AFCA on the way – disclosure relief and ASIC’s enhanced powers

September, 2018
This is article No. 2 in a four-part series on the new Australian Financial Complaints Authority (AFCA), which commences on 1 November 2018. 

 

By Mark Bland, Partner, Jacqueline Wang, Senior Associate and Eliza Kane, Paralegal


The AFCA Rules set out the processes applying to all complaints submitted to AFCA, including superannuation complaints. ASIC’s approval of the Rules is a reminder of ASIC’s enhanced role under the new AFCA regime and the need for Financial Services Providers (FSPs) to prepare carefully over the next seven weeks for the arrival of AFCAMore plans were put in place last week for the upcoming launch of the Australian Financial Complaints Authority (AFCA) on 1 November 2018, with ASIC announcing it had approved the AFCA Rules and the terms of reference for the Independent Assessor (IA).

1. Disclosure Requirements and Relief

As part of the new regime, FSPs will be required to update mandatory disclosure documents, periodic statements and exit statements with the contact details of AFCA.

In response to submissions, ASIC has given FSPs disclosure relief until 1 July 2019, conditional upon FSPs updating their documented Internal Dispute Resolution (IDR) procedures and consumer communications about complaints and dispute resolution with current information about the AFCA Scheme (AFCA Information), by 1 November 2018.[1]  If the FSP has a website, the website must also be updated with the AFCA Information.

In addition, by 21 September 2018, FSPs will be required to provide information about predecessor schemes and AFCA in all IDR final response letters and ‘delay letters’.[2]

2. ASIC’s Enhanced Powers

A material aspect of the new AFCA scheme is enhanced ASIC powers for oversight of the EDR regime. In line with the new statutory framework, ASIC has updated its existing guidance with the release of RG 267: Oversight of the Australian Financial Complaints Authority, in June 2018.

Key changes to ASIC’s powers are summarised in the table below.


Some stakeholders have voiced concerns about ASIC’s ability to increase claim and remedy limits without consultation with members and the impact that such changes may have on the price and availability of professional indemnity insurance. The AFCA legislation also introduces an enhanced Internal Dispute Resolution (IDR) framework that gives ASIC powers to determine the content and form of IDR reporting, and to publish financial firms’ IDR data at both a firm and aggregate level. The objective is to deliver increased accountability and transparency to consumers.

Broader concerns have also been raised about ASIC’s broad powers to issue directions without any requirement for public consultation.

It is not clear if ASIC intends to engage and consult with industry and/or AFCA users in the exercise of its powers but it is clear that failure to do so may undermine stakeholder confidence in the new EDR scheme.

Up next

In article No.3 of the ‘AFCA on the way’ series, we will consider the broader impact of AFCA’s increased jurisdictional limits, as well as compensation caps on the behaviour of consumers and providers of financial services in Australia.

 

Contact Mills Oakley

For further information, please do not hesitate to contact:


Mark Bland | Partner 
T: +61 3 9605 0832
E: mbland@millsoakley.com.au

Jacqueline Wang | Senior Associate

T: +61 3 9605 0960
E: jwang@millsoakley.com.au

 

[1] ASIC Corporations (AFCA transition) Instrument 2018/447 and ASIC Credit (AFCA transition) Instrument 2018/448

[2] ASIC Regulatory Guide 165 ‘Licensing: Internal and External Dispute Resolution’.

[3] Corporations Act 2001 (Cth) sections 1051, 1051A, 1052C.

[4] Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (Cth).

[5] Corporations Act 2001 (Cth) section 1052D.

[6] Regulatory Guide 267: Oversight of the Australian Financial Complaints Authority, RG 267.36.

[7] Regulatory Guide 267 at RG 267.37.

[8] Corporations Act 2001 (Cth) section 1052E(1).

 

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