The Minister for Revenue and Financial Services announced the establishment of AFCA last month (discussed here). ASIC has since announced disclosure relief and released guidance for its oversight of AFCA. AFCA has also opened consultation on the proposed rules governing its jurisdiction and process. These have been discussed in depth below.
Financial firms should note that AFCA will commence accepting claims from 1 November 2018, however existing claims will not be transferred to AFCA. All financial firms that are required to have a dispute resolution system to deal with complaints by consumers and small businesses must become members of AFCA by 21 September 2018.
ASIC announces disclosure relief during transition to AFCA
ASIC has announced that financial firms will be given disclosure relief during the transition to AFCA. Under the transitional relief, financial firms will have until 1 July 2019 to update their external dispute resolution details to that of AFCA in mandatory disclosure documents, periodic statements and exit statements. Firms will also be relieved of their statutory requirement to issue significant event notifications in relation to the transition to AFCA. ASIC has also updated its regulatory guidance in Regulatory Guide 165 Licensing: Internal and external dispute resolution to require that complainants be provided with information about both AFCA and predecessor schemes.
The new scheme will replace the current complaints processes operated by the Financial Ombudsman Service, Credit and Investments Ombudsman and the Superannuation Complaints Tribunal and will operate under significantly higher monetary limits and compensation caps.
ASIC releases guidance for its oversight of AFCA
ASIC has also released Regulatory Guide 267: Oversight of the Australian Financial Complaints Authority (RG267). RG267 pertains to the broad AFCA governance framework and sets out ASIC's oversight role in relation to AFCA, including ASIC's reporting requirements and powers to issue regulatory requirements. Membership of AFCA will be open to any entity that is required to be a member of an external dispute resolution (EDR) scheme.
As part of its oversight of AFCA, ASIC will have a range of powers, including to:
- impose regulatory requirements through legislative instruments;
- direct AFCA in the event that AFCA (in ASIC's view) has not done all things that are reasonably practicable to ensure compliance with legislative requirements;
- issue additional directions to AFCA in relation to the limits on the value of claims that may be made, and to take measures to ensure that AFCA's operations are sufficiently funded; and
- approve any material changes to the AFCA scheme.
ASIC has stated that it will retain the existing guidance under Regulatory Guide 139 Approval and oversight of external dispute resolution schemes, until all complaints made under the existing approved schemes have been resolved.
In our view, the new RG267 guidance provides policy certainty for stakeholders and supports an efficient transition to the new single scheme.
AFCA consults on proposed Rules
AFCA has opened consultation on its proposed Rules governing its jurisdiction and processes. The consultation paper details significant changes to the AFCA Rules as in comparison with the rules of predecessor schemes. This includes jurisdictional limits, compensation caps and monetary limits (although, the latter two are not open for consultation).
Specifically, in relation to superannuation complaints, AFCA will large adopt the jurisdiction of the current Superannuation Complaints Tribunal (SCT) as set out in the Superannuation (Resolution of Complaints) Act 1993 (Cth) and Regulations, but for complaints submitted more than 12 months after the decision or conduct complained of, AFCA has a general time limit of two years from the date of receiving the trustee’s internal dispute resolution response. Previously, the SCT operated with an express discretion to exclude these complaints.
AFCA has also released independent assessor draft Terms of Reference as part of the consultation. Legislation mandates that AFCA have an independent assessor to review complaints about service issues in AFCA’s complaint handling. The independent assessor will not be able to review the merits of an AFCA decision.
Submissions are to be received by Friday 29 June.