anticipated increased volume of enquiries, AFCA will provide additional resources for small business complaints, and we will ensure that complaint handling processes efficiently meet small business needs. We will also have a dedicated Lead Ombudsman experienced in small business complaints.
We are committed to meeting the diverse needs of small businesses across Australia and will work closely with the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) as well as the state Small Business Commissions to do so successfully.
In the following months, we will provide tailored communications to all small businesses to raise awareness of our free service and AFCA’s role in the financial services industry.
We expect to see 55,000-plus complaints in our first year of operation – however, ultimately our goal is for AFCA to go out of business. This would mean that our members are effectively resolving financial disputes without our aid, and that the lack of trust in the financial services sector is well on its way to being restored.
David Locke, Chief Executive and Chief Ombudsman, Australian Financial Complaints Authority