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Released every month our debt collection blog contains news, stories and tips to keep you informed.

Social Media Complaints and IDR

Thursday, May 30, 2019 - Posted by Michael McCulloch

It is now being widely reported across several media sites, including Money | Management, that the Australian Securities and Investments Commission (ASIC) has issued a discussion document to Financial Service Providers (FSPs) regarding complaints made via social media platforms such as Twitter and Facebook.

It is a move that appears to recognise that there are other channels for complaints to be made meaning that even a single tweet on Twitter could require the IDR process to be applied and legally acted on. ASIC Deputy Chair Karen Chester said in a statement to itnews.com.au, "It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate. The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA."

The discussion paper, which can be downloaded here, asks contributors several questions including what constitutes a complaint, are complaints made via social media channels dealt with under IDR processes and is the treatment of a complaint handled differently if the complainant is made via an external platform and not the FSPs own social media platform.

ASIC have have indicated that it plans to release the revised regulatory guide by December 2019.

Moves to Track IDR Within FSPs

Thursday, May 30, 2019 - Posted by Michael McCulloch

Mirage News is reporting that the Australian Financial Complaints Authority (AFCA) has welcomed the news from the Australian Securities and Investments Commission (ASIC) that financial service providers will be required to supply standardised data on their internal processes for handling customer complaints.

The proposed standard, which is pending public consultation, will include new mandatory data reporting with FSPs required to meet new standards when a complaint goes through the Internal Dispute Resolution (IDR) process with a view to make complaints handling performance transparent. In making the announcement, ASIC Deputy Chair Karen Chester, said, "It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. The Ramsay Panel Review, recent ASIC research, case studies before the Financial Services Royal Commission (FSRC) and our own supervisory work have all identified shortcomings in consumer complaints handling. Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate. The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA. With the benefit of broad consultation, ASIC’s new standards will lift complaints handling performance of firms and ultimately consumer outcomes and fairness of the financial system. And transparently so. These standards will also apply in their entirety to all APRA regulated superannuation funds".

In response to the news, AFCA Chief Ombudsman and CEO David Locke said, "Increased transparency is good news. It will help firms to continuously improve, and that will be good for the firms and their customers alike. We also welcome the idea of requiring firms to provide a standard set of data – this will help companies know how they compare to their competitors and help to inform consumers about the companies they’re dealing with. In this digital age, the move by ASIC to require firms to include complaints made on social media platforms, is entirely appropriate".

ASIC has sought public input on the consultation documents by 9 August 2019 and aims to release the new standards in a new Regulatory Guide by the end of 2019. You can find out more and read the media release by ASIC at ASIC Media Release 19-115MR


AFCA Approach to Financial Difficulty - Early Release of Superannuation

Thursday, May 30, 2019 - Posted by Michael McCulloch

Following on from last month where we looked at the AFCA Approach to Mortgagee Sales this month we look at the Australian Financial Complaints Authority (AFCA) approach to Financial Difficulty - Early Release of Superannuation.

The purpose of this article is to summarise the approach AFCA have regarding the early release of superannuation and what lenders obligations are when considering a request from a consumer to support the early release of superannuation.

Grounds for Release
There are 2 primary circumstances where a consumer may apply for the early release of superannuation. These are due to several financial hardship or compassionate grounds (mortgage arrears). A consumer that has been in receipt of a Government support payment, such as Newstart Allowance, continuously for 26 weeks may be entitled to the early release of superannuation on the grounds of financial hardship. A consumer may access between $1,000 to $10,000 once a year and the application must be made directly to their superannuation fund. The payment can be utilised for any purpose and does not require the support of the FSP.
Where the application is being made on compassionate grounds (mortgage arrears) the process is administered by the Australian Taxation Office (ATO). A consumers application to the ATO for payment of mortgage arrears will need a letter from their FSP stating that the amount is overdue and if the overdue amount is not paid by the due date the mortgagee will foreclose or force the sale of the consumers principal place of residence. More information is available from Access on Compassionate Grounds on the ATO website.

AFCA Expectations
There is an expectation from AFCA that FSPs will consider alternatives rather than simply supporting a request for the release of superannuation as the release of superannuation is a last resort. AFCA expects FSPs to take appropriate steps to understand the consumers financial position, decide what assistance it can provide the consumer and communicate its decision to the consumer. 

Factors to Consider
When considering if support should be given for the early release of superannuation the FSP, , should explore all alternative options -
Where it is apparent that the consumer can afford to continue with the contractual repayments but unable to clear the arrears the FSP may consider it more appropriate to capitalise the arrears. 
Where the FSP is unable to determine if the consumer can meet their ongoing contractual obligations it may be more appropriate for the FSP to provide a reasonable moratorium period to allow the consumer time for their situation to improve.
Where it is clear that the consumer will be unable to meet their ongoing contractual obligations supporting a release for superannuation may not be appropriate as any release will only delay the inevitable. In certain situations it may be beneficial for the FSP to allow the consumer time to sell the security property which will preserve their superannuation and may offer some financial relief.

Failing to Meet Obligations
Where AFCA believe that the FSP has failed to meet their obligations AFCA may rule that the FSP has failed to meet financial difficulty obligations under the AFCA Rules. Where the consumer has suffered a financial loss AFCA may award compensation.
Where the FSP has supported an early release for superannuation that AFCA believe inappropriate they will generally not require the FSP to refund the superannuation monies or reimburse any tax paid as a result of the withdrawal of the funds as in most cases the consumer will have obtained the benefit of the funds and will have potentially saved on interest, fees and charges.

To learn more or to read this article in its entirety visit AFCA Approaches - Early Release of Super.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relief on in any way.


AFCA Approach to Mortgagee Sales

Monday, April 29, 2019 - Posted by Michael McCulloch

Recently the Australian Financial Complaints Authority (AFCA) released a series of guides outlining their approach to common complaints. This month we take a look at the AFCA approach to Mortgagee Sales.

Where a consumer (Borrower) is unable to repay a loan a Financial Service Provider (FSP) may elect to take possession of the property to sell it to reduce or payout the loan. AFCA have set out their guidelines as to what a FSP must do when it takes possession and what they will take into account if there is a complaint raised by the Borrower about the sale process -

Reasonable Care
The FSP must take reasonable care when it takes possession to ensure that the property is sold at its market value. The FSP does this by making important decisions at key milestones and oversees the entire sale process.

Consulting the Borrower
The FSP does not need to consult the Borrower about key decisions or the sales process nor is there an obligation to keep the Borrower informed as to the progress of the sale. There is however an obligation on the FSP to communicate to the Borrower when the sale is completed and how the sale proceeds have been used.

Property Maintenance
The FSP generally does not have to spend money to improve the property nor does it need to find new tenants or let existing tenants stay to make money prior to the sale. The FSP however may need to pay for common maintenance issues such as repairing broken windows or replacing locks to secure the property, cleaning, gardening or lawn mowing, repairing pool equipment or fencing a pool if it is required by law before the property can be sold.

Insuring the Property
The FSP should insure the property prior to taking possession.

Market Value
The FSP should obtain at least 1 sworn valuation from an independent registered valuer.
According to the International Valuation Standards Council the definition of "market value" is -
"The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."

Marketing the Property
The FSP should obtain at least 1 marketing proposal from a reputable property agent. This proposal should include recommendations on the market value, the best way to sell the property (auction, private sale, tender), marketing and advertising strategy and any work needed to prepare the property for sale such as repairs and maintenance.
Advertising campaigns may include print media, online ads through reputable sites such as domain.com.au and realestate.com.au, billboards at the property, flyers or handbills, contact with potential purchasers through an agents internal marketing list, public inspections or inspections by appointment.
It is at the discretion of the FSP is they advertise the sale of the property as a mortgagee in possession. This may attract more purchasers with the onus on the auctioneer to ensure that the auction generates competition between bidders to achieve a sale at market value.

The Sale Method
In a vast majority of cases the property will be sold an auction with AFCA recommending a minimum 4 week advertising campaign with weekly inspections and inspections on the day of the auction.
If there is advice from a the FSPs experts recommending a private sale the FSP must take reasonable care with marketing and advertising. It must show that it bought the property to the attention of all potential purchasers thus creating competition and achieving market value.
Where the property is being sold at auction all available information should be considered such as valuations, marketing reports and previous offers.

Proceeds of the Sale
All proceeds following the sale must be accounted for and must be explained to the Borrower after the sale has been completed.
Funds from the sale may be used to reduce or payout the debt the Borrower owes to the FSP or other Creditor with a mortgage over the property, pay reasonable costs incurred in taking possession of, maintaining and selling the property.
Any surplus from the sale should be paid to the Borrower. Where the Borrower has loans from the FSP for more than one property any surplus may be used to reduce the balance of the other loan.

Reasonable Costs
The FSP should only do what is necessary to obtain possession of the property. For example if the Borrower is prepared to offer up possession and agreeing to the sale it would be unnecessary for legal action.
Once in possession the FSP can reimburse itself for costs relating to the security, insurance and maintenance of the property as well as the relevant advertising and sale costs including agent commissions.
The FSP, under the Loan Contract or Mortgage, will also usually be allowed to recover reasonable and proper legal costs. The FSP, of course, must not recover more costs than was paid to it legal representative and must apply any discount or rebate to the Borrowers loan.
In the event of a complaint the FSP must provide invoices for all costs it has taken from the sale proceeds.

To learn more or to read this article in it's entirety visit AFCA Approaches - Mortgagee Sales.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

Unfair Financial Difficulty Policies

Friday, March 29, 2019 - Posted by Michael McCulloch

Case Study - Unfair Financial Difficulty Policies

Issue: There were concerns that a bank's financial difficulty policies and procedures for its home loans were not compliant with section 72 of the National Credit Code (NCC), clause 28 of the Code of Banking Practice (CBP), and the AFCA Approach to Financial Difficulty.

The financial firm’s hardship policies prevented it from offering hardship solutions if a customer had been in long term financial difficulty and had previously failed to adhere to hardship agreements, or where the period of delinquency was significant. This means the financial firm refused to consider options such as a serviceability test followed by a capping arrangement, and instead focused on alternative repayment options which were unaffordable in light of the circumstances.

Outcome: Following our identification of the issue, the financial firm updated its hardship policy to offer more sustainable solutions. This included having practical discussions with customers experiencing financial difficulty to assist them to overcome their hardship.

The firm also offered capping arrangements for investment properties on a case by case basis. Training was provided to the firm’s hardship team to ensure that the updated policies were implemented correctly.

Application: Policies should not automatically exclude a customer from receiving hardship solutions due to long term hardship and issues such as high arrears or long periods of delinquency. Instead, financial firms should assess each request for assistance on an individual basis, and place an emphasis on the customer demonstrating their ability to service the loan.

If a customer has a positive change in circumstances that allows them to restart payments on a loan, they could be offered a repayment trial followed by capitalisation of arrears – the repayment trial could be the usual minimum monthly payment (MMP), interest only payments or loan term extension with reduced MMP.

Alternatively, if the customer has received hardship assistance over an extended period and they are still unable to meet the repayment schedule, then it may be appropriate to decline further hardship assistance, but instead consider other options such as a timeframe to permit the asset to be sold to repay the debt.

This article originally appeared in AFCA News and has been reproduced with the permission of AFCA


AFCA Rules Consultation

Friday, March 29, 2019 - Posted by Michael McCulloch

In our February 2019 edition of Debt Collection News we reported that the Australian Financial Complaints Authority (AFCA) would be looking at accepting complaints dating back to January 2008. In a recent media release AFCA has now confirmed that they are seeking submissions on the proposed changes to their Rules.

AFCA has announced that the proposed change would see a new section added to their rules which solely pertains to legacy complaints and would only apply for the period 01/07/2019 to 30/06/2020 after which time the proposed new section would be removed from the AFCA Rules. A draft of the proposed new section, Section F, has been reproduced below:

F.1 Application of this Section

F.1.1 Legacy complaints will be dealt with under this section of the Rules as at 30 June 2019. All other complaints will be dealt with under the other sections of the Rules that apply as at the date the complaint was lodged.
F.1.2 Legacy complaints will not be subject to the time limits set out in B.4.
F.1.3 In all other respects, Sections A to E of the 30 June 2019 Rules will apply to legacy complaints unless modified by Section F. In the event of inconsistency between the other sections of the Rules and Section F, Section F prevails as it relates to legacy complaints.

F.2 Requirements for Legacy Complaints

F.2.1 AFCA will not consider a Legacy Complaint:
a) unless it is submitted to AFCA between 1 July 2019 and 30 June 2020.
b) about conduct that occurred and ended before 1 January 2008.
c) in relation to which a decision or determination has been made by a court or tribunal.
d) in relation to which a decision or determination about the merits of the complaint has been made by a Predecessor Scheme or AFCA.
e) that has previously been finally settled by the Complainant and the Financial Firm to whom the complaint relates (other than a complaint which can still be made under the Rules).
f) in relation to a superannuation death benefit.
g) that solely relates to a right or obligation arising under the Privacy Act.

You can learn more, read the consultation paper and provide feedback via their consultation page.

AFCA to Accept Complaints Dating Back To January 2008

Wednesday, February 27, 2019 - Posted by Michael McCulloch

Following the final report from the Royal Commission into Misconduct in Banking it has been revealed that the Government is proposing a change to the Australian Financial Complaints Authority (AFCA) Rules which will allow them to deal with disputes dating back to January 2008.

The proposed change would see AFCA being able to investigate disputes about misconduct that have not been dealt with previously by the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) or by the Courts. AFCA has indicated in a media release that consumers and small businesses will soon be provided with information as to the complaints procedure however confirmed that until such as time as the Rules are changed that they cannot consider such disputes.

In a statement to the media AFCA Chief Executive and Chief Ombudsman, David Locke, said, "The announcement from the Government today that AFCA will now be able to consider some of the legacy disputes excluded by the predecessor schemes going back to 1 January 2008, means that many more people will be able to get access to justice and have their matters properly considered. This is a really positive step for consumers and we will be issuing guidance shortly to assist people to bring these disputes to us."

AFCA has also publicly welcomed the Commissioner's recommendation in relation to s912A of the Corporations Act 2001 which will see AFSL holders being required to take reasonable steps to cooperate with AFCA to resolve disputes and release documents.



AFCA Warns FSPs of Bigger Compensation Bills

Wednesday, January 30, 2019 - Posted by Michael McCulloch

Newly appointed Chief Ombudsman, David Locke, has recently announced in an article in the Financial Review that Financial Service Providers (FSPs) that fail to respond quickly to matters brought to the attention of the Australian Financial Complaints Authority (AFCA) may face bigger compensation bills.

Since its inception in November 2018 AFCA claim to have received 11,500 complaints of which 4,000 have been about FSPs. By direct comparison the Financial Ombudsman Service, at its peak, received 2,100 complaints per month.

Mr Locke indicated that responsible lending and misleading sales were among the issues most frequently complained about by consumers and said in a statement, "The volumes of matters coming to us are very high. A lot of people have been treated very poorly by financial institutions over a number of years. The royal commission has shone a bright and forensic light on some issues but most people still feel they haven't been heard or had their matters addressed."

While Mr Locke was unable to provide an actual dollar figure for compensation ordered to date he did indicate that the AFCA cost model is structured so FSPs pay more the longer a dispute goes on so there is an incentive to resolve disputes as quickly as possible.

Of the 11,500 complaints since AFCA came into power 32% of cases have been resolved.


AFCA Announces New Small Business Lead Ombudsman

Thursday, November 29, 2018 - Posted by Michael McCulloch

The Australian Financial Complaints Authority (AFCA) has announced on their website that a new small business Lead Ombudsman will be appointed to resolve financial disputes that small businesses have with their financial service providers (FSPs).

Under AFCA the small business is now defined as an organisation with less than 100 employees and can consider complaints from small businesses with their FSP up to the value of $5 million. AFCA also announced an increase in the available compensation to small businesses from $323,500 to $1 million.

In a statement to the media AFCA Chief Ombudsman and CEO David Locke, said, "With the arrival of AFCA, and the increase in monetary limits, many small business complaints will now be covered by an external dispute resolution scheme for the very first time. This will be a big help and provides small businesses with a fair, free and independent way of resolving their disputes."

The Australian Small Business and Family Enterprises Ombudsman (ASBFEO) has applauded the decision with Kate Carnell saying, "We welcome the announcement of a dedicated small business lead ombudsman,” Ms Carnell said. “We envisage a small business expert will be appointed, which will significantly improve small businesses’ access to justice and save them time and money."

The announcement comes on top of AFCA releasing information that in their 1st week of operation that they received 2,500 calls with a subsequent 1,500 complaints being made.


AFCA Rules of Complaint Resolution

Tuesday, October 30, 2018 - Posted by Michael McCulloch

On Thursday, 1 November 2018 the new Australian Financial Complaints Authority (AFCA) will begin receiving complaints.

AFCA has released their Complaint Resolution Scheme Rules which you can download from our website which outline the types of complaints that AFCA can deal with and how it will handle complaints from consumers against financiers.

AFCA Jurisdiction

The graphic below depicts how AFCA will determine if a complaint falls within their jurisdiction -

AFCA Complaint Resolution Process

Section A
A.4 - Complaints that AFCA Considers

A.4.1 The Complainant must be an Eligible Person.

A.4.2 A complaint must be about a Financial Firm that is an AFCA Member at the time that the complaint is submitted to AFCA (even if not an AFCA Member at the time of the events giving rise to the complaint).

A.4.3 There are some additional requirements that must be met in order for AFCA to be able to consider a complaint. In summary:

a) The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA’s jurisdiction.
b) There must be a sufficient connection with Australia.
c) Generally, there is a time limit within which the complaint must be submitted to AFCA.
d) If the complaint is about a Traditional Trustee Company Service that involve Other Affected Parties, the Complainant must get the consent of all Other Affected Parties.

Section B sets out these requirements.

A.4.4 There are some types of complaints that AFCA must exclude and some situations in which AFCA can decide to exclude a complaint.

Section C sets this out.

A.4.5 If AFCA excludes a complaint, AFCA will give written reasons to the Complainant and specify the timeframe within which the Complainant may object to this decision.
A.4.6 If the Complainant objects within the specified timeframe, AFCA will review the decision if AFCA is satisfied that the objection may have substance. If this is the case, AFCA will inform the Financial Firms involved in the complaint and provide them with an opportunity to make submissions before AFCA makes a final decision as to whether to consider the complaint.
A.4.7 Despite other rules, AFCA may consider a complaint if all parties to the complaint consent in writing and AFCA agrees to this. This does not apply to complaints about payment of a death benefit excluded under the time limits in rule B.4.1.3.

Section B
B.2 Relationship Giving Rise to the Complaint - Other Complaints
Section B.2.1

A complaint (other than a Superannuation Complaint) must arise from or relate to:

a) the provision of a Financial Service by the Financial Firm to the Complainant;
b) the provision by the Complainant of a guarantee or security for, or repayment of, financial accommodation provided by the Financial Firm to an Eligible Person;
c) an entitlement or benefit under a Life Insurance Policy that specifies or refers to the Complainant, whether by name or otherwise, as a person to whom the insurance cover extends or to whom money becomes payable under the Life Insurance Policy;
d) an entitlement or benefit under a General Insurance Policy that specifies or refers to the Complainant, whether by name, or otherwise, as a person to whom the policy extends;
e) a legal or beneficial interest of the Complainant arising out of:
(i) a financial investment (such as life insurance, a security or an interest in a managed investment scheme or a superannuation fund); or
(ii) a facility under which the Complainant seeks to manage financial risk or to avoid or limit the financial consequences of fluctuations in, or in the value of, an asset, receipts or costs (such as a derivatives contract);
f) a claim by the Complainant under another person’s Motor Vehicle Insurance Product for:
(i) property damage to an Uninsured Motor Vehicle caused by a driver of the insured motor vehicle;
(ii) non-financial loss as a result of claims handling by the Financial Firm that insured the motor vehicle, but only where a valid claim has been submitted by the owner of the insured motor vehicle (unless the claim is being made pursuant to section 51 of the Insurance Contracts Act 1984);
g) an investment made by the Complainant that was offered by a Financial Firm under a foreign recognition scheme to Australian resident investors, unless expressly excluded from access to AFCA or a Predecessor Scheme by the investment offer document; or
h) a Traditional Trustee Company Service where:
(i) the Complainant is entitled to request an Annual Information Return from the trustee; and
(ii) at least one co-trustee was at that time a current AFCA Member and all co-trustees that are not AFCA Members have consented to AFCA considering the complaint.
i) a breach of obligations arising from the operation of the:
(i) Privacy Act; or
(ii) the Consumer Data Framework.

B.3 Sufficient Connection with Australia
B.3.1

A complaint must arise from:
a) a contract or obligation arising under Australian law, including but not limited to privacy obligations;
b) an offer to invest that was received in Australia by a Complainant in relation to a recognised Foreign Collective Investment Scheme; or
c) a direct or indirect investment in a product through a platform which was offered in Australia.

B.4 Time Limits for Complaints
B.4.2 Complaints to Which the National Credit Code Applies
B.4.1.1

Where a complaint relates to a variation of a credit contract as a result of financial hardship, an unjust transaction or unconscionable interest and other charges under the National Credit Code, AFCA will generally not handle the complaint unless it was submitted to AFCA before the later of the following time limits:
a) within two years of the date when the credit contract is rescinded, discharged or otherwise comes to an end; or
b) where, prior to lodging the complaint with AFCA, the Complainant was given an IDR Response in relation to the Complaint from the Financial Firm - within two years of the date of that IDR Response.

AFCA Type of Complaint

Section C
C.1 Mandatory Exclusions
C.1.2 Exclusions Applying Generally

AFCA must exclude:

a) A complaint about the level of a fee, premium, charge, rebate or interest rate – unless:
(i) the complaint concerns non-disclosure, misrepresentation or incorrect application of the fee, premium, charge, rebate or interest rate by the Financial Firm having regard to any scale or practices generally applied by that Financial Firm or agreed with that Complainant;
(ii) the complaint concerns a breach of any legal obligation or duty on the part of the Financial Firm; or
(iii) the Complainant’s complaint is with a medical indemnity insurer and pertains to the level of medical indemnity insurance premium or the application of a risk surcharge (as defined in the Services Contract between the Health Insurance Commission, and the Commonwealth of Australia represented by the Department of Health and Ageing, and medical indemnity insurers).
b) A complaint that relates to a decision by a Financial Firm as to how to allocate the benefit of a Financial Service between the competing claims of potential beneficiaries, unless the complaint relates to a Superannuation Complaint or a Traditional Trustee Company Service.
c) A complaint that raises the same events and facts and is brought by the same Complainant as a complaint previously dealt with by AFCA and there is insufficient additional events and facts raised in the new complaint to warrant AFCA considering the new complaint.
d) A complaint that has already been dealt with by a court, dispute resolution tribunal established by legislation or a Predecessor Scheme, unless the Complainant has requested a stay on the execution of a default judgment on the basis of financial difficulty, and the Financial Firm has declined the Complainant’s financial difficulty assistance request, and the request has not previously been dealt with. For the avoidance of doubt, AFCA may consider a complaint by a Primary Producer about issues unresolved after a farm debt mediation.
e) A complaint where the value of the Complainant’s claim when the complaint is submitted to AFCA exceeds $1 million or higher amount that applies as a result of an adjustment in accordance with rule D.4.3. This jurisdictional limit does not apply to:
(i) a Superannuation Complaint; or
(ii) a complaint by a borrower arising from a credit facility provided to a Small Business (including Primary Producer); or
(iii) a complaint to set aside a guarantee supported by security over the guarantor’s primary place of residence.
f) A complaint where the Complainant is a member of a group of Related Bodies Corporate and that group has 100 employees or more. 
g) A complaint that would require review of a trustee’s exercise of discretion but this does not exclude:
(i) a complaint to the extent that an allegation is made of bad faith, failure to give fair and proper consideration to the exercise of the discretion, or failure to exercise the discretion in accordance with the purpose for which it was conferred; or
(ii) a Superannuation Complaint,
h) A complaint about professional accountancy services provided by an Accountant unless they are provided in connection with one of the following:
(i) a financial service within the meaning of section 766A of the Corporations Act or section 12BAB of the ASIC Act;
(ii) credit activity within the meaning of the National Consumer Credit Protection Act 2009; or
(iii) tax (financial) advice services within the meaning of the Tax Agent Services Act 2009.
i) A complaint about a:
(i) Privacy Act Participant that does not relate to a right or obligation arising under the Privacy Act; or
(ii) CDR Participant that does not relate to a right or obligation arising under the Consumer Data Framework.

C.2 AFCA's Discretion Not to Consider Complaints
C2.1

AFCA may in its discretion exclude a complaint, if AFCA considers this course of action is appropriate.

AFCA will not exercise its discretion to exclude a complaint lightly. The discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint. 

Section D
D.3 Compensation for Complaints Other Than Superannuation Complaints
D.3.1

An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for direct financial loss. When calculating the value of such a remedy, monetary compensation and any remedy where the value can readily be calculated, such as the waiving of a debt, are included.

D.4 sets out the maximum amount that an AFCA Decision Maker can award for direct financial loss.

D.3.2

In addition or instead, an AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for indirect financial loss. This is not the case if the complaint arises as a result of a claim:

a) on a General Insurance Policy that expressly excludes such liability; or
b) by the Complainant under another person’s Motor Vehicle Insurance Product.
D.4 sets out the maximum amount that an AFCA Decision Maker can award for indirect financial loss.

D.3.3

An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for non-financial loss:

a) for a complaint relating to an individual’s privacy rights - injury has occurred to the Complainant’s feelings or humiliation has been suffered by the Complainant; or
b) for other complaints – an unusual degree or extent of physical inconvenience, time taken to resolve the situation or interference with the Complainant’s expectation of enjoyment or peace of mind has occurred.
This type of compensation, however, is not permitted if the complaint arises as a result of a claim on a General Insurance Policy that expressly excludes such liability.

D.4 sets out the maximum amount that an AFCA Decision Maker can award for non-financial loss.

D.4 Monetary Limits for Complaints Other Than Superannuation Complaints -

AFCA Compensation Amount Limit

As indicated above, AFCA will apply a new definition for small business and will also introduce the following monetary limits and compensation caps:

  • small business is now defined as any business with fewer than 100 staff;
  • unlimited monetary jurisdiction for superannuation disputes;
  • a monetary limit of $1,000,000 and a compensation cap of $500,000 for most non-superannuation disputes;
  • a monetary limit of $5,000,000 and a compensation cap of $1,000,000 for small business credit facility disputes;
  • increased compensation caps for small business primary production producers; and
  • no monetary limits and compensation caps for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other securitised interest over a guarantor's primary residence.
Default Judgment

In accordance with the Complaint Resolution Scheme Rules A.7 Restrictions on Financial Firms During a Complaint AFCA have confirmed that while they are considering a complaint that legal proceedings cannot commence against a Complainant or any other party to the complaint while the complaint is being investigated. Furthermore AFCA have indicated that where proceedings have been commenced an application for Default Judgment must not be sought or to pursue debt recovery legal proceedings.

Where an application for Default Judgment has been filed AFCA are instructing financial firms to write to the Court requesting that the application not be processed. In the event of the application having already been lodged and processed by the Court the financial firm is to make an application to set aside Default Judgment, at your cost.

Despite Rule A.7.1 AFCA have confirmed that with their permission legal proceedings can be commenced where -

A.7 Restrictions on Financial Firms During a Complaint
A.7.2

a) begin legal proceedings if the legal limitation period for the proceedings is about to expire – but the Financial Firm may not pursue those legal proceedings other than to the minimum extent necessary to preserve the Financial Firm’s legal rights;
b) begin legal proceedings if AFCA agrees to allow the Financial Firm to treat the complaint as a test case and the Financial Firm meets the requirements set out in rule C.2.2(f);
c) exercise any rights it might have to freeze, preserve or sell assets the subject of the complaint;
d) continue with legal proceedings if the Complainant, anyone else joined as a party to the complaint or Other Affected Party took a step in defending those legal proceedings that went beyond lodging
a defence or a defence and counterclaim;
e) continue with legal proceedings about a Small Business (including Primary Producer) credit facility of more than $5 million; or
f) enforce a default judgment obtained in court.
In each case, the Financial Firm must comply with any conditions that AFCA imposes.

Mapping of FOS Terms of Reference, CIO Rules and AFCA Rules

To further assist financiers in making the transition, AFCA has released Mapping of FOS Terms of Reference, CIO Rules and AFCA Rules which provides a reference when attempting to locate a particular section of the new Rules. This has been released following feedback from submissions. You can read the 34 submissions online at the AFA Rules Consultation page.

As AFCA start receiving complaints and making decisions public we will endeavour to publish these via our blog and across social media to keep you informed as to the interpretation of the new Rules and how this may impact you.

Alternatively if you have any questions regarding the new Rules we urge you to speak with a qualified legal practitioner or speak with Collection Law Partners.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.



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