The Australian Financial Complaints Authority (AFCA) is consulting on a new user-pays funding model, which it says will be fairer and more transparent.

AFCA says 90% of members will see a positive or neutral impact on total cost, with one in five members benefiting from a decrease in fees.

About 10% – the very largest financial institutions, including major insurers – would face increased costs “that more accurately reflects their usage, addressing cross-subsidisation of larger firms by smaller members of the ombudsman scheme”.

AFCA, which provides its services free to consumers, has been working a new funding model for some time. It has now proposed a way forwards and will consult with industry.

“It’s a fair, transparent and equitable model that is supported by strong data and modelling,” AFCA’s Chief Ombudsman and CEO David Locke told a webinar for members.

“We have listened to what you have told us over the past few years and this has been used to design a model that rewards good performance and early resolution, and apportions fees fairly based on use of AFCA’s services.”

Under the user-pays model, firms would have control over the fees they pay by managing their complaints well, AFCA says.

The proposed model includes a single registration fee, a simplified complaints fee structure and introduces five free complaints per year to all members.

Under the proposed model, 66% of fees would be recovered from the 2.5% of AFCA’s members that represent 66% of all complaints received by AFCA.

AFCA says the model would reduce the burden on small members like financial planning firms and brokers, as well as other less frequent users of the scheme.

The proposed model emerged from a study by PwC that incorporated feedback from members, including submissions made to last year’s Treasury-led Independent Review of AFCA.

A six-week consultation period ends on April 22. The model will then be put to AFCA’s independent board in May, for a decision. Any changes would take effect from July 1.