From today, all new complaints previously made to the Financial Ombudsman Service (FOS), the Superannuation Complaints Tribunal (SCT), and the Credit and Investments Ombudsman (CIO) are made to and dealt with by the Australian Financial Complaints Authority (AFCA) under the AFCA Scheme.

Financial firms are required to belong to an external dispute resolution scheme, and the AFCA Scheme is the only relevant scheme to which they can belong. AFCA will accordingly be a powerful consumer-focused one-stop shop for most financial complaints concerning insurance, banking, other credit provision and superannuation.

At the risk of oversimplification, some key features follow. Generally:

  • The Scheme is optional and free for consumers and small businesses making complaints.
  • The Scheme is mandatory for insurers, banks, credit providers, superannuation funds and trustees when complaints are made to AFCA.
  • Once a complaint against a financial firm is made to AFCA, most legal proceedings cannot be commenced or pursued by the financial firm against the complainant at least until the AFCA scheme process has run its course.
  • For superannuation complaints, AFCA’s determinations are final and binding subject to appeal to the Federal Court only on a question of law.
  • For some trustee services complaints, AFCA’s determinations are final and binding when made, with no appeal rights.
  • For all other complaints, AFCA’s determinations are final and binding if accepted by the complainant within 30 days. There are no appeal rights, exclusions from the Scheme are limited, and time limits are mostly generous.
  • As was the case with FOS, in relation to similar matters the financial firm is bound to AFCA’s determination at the complainant’s option, with no right to recover any costs (although the financial firm may be ordered to contribute to some of the complainant’s costs and/or to AFCA expert costs).
  • AFCA has (contractual) authority and power to determine complaints concerning facilities and compensation claims well in excess of the powers previously exercised by FOS and CIO.
  • There is no limitation on the amount in issue or that can be awarded for superannuation complaints, and statutory obligations on AFCA (like SCT).
  • In relation to other complaints AFCA can, depending on the nature of the complaint:
    • consider facilities up to $5m (or without limit in relation to security provided by a guarantor’s primary place of residence); and
    • award compensation up to $2m for direct financial loss, and small amounts for indirect financial loss and non-financial loss.

Whether and the extent to which judicial review of AFCA determinations will be permitted remains to be seen. Although AFCA has an internal review mechanism and an Independent Assessor, it will not revisit the merits of individual cases and her/his role is limited. The AFCA Scheme Rules and Operational Guidelines do not suggest any scope for appeal or review of individual determinations (apart from limited superannuation complaint appeal rights on questions of law).

Generally the AFCA Scheme is a creature of private law not amenable to full judicial review, with its “powers” and “jurisdiction” premised on contractual obligations of financial firms as required members of the Scheme (although superannuation complaints are in part governed by specific provisions in the Corporations Act 2001). However, it might be argued generally that the structure of the AFCA Scheme (effectively mandated by the Corporations Act 2001 and supervised by ASIC) is such that AFCA is performing a public function giving rise to broader judicial review rights.

With or without review rights, it appears that AFCA is likely to be busy with and following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.