AFCA: The first six months - and the year ahead

By Andrew Maher
Banking & Finance Financial Services Insurance Private Capital Superannuation

In brief

Written by Partner Andrew Maher, Senior Associate Ingrid Weinberg and Lawyer Zoe Chapman

The Australian Financial Complaints Authority (AFCA), the new 'one-stop-shop' for resolving financial complaints, has had a very busy first six months of operation.

Partner Andrew Maher, Senior Associate Ingrid Weinberg and Lawyer Zoe Chapman take a look at some of what AFCA has been doing, and what businesses and consumers may expect from AFCA going forward.

You can read more about the establishment of AFCA in a previous edition of Unravelled, available here.

Increase in consumer claims

In its first quarter, AFCA received 23,681 complaints – a 42 per cent increase in volume compared to its predecessor schemes1. Most complaints related to credit (44 per cent) and general insurance (22 per cent), with the remaining third relating to deposit taking, superannuation, payment systems, investments and life insurance. The majority of complaints (67 per cent) were resolved by the financial firm, with others discontinued or negotiated. More than $54 million has been awarded or obtained by consumers and small businesses.2

This increase in complaints is unsurprising for several reasons.

AFCA's monetary limits and compensation caps are higher than previous limits and caps under its predecessor schemes.3 Extensive media coverage of the Financial Services Royal Commission (the Royal Commission) dramatically increased consumer awareness of both financial services disputes and conduct potentially falling below 'community expectations'. AFCA's stated commitment to implementing a 'fairness revolution'4 has evidently found a receptive consumer audience.

An expanding remit

Currently, AFCA can only consider complaints arising from the last six years (or two, where the complaint has already been through a financial firm's internal dispute resolution process).5

From 1 July 2019, AFCA's jurisdiction will expand to deal with financial complaints dating back to 1 January 2008 (the period considered by the Royal Commission) that the FOS, the CIO or the SCT have not otherwise dealt with (so-called legacy complaints). This expanded remit will operate until 30 June 2020 under a new Section F of the AFCA Rules. AFCA is due to issue guidance on this Section prior to 1 July 2019, with consultation open to the public until 12 April 2019.6

The 2019 Federal Budget includes $2.8 million for AFCA to consider legacy complaints dating back to 2008, with an additional $30.7 million to pay for legacy unpaid external dispute resolution determinations.7

Engagement with ASIC and consumer groups

From its inception, ASIC has been strongly supportive of AFCA and its remit.8 All AFS licensees, Australian credit licensees, superannuation trustees and other firms that provide financial services to retail clients were required to become members by 21 September 2018 (and are required to notify ASIC of their membership). Last month, ASIC cancelled the AFS licences of two firms who failed to obtain membership of AFCA by that date.9

To reach out to consumers following the Royal Commission, in February, AFCA established the Consumer Advisory Panel.10 The Panel consists of 10 leading consumer representatives, including those who represent older Australians, Indigenous Australians, vulnerable communities and those in financial difficulty. It will 'provide insights and analysis on strategic and policy issues, as well as highlight emerging issues facing consumers'11. The Panel is designed to balance AFCA's regular forums with the financial services industry, and will meet quarterly in various locations across Australia.

AFCA also plans to run a 'national roadshow' over the next year. As part of this, David Locke, CEO and Chief Ombudsman, and other senior representatives, will visit regional, rural and remote communities to raise awareness of AFCA's work.12 This initiative may also increase the number of complaints against financial firms from those parts of Australia.

Compensation Scheme of Last Resort

Another important recent development for AFCA is the Government's acceptance of the Royal Commission's recommendation that a Compensation Scheme of Last Resort (CSLR) be established to compensate consumers and small businesses who received a court or tribunal decision, or an AFCA determination, in their favour, but who are nevertheless unable to collect the compensation owed to them (eg, because the financial firm in question has become insolvent).13

The Federal Opposition is equally supportive of this scheme.14

The CSLR will be industry-funded, and will form part of AFCA, which has commented that it 'looks forward to working with the Government to implement this important reform'.15 The Government has also agreed to fund the payment of legacy unpaid determinations from the FOS and CIO, reflecting AFCA's temporarily extended remit over legacy complaints.

The 2019 Budget allocates $2.6 million to the establishment of the CLSR.16

The Government has also accepted the Royal Commission's recommendation that AFS licensees should be required to co-operate with AFCA in the resolution of disputes, including making available to AFCA all relevant documents and records relating to the issues in dispute. Notably, the Government extended this obligation to Australian credit licensees and superannuation trustees.17

Reporting systemic issues and serious contraventions to the regulators

AFCA is required to identify, refer and report systemic issues, serious contraventions and other reportable breaches to ASIC, APRA and the ATO.18 Systemic issues are those that have implications beyond the immediate actions and rights of the parties to a complaint. A contravention will be considered serious if there are sufficient facts to ground an objectively reasonable belief, or AFCA in good faith forms a belief, that a serious contravention of the law may have occurred.19 Other reportable breaches include a contravention of the governing rules of a superannuation fund or an approved deposit fund, a breach of the terms and conditions of an annuity or a life policy, and a financial firm refusing or failing to give effect to a determination made by AFCA.

Since 1 November 2018, AFCA has started 39 investigations into possible systemic issues, and eight investigations into possible serious contraventions. Most relate to misleading conduct by financial firms. AFCA has stated it will 'work collaboratively' with financial firms to resolve confirmed issues, which may include financial firms implementing controls to avoid recurrence of the issue. As highlighted in a previous edition of Unravelled, available here, this includes a power to require the financial firm 'to do or refrain from doing any act which AFCA considers reasonably necessary'.20

AFCA must refer systemic issues and serious contraventions to ASIC, APRA and/or the ATO within 15 days. From there, any regulatory action will be addressed by the relevant regulator. This collaboration is likely to provide an important source for the regulators' investigative surveillance and enforcement activities.

The message for AFCA members

AFCA member firms should continue to familiarise themselves with AFCA's important role in the new legal and regulatory landscape. The significant increase in complaints, particularly in light of its expanding mandate and consumer awareness activities, means AFCA will play an increasingly important role in the financial services regulatory space. Referrals to, and coordinated approaches with, each of ASIC, APRA and the ATO in respect of systemic issues and serious contraventions provide one example of this role, as financial firms and regulators continue to deal with the fallout of the Royal Commission.


  1. AFCA, 'Snapshot of AFCA's first four months' (13 March 2019). The 'predecessor schemes' are the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
  2. AFCA, Resolution of Disputes with Financial Service Providers within the Justice System: Submission to Senate Legal and Constitutional Affairs Reference Committee Inquiry (4 March 2019) 3.
  3. AFCA, Complaint Resolution Scheme Rules (1 November 2018) D.4. The consumer complaint monetary limit has increased from $500,000 to $1 million, and the compensation cap has increased from $323,500 to $500,000. The consumer limits and caps are unlimited where the home secures the guarantee to be set aside. In respect of small business, the credit facility limit has increased from $2 million to $5 million, and the compensation cap has increased from $323,5000 to $1 million (or $2 million where the small business is a primary producer): AFCA, 'AFCA at a Glance' (24 October 2018).
  4. AFCA, 'Helen Coonan: AFCA is Bringing a Fairness Revolution to the Banks' (Media Release, 27 March 2019).
  5. AFCA, Complaint Resolution Scheme Rules (1 November 2018) B.4.
  6. See

  7. Patrick Durkin, 'Federal Budget 2019: Banks face Hayne compensation scheme', Australia Financial Review (2 April 2019). See generally Australian Government, Budget Paper No 1: Budget Strategy and Outlook 2018-19 – Budget Statement 1: Budget Overview (2 April 2019).

  8. ASIC, 'ASIC approves Australian Financial Complaints Authority rules' (12 September 2018).
  9. ASIC, 'ASIC Cancels the Licences of Firms that Failed to Join AFCA' (Media Release 19-063MR, 22 March 2019).
  10. AFCA, 'AFCA Announces Consumer Advisory Panel' (Media Release, 20 March 2019).
  11. Ibid.
  12. AFCA, 'AFCA Roadshow'.

  13. See Australian Government, Restoring Trust in Australia's Financial System: The Government Response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (February 2019). The potential for a CSLR was first raised in 2017 as part of the Review into External Dispute Resolution and Complaints Framework (the Ramsay Review): Ian Ramsay, Julie Abramson and Alan Kirkland, Supplementary Final Report: Review of the Financial System External Dispute Resolution and Complaints Framework (September 2017).
  14. James Frost, 'Labor to pressure banks into opening old cases', Australian Financial Review (26 February 2019).
  15. AFCA, 'AFCA's Statement on the Royal Commission Final Report' (Media Release, 4 February 2019).
  16. Patrick Durkin, above n 8. See generally Australian Government, Budget Paper No 1: Budget Strategy and Outlook 2018-19 – Budget Statement 1: Budget Overview (2 April 2019).
  17. Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) vol 1, recommendation 4.11; the Hon Josh Frydenberg MP, 'Taking Action on the Banking, Superannuation & Financial Services Royal Commission' (Media Release, 6 April 2019).
  18. Corporations Act 2001 (Cth) section 1052E, ASIC Regulatory Guide 267: Oversight of the Australian Financial Complaints Authority (RG 267), AFCA, Complaint Resolution Scheme Rules (1 November 2018) A.17, A.18.
  19. RG 267, RG 267.41.
  20. AFCA, Complaint Resolution Scheme Rules (1 November 2018) A.17.4.