Australian Financial Complaints Authority to be established

Chris Hamblin

3 November 2017

On 26 July 2017 the Minister for Revenue and Financial Services established a Transition Team led by Dr Malcolm Edey to ensure a smooth transition from the existing three external dispute resolution (EDR) schemes to the new Australian Financial Complaints Authority (AFCA).

Recommendation 4 of the Ramsay Review was that AFCA (once it is set up) should have significantly higher monetary limits and compensation caps than the existing EDR schemes (the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO)) that are subject to regular indexation and review. The review also recommended an unlimited monetary jurisdiction for disputes about pensions.

The Government has decided that AFCA will commence operations with the following monetary limits:

a dispute limit of A$1 million (US$764,711) and a compensation cap of A$500,000 (US$382,363) for most non-superannuation disputes;
unlimited monetary jurisdiction for superannuation disputes;
no dispute limits and compensation caps for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other security over the guarantor’s primary place of residence; and
A$1 million for small business credit facility disputes.

The consultative paper states that the Ramsay Review thought that many of the key features of the proposed AFCA model are strengths of the current ombudsman schemes.