SMEs that suffered at the hands of financial misconduct are being urged to come forward and lodge a formal complaint, and potentially receive up to $1 million in compensation.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell (pictured), said that an impending deadline will remove the opportunity for legacy complaints of financial misconduct to be investigated by the Australian Financial Complaints Authority (AFCA).
According to Ms Carnell, from 1 July 2019, there will be a one-year window for businesses to lodge a complaint with AFCA about problems going as far back as to 1 January 2008.
“This is a positive step forward for small businesses who have fallen victim to financial misconduct, as AFCA previously only took complaints going back six years,” Ms Carnell said.
“It’s a very simple process that involves clicking the yellow ‘Make a complaint’ button on the AFCA website.
“Small businesses could be awarded up to $1 million in compensation if their claim is successful, and the maximum compensation for primary producers is $2 million.”
Ms Carnell noted that businesses are eligible to have legacy complaints investigated by AFCA where:
- the business has fewer than 100 employees;
- the complaint relates to matters worth less than $5 million;
- the complaint is about a financial organisation that was a member of AFCA at the time of the complaint;
- and that the complaint has not already been heard by the financial ombudsman or a court.
She said it is “unfortunate” that AFCA is bound by the $5 million cap, stating that “we know of a range of cases where the small business loan was over this amount and those businesses have nowhere to go — no access to justice”.
“These businesses don’t have the resources to take financial misconduct to court and they deserve justice too,” Ms Carnell said.
The ombudsman said that AFCA will initially refer complaints back to the financial organisation to try and resolve, and failing that, it would begin its own investigations from 1 October this year.
“This will go some way to providing access to justice and redress to many small businesses, but we will continue to put pressure on the government to adopt Ramsay’s supplementary report on a scheme for small businesses with complaints relating to loans over $5 million that includes options such as an independent forum to hear past disputes or government-supported legal funding,” Ms Carnell said.
Thousands of complaints already identified
On Tuesday (18 June), AFCA welcomed the rule change enabling it to investigate legacy complaints of misconduct by financial services providers, a move that was approved by ASIC.
“From 1 July 2019, Australian consumers and small business will be able to lodge complaints with AFCA about the conduct of financial firms dating back to 1 January 2008,” AFCA said in a statement.
“AFCA has a 12-month window to accept and investigate these complaints, which must not have been dealt with by AFCA, its predecessor schemes, courts or tribunals.”
Its CEO and chief ombudsman, David Locke, said the organisation has identified “thousands of complaints that could potentially be made to AFCA”, which may have been previously raised but had not been examined because they had been deemed to be outside of the jurisdiction of the relevant body at the time.
“However, there will also be many matters that were never lodged with the Financial Ombudsman Service, the Credit and Investments Ombudsman or the Superannuation Complaints Tribunal that may now be brought to us,” Mr Locke said.
“We also expect that these matters are likely to be highly complex, and further complicated by the number of years that have passed since the issue occurred.”
He said the regulator expects financial services organisations to “proactively resolve these legacy matters themselves where possible”, as part of a commitment to remediate misconduct, including that identified by the banking royal commission.
“Where firms are unable to satisfactorily resolve the complaints, AFCA will start investigating these matters from 1 October 2019,” Mr Locke said.
Eligible businesses can lodge a complaint through AFCA’s website.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
Ask the Experts: Does automation stack up financially?
By Christopher Overton
Opinion: How bad do things have to get?!
By Adam Zuchetti
Business lessons from the All Blacks
By Steve Stanley