Report recommendation

AFCA should provide 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.

Where the issue is combined with an existing complaint, both parties should be provided with procedural fairness by having the opportunity to comment on changes to the scope of the complaint.

In instances where AFCA finds parties inappropriately seeking to add new issues, however, it should take action to dismiss or curtail such behaviour.

Completed work

• Preparation of internal guidelines to support consistent treatment of further issues has been completed.
• We reviewed existing Approaches and resources for dealing with further issues, and updated our guidance to clarify our process, which includes consideration of:
• our jurisdiction, whether an issue can be dealt with under AFCA’s Rules
• procedural fairness
• the nature of the connection to the existing complaint
• the stage of the existing complaint in the complaint handling process
• complainant vulnerability, and
• our joinder process and where further issues may require a joinder of a party.
• Delivered internal training to staff on how to deal with further issues that arise during a complaint.
• Informed key stakeholders of how AFCA will approach further issues that arise during a complaint.

Report recommendation

In making its decisions, AFCA should consider what is 'fair in all the circumstances' having primary regard to the four factors identified in its Rules - legal principles, industry codes, good industry practice and previous decisions.

Completed work

Fairness Jurisdiction Project

The AFCA Fairness Jurisdiction Project completed its examination of how AFCA applies its jurisdiction throughout our dispute resolution processes. The project delivered resources to AFCA staff, members, complainants and stakeholders to ensure our fairness jurisdiction is clearly communicated to all parties throughout our process. The resources include:

• New Fairness navigation tool which ensures AFCA decision makers are consistent when applying AFCA's fairness jurisdiction to complaints
• New decision templates highlighting AFCA’s approach to fairness when making decisions
• Apprehended Bias Policy, which sets out how AFCA’s people remain impartial when working to resolve complaints
• AFCA’s Engagement Charter, which sets clear expectations for how parties should engage with each other and AFCA to ensure a fair process
• AFCA’s Fairness Jurisdiction Project outcomes report, which provides information on how AFCA ensures these principles are applied consistently and in a way that is fair for members and complainants, and
• Republishing AFCA Approaches to better reflect fairness jurisdiction (completed in May 2022), and
• The post implementation review (PIR) has been completed including a review of the Fairness Jurisdiction Project, work to ensure project outcomes are being used appropriately.

Independent Decision review

In order to ascertain whether AFCA’s Decisions and processes are operating in a manner which is fair in all the circumstances a decision to review a number of AFCA complaints that went to Determination was made.

• Engagement of expert and independent reviewers for the review of 30 AFCA complaints.
• Identify the criteria for selection and then the actual selection of the 30 complaints for review by the reviewers.
• Creation of the form or matrix for the reviewers to complete for each reviewed complaint.
• Provision of IT support and infrastructure to the reviewers for the project.
• Receipt of all of the completed reviews from the reviewers.
• Receipt of final report from reviewers.
• Precis from Reviewers summarising and de-identifying their report.
• Presentation of Final Report and Management Response to the AFCA Board.

Report recommendation

AFCA should not advocate for, nor act in a manner that otherwise advantages, one party such that the impartiality of the complaints resolution process is compromised.

Completed work

• An internal working group is focused on embedding practices that promote impartiality during the complaint process.
• Resources delivered by the AFCA Fairness Jurisdiction Project include the Apprehended Bias Policy, which sets out how AFCA’s people remain impartial when working to resolve complaints.
• AFCA has established a training program on trauma informed and culturally appropriate dispute resolution practices for our teams.
• External review of AFCA determinations from Recommendation 2 to make sure that the benchmark set by the Independent Review is being met or exceeded.

Report recommendation

AFCA should address poor conduct by paid advocates affecting the efficiency of the scheme, such as by amending its Rules to allow it to exclude certain paid advocates from involvement in the complaints process. The Government could also consider an amendment to AFCA’s authorisation conditions to support such changes.

Completed work

• Updated process and online resources to ensure paid advocates provide the required information and understand our expectations when making complaints on behalf of consumers.
• Internal working group created, focused on updating AFCA Rules and Operational Guidelines, and developing a new future state process with input from key stakeholders.
• Consultation on updates to AFCA’s Rules and Operational Guidelines and supporting information with key stakeholders.
• Feedback from stakeholders received during the consultation period has been reviewed and collated.
• Briefing on the upcoming changes to AFCA's Rules and Operational Guidelines, outlining the Rules changes and expectations by Paid Representatives.
• The changes to AFCA's Rules and Operational Guidelines have been approved by ASIC and have been published, taking effect from 1 July 2024.

Report recommendation

AFCA should:

• continue to publish data on its timeliness and start publishing data on the full range of complaints it resolves, including those that extend beyond 12 months.
• better manage expectations around timeframes in its communication with parties to a complaint.
• focus on improving the timeliness of complaints that remain unresolved beyond 12 months.

Completed work

Related to aged complaints

• Continued focus on improving timeliness of unresolved complaints, including closure of complaints extending beyond 12 months.
• Review of available timeliness information for complaints to enable assessment of data solutions that will improve transparency.
• AFCA has implemented strong governance and oversight to reduce the volume of aged complaints (complaints or cases greater than 365 days from lodgement).
• Regular ‘aged case clinics’ which involves collaboration between key AFCA areas to troubleshoot complex aged complaints and develop options to progress and resolve.
• Regular reporting and performance tracking on aged complaints.
• An aged complaints reporting predictor which supports proactive monitoring and aids in the early intervention of complaints at risk of becoming aged.
• A Lead Ombudsman leading the work on aged complaints.

Other completed activities

• Implementation of a new case management system (CMS), which provides greater visibility on timeframes at various case stages.
• Updated information on the AFCA website about how long it takes for cases to move from different stages in the AFCA process.
• Implemented a communications strategy to manage consumer expectations about complaint timeframes, including introducing outbound touchpoints early in the process and revising outbound correspondence with clearer explanations of what consumers can expect when they lodge a complaint with AFCA.

Report recommendation

AFCA should exclude complaints from sophisticated or professional investors, unless there is evidence that they have been incorrectly or inappropriately classified.

Completed work

• An internal working group, focused on addressing how AFCA responds to complaints from sophisticated and professional investors, has reviewed our approach and drafted a proposed change to the AFCA Operational Guidelines.
• Consultation on updates to AFCA’s Operational Guidelines and supporting information with key stakeholders.
• Feedback from stakeholders received during the consultation period has been reviewed and collated.
• AFCA leads have commenced conversations about Rules changes including reference to classifying wholesale and sophisticated investors.
• The changes to AFCA's Rules and Operational Guidelines have been approved by ASIC And have been published, taking effect from 1 July 2024.

Report recommendation

AFCA’s funding model should not disincentivise financial firms from defending complaints they consider do not have merit and should better take into account the circumstances of small financial firms.

Completed work

• On 1 July 2022, AFCA implemented its new funding model. The new model addresses recommendation 7 through several features which aim to remove any inadvertent disincentives to proceed through our dispute resolution process, and to remove financial pressure from small financial firms. These features include:
  • Five free complaints each financial year
  • A single annual flat registration fee of $375.55 for financial firm members, and $65.98 for Authorised Credit Representatives, and
  • A simplified complaint fee structure that reduces complexity and reduces complaints fees.
• A comprehensive review of the model has been completed, indicating the funding model is operating as intended and has achieved its objectives of being efficient and sustainable. For more information visit the AFCA funding model page.
• Members have been issued their first year of invoices under the new fee structure.
• AFCA continues to review its processes to support members and consumers to resolve complaints as early as possible in a fair and transparent way, including the recent development of proposed guidelines which will help parties accept reasonable offers of settlement and resolve complaints more efficiently.

Report recommendation

AFCA should improve the transparency of its fees for financial firms and how the fees are being used to support AFCA’s activities.

Completed work

• Simplified fee structure in the new AFCA funding model allows members to more easily understand the fees incurred by complaints at different stages of our process. For more information visit the AFCA funding model page.
• New financial information published in the AFCA 2021–2022 Annual Review illustrates how funds are spent to support the delivery of AFCA's service.
• Comprehensive review of our funding model:
  • AFCA’s new funding model has now been in place for more than a year. We completed a comprehensive review of the model, which indicates it is operating as intended and has achieved its objectives of being efficient and sustainable.
  • Actual fees and the distribution to members closely aligned to the modelling completed as part of the design of the new model during the 2022 financial year. At the end of FY23, AFCA landed with a 54% fixed and 46% variable funding model, allowing for more variability in AFCA’s funding. The ‘user-pays’ feature is functioning as expected with the heaviest users of AFCA’s service paying their fair share.
  • AFCA saw a significant increase in complaint volumes during the year. The review found the proportion of complaints closed at each stage have remained relatively stable year on year, indicating the model has not driven a change in behaviour from members or consumers because of published and reduced fees.

Report recommendation

AFCA determinations should continue to not be subject to merits review, but the substance of a determination should be reviewable with respect to its application to future cases. To this end, AFCA should enhance the visibility, accessibility and independence of its existing forward-looking review mechanism.

AFCA should amend its Operational Guidelines to remove the requirement for an applicant to demonstrate an error of law to access the formal forward-looking review mechanism. Applicants should be able to access it if they are able to demonstrate that the AFCA determination adopts an approach that could have a significant impact across a class of consumers, businesses or transactions.

Completed work

• We have consulted on proposed changes to AFCA’s Operational Guidelines, which will be updated from 1 July 2024.
• Updates provided to ASIC, APRA and Treasury on FLRM and Approach document models.
• New information confirming the process for requesting a forward-looking review has been published to the AFCA website.
• Bespoke communications sent to member firms, Treasury, ASIC, APRA, industry bodies confirming the governance and cost contribution model.

Report recommendation

Complaints about AFCA’s service should remain the responsibility of the Independent Assessor. AFCA should improve the Independent Assessor’s visibility as part of its communications with parties to a complaint.

Completed work

• Updated communications to both consumers and members about how to provide feedback and the Independent Assessor function.
• Enhancements to public resources include:
  • Updated information about the service complaints process and the Independent Assessor have been published on the AFCA website, including new videos for members, consumers and stakeholders.
  • Information about AFCA’s service complaints process and the Independent Assessor is now available in 19 languages to improve accessibility on the AFCA website.
  • Improved AFCA website navigation and enhance webpages accessibility through search engine optimisation to make it easier to find information about the Independent Assessor.
  • Improved the Independent Assessor’s report in the Annual Review and developed a new factsheet.
• Enhancements to member specific channels include new resources and links on the member portal, communications to members and the member satisfaction survey.
• Enhancements to uplift internal visibility include review of resources, updated staff training modules and completing several staff presentations. We also developed new workforce planning tools to ensure AFCA is appropriately resourced to meet and maintain service levels for service complaints.
• The Independent Assessor presented to consumer representative organisations and will be presenting at future stakeholder forums.

Report recommendation

AFCA should ensure consultation is undertaken on each Approach Document prior to final publication.

Completed work

• Researched options for improving future consultations with input from key stakeholders.
• Piloted consultation process with two recent new approaches: Responsible Lending and Small Business Lending.
• Developed a governance model for our consultation process.
• Consulted on the annual Approach document schedule for financial year 2024-2025 and published a consultation feedback report, which outlines the consultation process and how we responded to stakeholder feedback.
• Published the final 2024-2025 Approach document schedule, which provides a list of prioritised Approach documents that we plan to consult on during the current financial year.

Report recommendation

Where a systemic issue has been referred to ASIC or another regulator, AFCA should cease its investigation of the systemic issue. ASIC and other regulators should advise AFCA of the outcomes of the referrals they receive. However, AFCA should continue to resolve any relevant individual complaints.

Completed work

• AFCA had completed its own review of the systemic issues function prior to the independent review and initiated the Systemic Issues Transformation project in part to address the different roles AFCA and regulators play.
• Engagement with ASIC and Treasury to address this matter.
• Developed assets to tell the AFCA Systemic Issues story to a diverse group of stakeholders, including a new member pack.
• Engagement with key stakeholders to share and test key messages about AFCA’s systemic issues role. The feedback received was neutral to positive.
• Met with Treasury to close the loop about the key stakeholder engagements and AFCA’s systemic issues role messaging acceptance.
• Plenary session at the March 2024 Member Forum provided key messages about AFCA’s systemic issues function, available to all members. The new systemic issues member resources launched at the Member Forum align with and include the updated messaging around AFCA’s systemic issues role.
• Recommendation 12 and 13 Closure Report was tabled at the Independent Review Response Program Board March 2024 meeting.

Report recommendation

AFCA should be more transparent in its public reporting of systemic issues, including on a de-identified basis as appropriate. This would encompass factors such as the industry to which the systemic issues relate, the nature of the complaints, the number of affected consumers, total value of remediation and reporting to the regulators.

Completed work

AFCA had completed its own review of the systemic issues function prior to the independent review and initiated the Systemic Issues Transformation project which addresses public reporting.

Increased the visibility of systemic issues with input from ASIC and communicated to key stakeholders. This included launching the second edition of the AFCA FY21-22 Systemic Issues Insights Report, which features data and findings from a range of systemic issues cases across the financial services industry and provides an opportunity for members to learn from others’ experiences. The report is released bi-annually.

Report recommendation

The National Consumer Credit Protection Act 2009 should be amended to no longer require authorised credit representatives to be members of AFCA.

Next steps

• Awaiting Government direction.