Fairness is the mandate of the new organisation charged with resolving disputes between customers and their financial services, as the banking royal commission continues to lay bare the breakdown in trust between consumers and corporations.
The Australian Financial Complaints Authority (Afca) was created to address failures in the complaint resolution process. It came out of the Ramsay review, which was instigated by the Turnbull government while it was still trying to avoid a royal commission.
Afca combines the former financial ombudsman service with the credit investments ombudsman and will also deal with superannuation complaints.
It will be able to hear complaints where the value of the dispute is less than $1m and has the power to award compensation of up to $500,000, which, if agreed to by the consumer, the financial institution must abide by.
When it comes to small business, Afca has the power to hear credit complaints with values of under $5m, and the ability to award up to $1m in compensation, almost three times the amount allowable under the previous ombudsman bodies.
The authority’s CEO and chief ombudsman, David Locke, said the new limits would increase the number of customers able to have their disputes dealt with by an independent adjudicator.
But Locke is also aware of the size of of the job.
The new body, chaired by former Liberal senator Helen Coonan, expects to deal with 55,000 complaints in its first year, which begins on Thursday.
It has been charged with not only dealing with individual complaints, but also spotting instances where multiple customers may have been affected, and working with the regulators to address potential misconduct before it spreads.
“I started in the role on the 25th of June, so I don’t come with a financial service background, I am coming at this with a fresh pair of eyes,” Locke said. “I think we have all been surprised by some of the evidence that has been given over the course of the royal commission and I think there are clear lessons for industry, there is also lessons for the regulators and there is also lessons for the ombudsman as well.
“Our remit is to work with financial services firms to improve standards and try to mitigate against complaints arising, but when they do arise to find ways to settle them and to make clear determinations.
“But we have to look [at] not just what is the contractual position but how has the parties behaved – what is good industry practice in this place, and what is a fair outcome for the consumer, and small business as well as the financial firm.
“What we want, what everyone really wants, is fair and ethical financial services, that people can have confidence in, it doesn’t serve anybody, any Australian to have the problems that we have had and so we really want to play our part in trying to work with business as well as consumer groups to address issues,” he said.
“And our role is very often to provide the redress, to help the individual and I think that what we do recognise, is that if you have a dispute with a financial firm, most people are not experts with financial service products and if you have a dispute with a bank or an insurer, these things can be incredibly stressful and incredibly difficult and actually it is not an equal power balance there.
“So our role is to help address that and to try and resolve these issues in the best possible way.”
