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New one-stop-shop financial ombudsman reveals how they have been getting up to 200 complaints a day

by Lewis Panther SA FIN | 21 Feb 2019
AFCA chief David Locke spoke to FINSIA about the work of the newly formed dispute resolution service for consumers and small businesses which is handling close to 200 complaints a day.

The Australian Financial Complaints Service that replaces three previous bodies – the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal - is clearly in for a busy 2019.

Since being established by the 2016 Ramsay Review and opening its doors last November the free one-stop-shop has recruited a 600-strong workforce. But it looks as though it needs them.

Here FINSIA gets a closer look with CEO and Chief Ombudsman David Locke, who will be hosting a series of FINSIA roadshows in April.

1. Can we get an overview of where we are in terms of numbers?

A. From November 2018 to January 2019, AFCA received 17,576 complaints from consumers and small businesses. Most of the complaints AFCA received have been about credit (44%), followed by general insurance (22%) and deposit taking (10%). 9% of complaints received were about superannuation. While most complaints were lodged by individual consumers, 1,273 complaints were lodged by small businesses, an area where we have expanded jurisdiction.

The most complaint provider type were banks with 6,113 complaints, followed by general insurers (3,239 complaints) and credit providers (2,903 complaints). The trends we are seeing remain fairly consistent.

About 9% of AFCA’s licensee members have had a complaint lodged against them in the first three months.

2. What has been the size of the biggest claim that has been resolved? And how much has been paid out in total so far?

A. We do not currently have data to publish on compensation amounts, but we will be reporting on this in future.

3. Given the figures that have seen published (in the two months up to mid January - 11,500 complaints as against 2,100 a month at the Financial Ombudsman Service) are more than double the FOS, what do you think lies behind that increase? Further, you indicated that you expected in excess of 50,000 complaints in the first year. The trajectory - following on from the first two months - suggests it could be more than 100,000, even getting close to 150,000. What do you envisage?

A. Based on our predecessor schemes’ complaint volumes, we projected receiving 55,000 complaints in our first year, a 27% increase. However, the current volume of complaints we have been receiving suggest that we might instead receive around 69,000 complaints in our first year – a 20% increase on our forecast, and significantly beyond the expected initial increase. This increase means that more and more Australians know about AFCA, and are aware that they can approach us when they are experiencing financial firms.

There are a few reasons for the increase. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry brought issues with the financial services industry to the forefront. This has made the Australian public more aware of when things weren’t right with their financial firm, and learning that they could approach AFCA for free.

Since and in the lead up to our launch, AFCA has been committed to increasing awareness about our service, and ensuring that Australian consumers and small businesses know they can approach us for redress with financial issues.

Given this increase in the volume of complaints we have been receiving, we are reviewing our complaint projections. Considering how we might managed increased demands on our service, while achieving our purpose, vision and goals successfully, is an ongoing process. We have several initiatives to deal with the increased volume of complaints in place already and are piloting new initiatives. Our purpose is to provide fair, independent and effective solutions for financial disputes, this is the crux of our work.

4. Following on from this - and it may have already formed a part of the previous answer - how much of an impact has the Royal Commission been?

While we are unable to say which complaints have been lodged as a result of the Royal Commission, as mentioned above, it is likely the Royal Commission heightened consumer awareness about misconduct in the financial services industry.

5. You’ve previously spoken about the incentive to settle quickly or costs for the guilty party increase. How is that mechanism worked out?

A. Our funding model is based on a user pays service, which has three elements: a membership levy, user charge and complaint fees. The membership levy is the fee all financial firms pay to be a member of AFCA.

The user charge promotes and rewards high rates of resolution at the internal dispute resolution (IDR) stage. Members who do not receive complaints against them year on year do not incur the user charge. A member who only receives one complaint against them in the relevant twelve-month period will not be charged the user charge.

The user charge is based on the number and complexity of the complaints the member has closed over the 12 months prior to the calculation of the charge. The approach rewards members and provides them with an incentive to:

  • increase their resolution rates within the IDR process and
  • reduce the need for their customers to come to AFCA.

The third element of our funding model is the complaint fee, which is charged on a particular complaint. The complaint fee is based on:

  • the stage in the process at which the complaint is resolved and
  • the complexity of the complaint if it progresses beyond the initial investigation stage.

These elements, especially the user charge, work in tandem to provide financial firms with an incentive to resolve complaints before they even come to AFCA, making it in the financial firm’s interest to enhance their internal dispute resolutions.

6. Given that AFCA has only been up and running since the beginning of November, it seems to have been successful in settling a high proportion of complaints. A figure of around a third has been published. That sounds like a really good return. Is it? How do you explain this happening?

A. We have already resolved about 45% of about 20,000 complaints we received since 1 November 2018.

AFCA will be holding a range of forums for members in 2019; these forums are a platform for us to update members on complaint trends, ongoing developments and our process initiatives. A very important issue we will be focusing on enhancing firms’ internal dispute resolution functions and frameworks. We want financial firms to ensure that they are improving how they are resolving issues and problems raised by consumers through their internal dispute resolution areas, and that they are properly notifying consumers about their right to come to AFCA.

In the future, we hope that an external dispute resolution scheme such as AFCA will not be necessary to resolve financial complaints. Instead, financial firms should make sure that they are constantly working to enhance their internal dispute resolution processes and dealing with complaints as they arise.

7. Following the GFC and exposure of the misconduct of banks and finance firms in the UK, a cottage industry of class action lawyers sprang up in a race for compensation. Do you foresee anything like that happening here? And is there are part of AFCA’s remit (overt or subliminal) to head off this sort of response?

A. As an independent dispute resolution service, we provide an avenue for consumers and small businesses to engage in a process which is easy to use, free, and efficient in its effectiveness. However, we are just one avenue for obtaining redress and it is up to the relevant consumers to choose the forum for resolving their complaints which best fits their circumstances. To do so, they should take into account issues such as whether the forum can assist them properly, the cost of obtaining an appropriate outcome and the time and complexity involved in doing so. In specific circumstances, a class action may be the most appropriate way of resolving a large number of litigious issues, and we will advise consumers and small businesses if we think that is the case.
However, external dispute resolution exists because resolution through the courts, particularly in the case of class actions, can also be a very long and expensive undertaking.

AFCA has flexible processes to deal appropriately with conduct of financial firms which appear to affect more than the parties to a particular complaint. Where we have received several complaints about the same conduct, options available to us include doing one or more of:
  • ‘Batching’ the complaints together and engaging in bulk negotiations with the relevant financial firm to ensure the best outcome for all relevant consumers.
  • Working with ASIC and the relevant financial firm to establish a remediation scheme where high volumes of complaints can be dealt with.
  • Utilising our systemic issues or serious contravention processes to investigate and resolve the situation for affected people who may or may not be complainants.
  • Where there is a breach of an industry Code of Conduct established, referring the matter to the relevant Code Monitoring Committee for further investigation and action.
All of these processes are free to the consumer or small business and are designed not to require legal representation.

In our vision we state that we will work actively with consumers and small businesses to reduce financial disputes through innovative solutions, education and communication – not just resolve them one at a time. While the individual circumstances are important, we will also be proactive – not just getting involved when things go wrong for a specific person. Instead, we will be actively working with our members to minimise disputes. We want to stop them from becoming something bigger that needs an external ombudsman to resolve.

8. What can attendees expect to learn from the AFCA/FINSIA roadshow in April?

A. The roadshows are an opportunity for us to share AFCA’s strategy with FINSIA’s members, and explain in detail AFCA’s focus on resolving complaints fairly. Fairness requires complaints to be considered objectively and without bias, and by staff and decision makers with appropriate expertise. It is important that AFCA considers what a fair and equitable outcome might look like, taking the whole picture into account, rather than just the black letter law.

In AFCA’s submission to the Senate Economics References Committee’s Inquiry into credit and financial services targeted at Australians at risk of financial hardship, we suggest that consideration be given to the introduction of a standalone enforceable standard requiring customers to treat customers fairly. Fairness is at the heart of everything we do, and this is a call we will continue to support. We look forward to speaking about this important issue in April.
Consumers and small businesses can lodge a complaint to AFCA online at, via email to [email protected] or by phoning 1800 931 678.


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