MFAA backs AFCA’s early triage scheme

The consultation put forward 14 recommendations to ensure that the body can improve its procedures, including by excluding complaints where they are vexatious, substantially similar, or have not resulted in loss and by ensuring only unresolved issues in dispute are progressed and that matters do not progress to case management or decision status, where appropriate offers of settlement have already been made.

In its response, the MFAA highlighted that very few complaints are lodged against mortgage brokers, outlining that less than 0.5 per cent of all banking and finance complaints and just 0.3 per cent of calls to the financial counselling National Debt Helpline are related to mortgage brokers, indicating that “the best [interests] duty is well embedded, broker internal dispute resolution (IDR) complaints are well managed and that consumers are happy with the service brokers provide”.

However, it suggested that some of the proposals put forward by AFCA could help improve the complaints process.

Naveen Ahluwalia, the MFAA’s head of policy, stated that one such improvement could be the adoption of AFCA’s proposal to introduce a new power to provide it with the discretion to close a complaint if an appropriate offer of settlement has been made but has not been accepted by a complainant. The MFAA also agreed with the proposal to give AFCA more comprehensive ability to address unreasonable complainant conduct.

In the MFAA response, Ms Ahluwalia said: “[This] will enhance the efficiency of AFCA’s complaint processes and will make the scheme fairer for all participants — both financial firms and complainants. For the reasons of fairness and efficiency, AFCA’s first step should always be to identify if the complaint has merit or substance and if it does not, it should close. An effective early triage system is crucial to the efficiency of the EDR scheme, [to] streamline the process and alleviate a lot of time, effort, and resource.

“The early triage process should consider whether there is merit to the complaint (or not), whether AFCA can consider the complaint under its rules and whether the complaint has been lodged against the right party. It is only where the complaint has merit that through an effective and early triage system should there be contemplation of settlement offers by the parties involved.”

The MFAA said it was also important that AFCA “does not inadvertently allow for the scheme to be utilised to lodge unmeritorious complaints simply to obtain a settlement offer and that its staff are independent, experienced, and unbiased in managing conciliations and settlements”.

Indeed, the association flagged that members had provided feedback showing that settlement negotiations were “incentivised”, even where there was “no evidence of wrongdoing or settlements in excess of what is considered reasonable are recommended, simply to allow for the complaint to close”.

The MFAA noted that brokers had flagged instances where AFCA case managers had tried to influence the financial firm to make a settlement offer where there was no evidence of wrongdoing, simply to allow for the complaint to close.

“Not only does this raise questions of fairness to member firms, as well as issues of precedent in offering a settlement simply to resolve the matter, but may also impact on professional indemnity policies, which are becoming harder for financial firms (particularly small businesses) to obtain and maintain due to the cost,” the head of policy said.

As such, the MFAA said it would welcome a roundtable discussion with AFCA and MFAA members on how the two bodies could “work together to ensure fair and efficient outcomes with regards to conciliations and settlements”.

The MFAA also flagged that while the new AFCA funding model (which commenced on 1 July 2022) was working well on the whole, some MFAA members had said there had been high complaint fees as a result of the closure of legacy and longstanding complaints prior to the commencement of the new funding model.

“We hope these complaints dissipate over time and understanding AFCA has costs associated with legacy complaints, that AFCA exercises fairness and discretion in applying discounts to fees charged to our small-business members for legacy complaints,” the head of policy said.

Other points raised in the MFAA submission to the AFCA consultation included:

• Whether financial firms, as well as AFCA staff, should be protected from inappropriate or abusive behaviour from complainants
• A suggestion that the financial firm should be notified where a complainant is excluded and will need to be informed as to whether the complaint will be automatically closed
• A suggestion that AFCA make public which paid representatives have been excluded from participation in the scheme for a period of 12 months due to inappropriate conduct
• A suggestion that AFCA provide guidance (including examples) on what AFCA considers to be ‘appropriate’ offers of settlement, in particular with respect to non-financial loss or loss that cannot be easily calculated
• A recommendation that AFCA provide complainants with clear guidance on what it means not to accept a determination (for example, when AFCA closes the complaint and the complainant is precluded from bringing the same or similar complaint to AFCA again)
• A recommendation that, in certain circumstances, a financial firm should be able to request a complaint come before an AFCA panel if certain criteria are met. For example, if it is a novel issue, if the matter concerns a request for a compensation amount that is significant or for complex matters that would benefit from the skills and expertise of panel members

The outcomes of the AFCA consultation and next steps will be published in September 2023.

[Related: Consultation opens on AFCA rules changes]