Login
ISCOVER
A government review into the complaints authority has noted a need for transparency in its public reporting and financial firm fees.
Treasury has tabled its review into the Australian Financial Complaints Authority (AFCA) to Parliament, with recommendations that the industry-funded watchdog should embrace initiatives that would enable greater transparency.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
The report, which was publicly released late on Wednesday (24 November), collected and analysed submissions from bodies that included current and former complainants, financial firms, consumer advocacy organisations, industry bodies, as well as “detailed data on AFCA’s operations”.
Overall, the review concluded that AFCA, during its 18 months of operation, is “performing well” during a “difficult operating environment and changing regulatory landscape”.
However, Treasury has issued 14 recommendations for the complaint authority, noting a need for stronger transparency in its actions, information and expectations.
Included in these recommendations were clearer guidance on the circumstances under which “a further issue identified during the complaint process would revert to financial firms for consideration through internal dispute resolution”, as well as an improved transparency over AFCA’s fees for financial firms and how the fees are being used to support AFCA’s activities.
“Although AFCA is subject to reporting obligations as a company limited by guarantee under the Corporations Act, it is clear that there is a desire for greater transparency on AFCA fees and funding structures from AFCA’s members,” the report wrote in its analysis of AFCA’s funding transparency.
“It is reasonable for members, who are required to be members to maintain their financial services or credit licence, to want to have confidence and visibility of AFCA’s processes since they are funding the organisation.
“However, AFCA should communicate more with members about its fees and charges. While AFCA, as a non-government entity, is not subject to the Australian government Cost Recovery Guidelines, these guidelines … could provide a useful guide for AFCA as to the type of reporting and transparency that financial firms seek.”
The review also suggested that AFCA’s funding structure should not “disincentivise financial firms from defending complaints that they consider do not have merit” was also included in this review.
However, the Treasury recommended that AFCA should be more transparent in its public reporting of systemic issues, “including on a de-identified basis as appropriate”, while also ensuring that complaints from “sophisticated or professional investors” should be excluded “unless there is evidence that they have incorrectly or inappropriately classified”.
“It is also essential that AFCA is clear with financial firms on its processes, thresholds and triggers for the identification of issues as systemic issues,” it said.
“The Review notes that there is limited information available publicly that would assist financial firms in understanding the circumstances in which AFCA may refer a matter as a systemic issue, and the ensuing process.
“Similar to publication of determinations, the Review also considers that AFCA should publish a greater level of detail on the types of issues identified as systemic issues, in particular those referred to regulators.
“While noting AFCA’s constraints around its confidentiality restrictions, the Review considers that there is scope for further transparency in AFCA communicating with its users by sharing information on a de-identified basis.”
The calls for transparency into funding and operations come less than one month after brokers received warnings that they would be expelled from AFCA due to unpaid outstanding invoices, despite those same brokers previously being issued renewal certificates.
One broker who spoke to The Adviser noted that, despite paying their fees in July and receiving a renewed certificate, they were issued a pre-expulsion notice and were advised that the payments had not been reconciled in AFCA’s accounts.
In a statement issued to The Adviser, AFCA said of the situation: “The grounds for this motion are that the member has failed to pay monies owing to AFCA within 30 days of receiving a notice requiring payment.”
“In most cases, AFCA has attempted to contact these members multiple times previously in order to obtain the details required to allocate their payment correctly but has received no reply,” the spokesperson continued.
“Therefore, AFCA has issued pre-expulsion notices to those that have been unable to provide correct or complete reference details by the due date.”
[Related: AFCA members to see ‘near real-time’ complaints data]
JOIN THE DISCUSSION