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AFCA has clarified that for historic complaints involving brokers, it is taking into consideration the regulations and policies that were established at the time of the transactions in question and assessing them "through a fairness lens".
Members of the broking industry had recently flagged concerns they had about how the Australian Financial Complaints Authority (AFCA) has been investigating legacy complaints involving brokers, claiming that the authority has been applying today’s requirements to loans written in the past, which could put brokers at risk of litigation.
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The government had in February extended AFCA’s remit to consider eligible financial disputes dating back to 1 January 2008. The complaints authority began accepting historic complaints from 1 July 2019 and will continue to review older cases until 30 June 2020.
Speaking to The Adviser, an AFCA spokesperson said that in resolving complaints, the external dispute resolution body is required to take into consideration factors such as “legal principles, good industry practice, codes of practice and previous decisions”.
“When resolving legacy complaints, we will have regard to the relevant laws, codes and industry practice that were in place at the time of the disputed conduct,” the spokesperson added.
“We will also take into consideration whether the conduct was consistent with the obligations and community expectations at the time.”
One broker, who requested to remain anonymous, claimed that their dealings with AFCA was “confusing” as the authority had reportedly suggested that the broker was at fault for not providing a detailed expense analysis using bank statements. The broker said the complaint relates to a business loan transaction that took place about six years ago, claiming that at the time, providing detailed expenses analyses were not required.
Another broker, who also wished to remain anonymous, came forth about a similar experience, saying that their past conduct has also been called into question, with AFCA’s “feedback not being right” as lenders did not require brokers to scrutinise expenses like they do now.
However, the AFCA spokesperson pointed to the authority’s Operational Guidelines Legacy Addendum, which states that:
- “It is unfair to retrospectively apply current legislative and regulatory frameworks when the past conduct was consistent with obligations and community expectations at the time.”
- “Applying a current approach to past conduct could lead to inconsistent outcomes (for example, a different outcome for an AFCA complaint versus a previous FOS or CIO complaint).”
- “When considering past conduct where there is a difference between standards applicable then and now, AFCA will set out which standard is to be applied unless the context already makes it clear.”
The addendum also mentions that the complaints authority does “not treat previous decisions as precedents”.
“There may be circumstances when a previous decision is not applicable because the facts are somewhat different, or we have changed our approach to a particular class of complaint,” the addendum states.
The AFCA spokesperson said that the external dispute resolution body is following its usual process when investigating legacy complaints.
“This process begins with AFCA referring complaints back to financial firms to resolve. It is our expectation that firms will engage proactively with their customers to resolve these legacy matters themselves where possible, as part of their commitment to justly remediate the misconduct of the past and meet the community’s expectations of fairness,” the spokesperson added.
Updated on 16 August 10:30am to clarify that AFCA will not assess historic cases solely on regulations and policies at the time of the transactions in question, but will take them into consideration, among other factors.
[Related: Credit scrutiny tougher on broker-originated loans]
