By Stephanie Koumbarakos (Trainee Lawyer) and Venn King (Special Counsel)
Complaints – nobody needs them, but everyone has them! Which is why there have to date been a variety of external dispute resolution (“EDR”) systems approved by the Australian Securities and Investments Commission (“ASIC”) in the financial services arena. But who needs multiple dispute resolutions systems when they all do much the same thing? That’s why the new Australian Financial Complaints Authority (“AFCA”) has come into being.
What is the Australian Financial Complaints Authority?
AFCA is the new EDR scheme relating to financial services and products. AFCA replaces the Financial Ombudsman Service (“FOS”), the Credit and Investment Ombudsman (“COI”) and Superannuation Complaints Tribunal (“SCT”).
Who needs to be a member?
Membership of AFCA is mandatory for ‘financial firms’ and others, including:
- holders of an Australian financial services licence (“AFSL”) with retail authorisations;
- unlicensed product issuers and unlicensed secondary sellers;
- holders of an Australian credit licence (ACL) and credit representatives;
- exempt special purpose funding entities;
- regulated superannuation funds (other than self-managed superannuation funds (SMSFs));
- approved deposit funds;
- retirement savings account providers and annuity providers; and
- life policy funds and insurers.
When do financial firms need to join AFCA?
The deadline for relevant financial firms to have transferred membership of their previous EDR scheme to AFCA has just gone by, on 21 September 2018. If you haven’t joined up, you need to get cracking!
When will AFCA start taking disputes?
AFCA will begin accepting new customer complaints in relation to financial services from 21 November 2018. Complaints already being dealt with under a former EDR scheme will continue with that scheme until resolved.
How should AFCA members manage the transition?
Notify customers of EDR by AFCA in final response and delay letters
Financial firms should amend all ‘final response’ letters (containing the decision on a customer complaint arising from the firm’s internal dispute resolution procedure, within 45 days or another applicable timeframe) and ‘delay’ letters (saying that a response can’t be provided within the relevant timeframe) used in response to customer complaints, to include AFCA’s contact details by 01 February 2019.
- From 21 September 2018 to 31 October 2018, final response and delay letters may include the details of both AFCA and the relevant former EDR scheme (usually FOS, COI and SCT).
- From 21 November 2018 to 31 January 2019, final response and delay letters may refer to both AFCA or the relevant former EDR scheme, provided that it is clear that as of 01 November 2018 complaints can only be made to AFCA.
- From 01 February 2019 onwards, final response and delay letters should only include contact details of AFCA.
Notify customers of EDR by AFCA on websites and general complaint brochures
Financial firms should update their communications with customers in relation to customer complaints and EDR, including on websites and brochures, to include AFCA’s details, by 01 November 2018.
Notify customers of EDR by AFCA in mandatory disclosure documents and periodic statements
ASIC is providing financial firms with disclosure relief during the period of transition to AFCA. However, from 01 July 2019 on, financial firms will need to refer to AFCA as the relevant EDR in all of their mandatory disclosure documents, periodic statements and exit statements.
Significant event notification relief
ASIC is also relieving financial product issuers from the need to notify retail clients of material changes and significant events in respect of the move to EDR by AFCA, until 01 November 2018.
For more information about the transition to AFCA, or to discuss financial services queries in general, please don’t hesitate to contact me.