Disputes about your superannuation and other finances are often stressful, but until recently, the complexity of the system has made the process even tougher. Working out which of the multiple external dispute resolution bodies was the right one to approach has long been a source of frustration for super fund members and consumers dealing with a complaint or dispute.
The Coalition government has finally acted on these criticisms, with the introduction of a new financial disputes framework. The government says the new framework will “significantly improve outcomes for consumers” through a new ‘one stop shop’, called the Australian Financial Complaints Authority (AFCA).
Now that AFCA is open for business (started operating on 1 November 2018), Australians can deal with AFCA if they have a financial dispute with their super fund or financial services provider (once they have gone through the preliminary complaint process with the fund or organisation).
Note: AFCA’s original commencement date for receiving and handling complaints was 1 July 2018, but passing the relevant legislation and incorporating the three existing complaints bodies into a single external dispute resolution framework pushed back the start date to 1 November 2018.
Back in May 2017, the Coalition government announced plans to establish a new body to handle complaints relating to organisations right across Australia’s financial system. The announcement was in response to the Ramsay Review, which investigated problems with existing financial sector external dispute resolution and complaints arrangements.
The aim of AFCA is for consumers and small businesses to have access to free, fast and binding dispute resolution, rather than needing to use the court system. AFCA replaces the Superannuation Complaints Tribunal (SCT), the Financial Ombudsman Service (FOS) and the Credit and Investment Ombudsman (CIO). For information about how these complaints bodies operated (and still operate as they process the pre-November 2018 backlog), see SuperGuide articles How to make a complaint about your super fund and What to do if you have a problem with your super fund or financial adviser
AFCA: How does it work?
AFCA is an ombudsman scheme (like FOS and CIO), rather than a tribunal (like the SCT). The authority will be governed by an independent board, with an independent chair and equal numbers of directors with industry and consumer backgrounds.
AFCA is a not-for-profit company limited by guarantee and funded by member organisation contributions under a user pay model. The scheme will be free to consumers. Membership of AFCA is compulsory for all Australian financial service and credit licensee companies, and superannuation fund trustees and any other body currently under the SCT’s jurisdiction.
Any decisions made by AFCA is binding on financial services providers. During the transition stage from the SCT, one director is required to have superannuation expertise.
Complaints about super funds
All trustees of APRA-regulated superannuation funds – other than SMSFs – are required to be member-organisations of AFCA. Exempt public sector super schemes may choose to become members if they wish.
- who can make a super complaint;
- time limits for complaints (with the exception of death benefit complaints);
- exclusions to AFCA’s jurisdiction (such as complaints about the management of a super fund, or matters considered or being considered by the SCT as at 31 October 2018);
- specific requirements for decision-making on complex superannuation matters; and
- remedies that can be awarded.
AFCA has more flexibility under its rules to resolve complaints using mechanisms such as negotiation, case conferences or conciliation.
Note: Since AFCA becomes operational on 1 November 2018, the Superannuation Complaints Tribunal can no longer accept new complaints about super matters. Pre-November 2018 complaints cannot be transferred from the SCT to AFCA, instead they are dealt with by the SCT. Any complaints withdrawn from the SCT cannot be relodged with AFCA.
The SCT continues to operate for a period alongside AFCA to resolve its existing backlog of complaints. (For information on how the SCT operates, see SuperGuide article How to make a complaint about your super fund)
Higher monetary limits, but (mostly) the same remedies
For superannuation disputes, the decision-making criteria is the same as those used by the SCT. Complaints must relate to whether a decision or behaviour by the super fund was ‘fair’ or ‘reasonable’ in the particular circumstances. If AFCA decides the super fund trustee’s decision was ‘fair and reasonable’, the authority will uphold the original decision.
In super disputes, AFCA has the same remedies available to it as the SCT. This means AFCA can only aim to place the super fund member back in the position he or she would have been in before the decision was made. AFCA cannot award costs or damages and won’t provide a remedy if there has been no adverse outcome or financial loss.
A key change with AFCA (compared with the complaints bodies it replaces) is the introduction of higher monetary limits and compensation caps (than those currently applicable for FOS and CIO):
- new dispute limit of $1 million and compensation cap of $500,000 for most non-superannuation disputes;
- no dispute limit and no compensation cap for disputes about whether a guarantee should be set aside for a mortgage over the consumer’s home; and
- compensation cap of $1 million for small business credit facility disputes where the credit facility limit is up to $5 million.
AFCA will commission an independent review of its monetary limits within 18 months of its establishment.
When it comes to resolving non-super financial disputes, AFCA’s criteria is to decide if the financial services provider’s action was ‘fair in all the circumstances’ considering legal principles, industry codes of practice and previous decisions by FOS and CIO.
Note: AFCA is required to report publicly about the complaints it receives. This will include naming the financial firm or super fund.
Talk to your super fund first: making a complaint
Although AFCA is a new dispute resolution body, the existing procedure for making a complaint remains in place. Initially, all complaints must be made to the super fund or financial services provider’s internal dispute resolution (IDR) team. It is compulsory to try to resolve a dispute through the IDR before seeking help from AFCA (For information on the complaints process, see SuperGuide articles What to do if you have a problem with your super fund or financial adviser and How to make a complaint about your super fund).
Note: Now that AFCA is in operation, all new complaints, including super complaints, must be referred back to the super fund or financial firm for a final opportunity to resolve the dispute before AFCA considers the complaint. The super fund or financial firm will then have a set timeframe to again try to resolve the complaint.
Appealing AFCA decisions
Consumers are bound by AFCA decisions and can still go to court or seek mediation. Financial firms, however, are bound by AFCA decisions, although they can appeal in limited circumstances.
Note: When it comes to superannuation decisions, both consumers and super funds can appeal an AFCA decision to the Federal Court, but only on matters of law.
For more information…
For more information about superannuation claims, and also the financial advice process, see SuperGuide articles:
- What are the different types of financial advice available?
- What happens when you meet with a financial adviser
- What to do if you have a problem with your super fund or financial adviser
- Income protection insurance through super: A definitive guide
- TPD insurance through super: A definitive guide
- How to find low cost (or free) financial advice