Australian Treasurer, Josh Frydenberg, announced that the government had implemented regulation based on the Royal Commission’s recommendation. Accordingly, Australian Financial Services License (AFSL) holders are compelled to work with Australian Financial Complaints Authority (AFCA). This cooperation will enable to resolve any disputes concerning them. This effectively boosts the powers of AFCA and demand any relevant records and documents in respect of the disputes.
The government’s move is interpreted as extending its backing to every AFCA member. This included Registrable Superannuation Entities and Australian Credit License Holders. This will also fulfill the promises made to AFCA by AFSL holders and provide the required statutory powers. As a result, the Australian Securities and Investments Commission (ASIC) is empowered to take action as and when the promises are not fulfilled. Also, any breach would lead to a civil penalty.
David Locke, the CEO and Chief Ombudsman, believes that the recent move is a key factor to resolve any financial complaints from consumers and small businesses. The focus is not only on efficiency but also on the effectiveness. He pointed out that the AFCA has the capacity to draw adverse inferences in case there is an absence of documentation. The agency has seen a spurt in complaints in the five-month period ended in March from the preceding four-month period.
There were as many as 29,893 complaints in the five-month period ended March 31. This is a sharp increase from the 23,681 complaints received by AFCA in the first four months of its existence. The organization has received 45 percent of all complaints on credit while general insurance products accounted for 22 percent of all complaints. These two are followed by investments, which represented 5 percent of all complaints.
The government has also made it compulsory for every AFS licensees to be a member of the AFCA. Similarly, others like superannuation trustees and Australian Credit Licensees have also been compelled to be a member of AFCA. These initiatives followed after the ASIC remained firm on the firms’ membership to resolve disputes. The organization has also taken the drastic action of canceling the AFS licenses of two financial service providers for failing to become members.