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Fair play: AFCA set for tweaks after positive beginnings

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The Australian Financial Complaints Authority (AFCA) has received a generally positive report card after its first Treasury review, with recommendations aimed at fine-tuning and keeping it on track rather than requiring major changes.

The critical question asked in the review was whether AFCA is fulfilling its role in a way that is fair, efficient, timely and independent. Wide consultation was undertaken and plenty of issues were raised.

“It is unsurprising that there was dissatisfaction by some respondents with AFCA decisions where the outcome was not in their favour,” the review says.

Nevertheless, when assessed against the parameters of fairness, independence and efficiency, the review found no evidence of any systemic failings or underperformance by AFCA.

Outcome fairness was the most common issue in “a large number of submissions from a wide range of financial firms”, with inconsistencies pointed out and some objecting to being held to a different standard to those required under the law or contracts.

The review says AFCA has established a fairness project to provide more certainty and has other initiatives underway, while noting the ombudsman “needs to exercise caution in the application of its fairness jurisdiction”.

The related recommendation simply says that “in making its decisions AFCA should consider what is ‘fair in all the circumstances’ having primary regard to the four factors identified in its rules – legal principles, industry codes, good industry practice and previous decisions”.

Independence in decisions was looked at in contexts including a court case last year, DH Flinders Pty Ltd v AFCA, where a complainant was assisted in identifying a different firm regarding a complaint rather than the one originally named.

“While questions regarding AFCA’s independence are raised in the case, the review did not find evidence to support a view that there are systemic issues with the independence of AFCA’s operations.”

AFCA has established an internal working group to review its processes and guidance in relation to assisting those submitting a complaint, the review says.

The report recommends AFCA “should not advocate for, nor act in a manner that otherwise advantages, one party such that the impartiality of the complaints resolution process is compromised”.

The Treasury review process involved bilateral meetings and roundtables and feedback from small businesses, financial firms, industry associations. consumer advocates and government organisations. It received 167 submissions.

The Australian Small Business and Family Enterprise Ombudsman argued there was a strong case to expand the monetary and insurance product jurisdiction for small businesses, while consumer groups said the $5400 cap for compensation for non-financial loss was far too low.

The review rejected change, saying AFCA should continue to collect data on decisions to award compensation for non-financial loss to “help inform future consideration of this matter”.

“We were disappointed with the recommendation not to increase the limits on non-financial loss, but we agree with the overall finding of the report that on balance AFCA is performing well,” Consumer Action Law Centre Senior Policy Officer Cat Newton told

“We and other consumer groups look forward to discussing the review with AFCA so that it continues to improve and provide effective access to justice, particularly for people who are experiencing vulnerability.”

In addressing other issues, Treasury recommends AFCA provide more information on timeliness of decisions, and makes proposals on the handling and transparency of systemic issues.

The funding model should not disincentivise financial firms from defending complaints that they consider do not have merit, and it should better take into account the circumstances of small financial firms, it says.

The review says the ombudsman should ensure consultation on approach documents, and it proposes AFCA could amend its rules to exclude certain paid advocates where there is poor conduct that is detrimental to the process.

“The overall finding of the review is that AFCA is performing well in a difficult operating environment and a changing regulatory landscape,” the review says.

“While this is an endorsement of its performance in its establishment phase, AFCA will need to continue to develop and improve its processes as it consolidates its place in the financial system.”

The review report suggests that AFCA has managed a generally smooth transition from the model that existed before it opened its doors.

The Treasury report is available here.