Australia has been quietly reforming and tidying up some of its financial regulatory processes in the wake of the Royal Commission inquiry into financial misconduct, with a new body set to launch this month to help better settle financial disputes.
The Australian Financial Complaints Authority (AFCA) officially launches today and is now considered the single regulatory body for all financial complaints and disputes. It will result in fewer confusing mechanisms and make resolutions easier.
After the inquiry revealed a raft of financial malpractices, there was a clear need to take steps to clean up some of the mess, and part of the problem in the aftermath was the realization that the resolution process could be confusing and hard to access.
This new body will supersede any work previously done along these lines by the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credits and Investments Ombudsman.
Many financial companies will now be obligated to join AFCA by law, including those providing financial services to clients in retail and those licensing and representing credit. Alongside this, trustees of superannuation funds and suppliers and issuers of products who carry no license to trade will also need to sign up.
A Treasury statement said that this process should simplify practices for average citizens and make it easier for them to lodge a complaint when receiving poor service or being mis-sold something. This move will also benefit small businesses.
AFCA should, therefore, allow a complaint to be resolved in the same place, whether it relates to a line of credit, a product from a major lender, an application of insurance or anything else that can fall under this banner.
Part of the reason to facilitate AFCA is to help rebuild some bridges that were burned when the inquiry showed many ways that some major lenders had been giving poor services to clients and customers. The new body aims to allow trust to regenerate in the financial sector.
It also lets those lodging complaints to ask for higher redress, as the limits of remuneration are higher with AFCA than they were with previous bodies. This means that a fairer form of compensation is achievable.
The loosening of the financial caps means AFCA can now hear disputes of up to $1m for consumers, with compensation of $500,000 available. This works out to nearly double what the previous ombudsmen could offer those affected.
Small businesses can lodge complaints when the dispute is worth less than $5m, and the redress now comes in at a total of $1m.
While this is triple the previous availability, those concerned with primary production disputes can now claim up to $2m back.
Superannuation disputes are not set to have any cap at all, and with these being one of the products that received a lot of attention during the inquiry, this will hopefully pump some consumer trust back into the sector.
Given that so many people are starting to look elsewhere for investments and the level of average household savings is coming down year-on-year, it will be hard for many Australians to believe that a super is the best place for their money, unless they know that they are better protected.