The Australian Financial Complaints Authority (AFCA) will consolidate the existing Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
Formed out of a recommendation from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Small Business Loans Inquiry, it is hoped the new external dispute resolution (EDR) body would “significantly improve access to justice, especially for capital-intensive enterprises”.
The government announced its intention to make a number of amendments to the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (the Bill), previously known as the Treasury Laws Amendment (External Dispute Resolution) Bill 2017, in response to its consultation on the new scheme.
Specifically, the amendments would see the size of disputes considered, and the compensation received, nearly triple.
Currently, under the FOS, disputes of less than $500,000 arising from a credit facility no higher than $2 million can be considered.
However, under the proposed amendments, a small business would be able to seek resolution of a dispute from AFCA where the credit facility is up to $5 million and potentially receive compensation of up to $1 million.
AFCA would also be able to make binding determinations.
The change will likely be of benefit to the number of businesses who have complained about the issue of unfair chargebacks by banks, with a lack of clear guidance and where and how disputes can be lodged.
Ombudsman Kate Carnell commented: “Small businesses do not have the money or time to challenge banks through the court system and there is a significant power imbalance between banks and small businesses.
“Small businesses do not have the financial capacity to hire expert legal advice to help them overcome this disadvantage.”
Ms Carnell stated that the higher compensation cap should incentivise banks to resolve disputes through internal processes before progressing to the AFCA.
She said: “The Government’s proposed model will provide a genuine alternate dispute resolution option in a forum where the needs of small business are understood.
“It will save time and money by significantly reducing the need for litigation.”
Minister for Revenue and Financial Services, Kelly O’Dwyer, said that the “improvements” to the Bill and the doubling of existing limits would “significantly enhance access to redress for consumers and small businesses who wrongfully suffer losses”.
“These changes provide industry and consumers with certainty on the AFCA framework and the opportunity to engage in further consultation with the transition team on AFCA’s terms of reference.
“Constructive stakeholder engagement will underpin the smooth commencement of this landmark reform.”