At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.
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.
The graphic below depicts how AFCA will determine if a complaint falls within their jurisdiction -
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.
B.4 Time Limits for Complaints
B.4.2 Complaints to Which the National Credit Code Applies
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
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.
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
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.
D.3 Compensation for Complaints Other Than Superannuation Complaints
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.
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.
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 -
As indicated above, AFCA will apply a new definition for small business and will also introduce the following monetary limits and compensation caps:
The Australian Securities & Investments Commission (ASIC) has provided transition relief for members of the Credit and Investments Ombudsman (CIO) who are currently awaiting membership certificates to be issued by the new Australian Financial Complaints Authority (AFCA).
In a statement to the media ASIC said, "ASIC understands that some licensees and credit representatives who are members of the CIO scheme have not yet obtained their membership to the AFCA scheme. ASIC understands that this includes licensees and credit representatives who: have lodged an application with AFCA Ltd, but membership has not yet been approved; and have not yet lodged an application with AFCA Ltd."
The initial deadline for licence holders was Friday, 21 September 2018 however ASIC said it would be giving transitional relief to prevent authorisations from becoming invalid due to circumstances however stressed to representatives affected by the changeover delays that they would only be granted relief as long as they ensure that their membership with CIO is maintained. A representative of ASIC went on to say that, "If you are not a member on 1 November, your authorisation will become invalid, and you will need to cease providing credit activities."
ASIC has recently sent a reminder to all financial services and credit licensees to join AFCA which combines the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman.
Source: TheAdviser - September 2018
In our June 2018 edition of Debt Collection News we published our article ASIC Regulatory Guide 165 Internal and External Dispute Resolution.
Regulatory Guide 139 (RG139) now appears to be out of amended draft form and can be download here with ASIC reminding Creditors that RG139 is only in place until all current disputes with the Financial Ombudsman Service and the Credit and Investments Ombudsman have closed -
Note (20 June 2018): In the transition to the commencement of the new, single EDR scheme—the Australian Financial Complaints Authority (AFCA)—on 1 November 2018, complaints made to the FOS and CIO schemes will continue to be dealt with under the relevant scheme’s terms of reference and rules that applied when the complaint was made.
This guide provides the framework for those versions of the terms of reference and rules. It will remain in force until all those complaints are closed. At that time, we will withdraw RG 139. Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) sets out how we will perform our oversight role in relation to the AFCA scheme.
As a reminder the Australian Financial Complaints Authority (AFCA) will start accepting complaints from 01/11/2018 with Creditors required to ensure that all final response letters and "delay" letters include reference to both relevant predecessor EDR schemes from 21/09/2018.
If you require clarification of the new requirements please contact Collection Law Partners on (02) 8923-1613.
The Australian Financial Complaints Authority (AFCA) has recently released a consultation paper which sets out how the new external dispute resolution scheme proposes to recover the cost of it operations.
A three-phase funding model has been developed by AFCA. Extracted from the AFCA Funding Model Overview:Phase I - Transition Funding
The Australian Securities and Investments Commission (ASIC) has now released Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority ahead of the 1 November 2018 transition.
The RG sets out how ASIC will perform their oversight role in relation to the Australian Financial Complaints Authority (AFCA) and includes guidance regarding members AFCA membership obligations.
ASIC has noted that it will retain its existing guidance under RG 139 until all complaints made under the existing schemes have been resolved and also stated, "Licensees and credit representatives must continue to maintain their EDR [external dispute resolution] membership through the transitional period, including paying membership and other scheme fees in full as required."
This month the Financial Ombudsman Service (FOS) has released an information sheet that outlines how the new External Dispute Resolution (EDR) scheme will be implemented over the coming months.
If you recall from our previous article, the Australian Financial Complaints Authority (AFCA) will operate from Thursday, 1 November 2018 and will replace FOS, CIO and the SCT so consumers have access to only 1 scheme for future disputes. The latest release from FOS provides more details regarding the transition including an announcement of the new AFCA Board and key dates to remember.
You can read the release on the FOS website.
As you may be aware once a debt has been referred to External Dispute Resolution ("EDR") all collection action should cease pending the complaint or dispute being resolved. What happens though when you have a Judgment and a dispute or complaint is lodged?
Both of the current EDRs in the Financial Ombudsman Service ("FOS") and the Credit and Investments Ombudsman ("COSL") have Terms of Service which clarify their position when it comes to a Judgment with both indicating that where Judgment has been entered they have no jurisdiction but how does this work in a practical sense?
In our quest for answers we reviewed some of the outcomes where Judgment was entered and a complaint or dispute was lodged with an EDR. In our search we came across a Review by COSL in August 2016. The original complaint related to:
49. For the reasons set out in the Review and this Determination, I find that the consumer's claims have either not been made out or are outside our jurisdiction.
In summary it is now our opinion having read the Review, Determination and Decision that while enforcement of a Judgment Debt cannot continue while a complaint or dispute is before EDR that if a Defence or a Motion is filed by a consumer in the Court that the FSP has the right to respond to an action raised by a consumer.
Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.
In our May 2017 edition of Debt Collection News we reported of the Consultation Paper Released On New EDR Scheme.
Earlier this month ASIC released confirmation that the Bill to establish the Australian Financial Complaints Authority ("AFCA") was passed through parliament with AFCA set to replace the Credit and Investments Ombudsman ("COSL"), the Financial Ombudsman Service ("FOS") and the Superannuation Complaints Tribunal ("SCT"). According to the ASIC media release, ASIC will work with the Government and new scheme stakeholders to ensure that the transition is as smooth as possible. In the interim ASIC has confirmed that they will retain direct oversight of both COSL and FOS with seperate arrangements being made for the ongoing operation of SCT.
According to the media release:
A total of 278,683 Radio Rental leases that led to poor outcomes for consumers has resulted in ASIC pressuring parent company, Thorn Australia, to issue $19.9 million in refunds.
The action comes after ASIC filed proceedings in the Federal Court where ASIC proposed a $2 million penalty in addition to the $11.8 million the company has already refunded to affected consumers for not upholding responsible lending practices. A further $6.1 million will also need to be paid to cover refunds and defaults for 60,000 leases and potentially a further $200,000 more in costs to ASIC.
This is seperate to thet $50 million class action that was filed by law firm Maurice Blackburn in March 2017.
2 of the examples provided to the Federal Court of irresponsible lending include:
The Credit & Investments Ombudsman ("CIO") has this month released a new fact sheet, "Credit Reporting: Enquiries".
The fact sheet covers: