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Transitionary schemozzle predicted on AFCA
The transitional arrangements around the creation of the Australian Financial Complaints Authority (AFCA) have been seriously questioned, with suggestions that there may be as many as four financial services external dispute resolution scheme in existence for up to 12 months after it is established.
The Association of Superannuation Funds of Australia (ASFA) has also told the Senate Economics References Committee review of the AFCA legislation that the entire establishment of the new body and its inclusion of the role of the Superannuation Complaints Tribunal (SCT) needs to be reviewed within at least 12 months.
However, dealing with the transitionary arrangements the ASFA submission to the Parliamentary committee has pointed out just how much work will be required by financial services firms and superannuation funds, including maintaining their membership of pre-existing structures such as the Financial Ombudsman Service (FOS) and the Credit Industry Ombudsman (CIO) for up to 12 months.
“This raises the prospect that there may now be four financial services EDR schemes in existence for up to 12 months after the authorisation of the AFCA scheme,” it said. “Each scheme will have their own governing statute or terms of reference and their own operating processes and expectations on the financial firms who are members (in the case of the AFCA scheme, FOS and the CIO), or subject to their jurisdiction (in the case of the SCT).”
The ASFA submission said this stood in sharp contrast with the stated intent of the reforms – to streamline EDR arrangements and reduce consumer confusion, by implementing a ‘one stop shop’.
“During this initial transition period, financial firms will need to be prepared to manage complaints through - and make members/customers aware of - all relevant EDR schemes.” It said.
The submission said that, as many superannuation trustees were members of FOS, the arrangements proposed by the AFCA bill would see trustees potentially needing to manage processes for - and communicate to members about - three EDR schemes (AFCA, the SCT and FOS) for a period of up to 12 months, then two EDR schemes (AFCA and the SCT) for a further, unclear, period until the SCT winds down.
For its part, the SCT has warned that given current funding it may be 2022 before it has cleared its caseload.
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