A Treasury review of the Australian Financial Complaints Authority (AFCA) has made recommendations to improve the ombudsman service while finding that “broadly” its decision making is fair, independent and efficient.

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

AFCA opened its doors as a one-stop shop for financial complaints in November 2018 under legislation that required a review early into its operation. The new organisation brought together three predecessor schemes including the Financial Ombudsman Service.

Most of the 14 recommendations, supported by AFCA and the Federal Government, focus on enhancements to transparency and improvements to decision-making processes.

The review says submissions that question elements of AFCA’s fairness, independence and efficiency raise issues such as different dispute determinations for seemingly similar cases.

The review finds no systemic failings but says AFCA “needs to exercise caution” when applying fairness considerations and that it should have “primary regard” to legal principles, industry codes, good industry practice and previous decisions.

Further merit reviews of decisions are not proposed but the report says there should be more visibility on existing “forward looking review mechanisms”, relating to the application for future cases. The report rejects calls for changes to monetary limits and compensation caps and says there’s insufficient evidence to suggest the ceiling for non-financial loss compensation is inadequate.

Tougher action is proposed on an increasing problem of poor conduct by paid advocates, which it says can affect the ability to provide an efficient service.

AFCA is well placed to recognise inappropriate conduct in the first instance, the review says, and it supports AFCA’s consideration of initiatives to deal with such behaviour such as excluding certain paid advocates.

Other recommendations propose AFCA should be more transparent in public reporting of systemic issues, including on a de-identified basis as appropriate, and that it should improve the timeliness of complaints that remain unresolved beyond 12 months.

The review considered feedback received and involved an assessment by former Federal Court judge Julie Dodds-Streeton of 20 complaints selected from submissions.

AFCA Chief Ombudsman David Locke says the report will aid scheme improvement and the organisation will consider any potential impacts on costs for industry and the timely resolution of complaints when acting on recommendations.

“Overall, this is a very positive report card, particularly for an organisation barely three years old,” he said.

“We know there are areas where we can improve as we move out of our establishment phase, and some of these have been identified in the review.”

The report is available here.