2020–21 Annual Review

Chief Executive Officer and Chief Ombudsman messageDavid Locke

I am very proud of all that AFCA achieved as an organisation in 2020–21, as we continued to deliver on our strategy in the face of a challenging environment. COVID-19 had a big impact on all Australians, affecting consumers, small businesses, and AFCA’s own people. Our full range of services were maintained and, as this report shows, we resolved just under 74,000 cases at this time of stress and uncertainty for so many.

AFCA is independent and impartial, and this underpins everything that we do. We are not on the side of the consumer or the member, but work with both to achieve resolutions to disputes that are often seen as intractable by the parties.

We seek to achieve outcomes that are fair to all the parties, and a big part of this involves ensuring that each side is properly heard, and all the facts are independently investigated and analysed.

At AFCA, we believe that our role should not just be to resolve complaints that are escalated to us, but that we should also have a preventative role sharing best practice and supporting internal dispute resolution practices. To this end, we work proactively with members to seek to reduce the issues that are likely to give rise to complaints.

We engage with our members every single day in one-to-one meetings as well as through our complaint handling processes, our systemic issues team, code monitoring functions, industry forums and liaison meetings.

There are almost 41,000 AFCA members. This includes a growing list of voluntary members that see the value of our services, as well as the credibility and confidence that AFCA membership provides to consumers.

Most of our members do not have complaints made against them. In fact, only 16% of our members had a complaint made about them in 2020–21. This is a slight decrease from the previous reporting period where 19% of our members received a complaint. A further move in a positive direction.

AFCA is very focused on doing what we can to support better outcomes for our members, consumers and small businesses.

In 2020–21, we launched a series of initiatives to better improve our processes and the customer experience.

AFCA’s fairness jurisdiction

AFCA’s fairness jurisdiction is mandated by statute and supported by regulatory guidance. It reflects long-standing and familiar principles of the law and equity, and the jurisdiction of AFCA’s predecessor schemes and other domestic and international ombudsman schemes.

We are very much guided by the law in our assessment of complaints at AFCA. Fairness is found everywhere in the law – from unfair contract terms to utmost good faith; from best interest duty obligations to fiduciary duties; from misleading and deceptive and unconscionable conduct obligations to the obligation of licensees to be efficient, honest and fair.

AFCA’s Fairness Project was developed to ensure AFCA understood and could explain its fairness jurisdiction, that it had a fair process and provided fair outcomes in complaints handling. The project is also aimed at increasing transparency and helping members and consumers to understand what to expect when dealing with AFCA.

We know that consistency of our decision-making is important, and we spent the past year strengthening our framework for delivering on AFCA’s fairness jurisdiction. This work is now being embedded into our ‘business as usual’ activities.

Engagement Charter

Over the last year, AFCA has developed an Engagement Charter to outline the service standards and values that stakeholders can expect of AFCA and, in turn, AFCA’s expectations for the conduct and engagement of all users of our service in the resolution of complaints.

Key to the Charter is our expectation that all parties should cooperate reasonably to bring finality to a complaint. We want all parties to engage with each other in a way that is transparent and honest, respectful and fair, and in good faith. Procedural fairness is undermined by behaviour that causes inefficiency and delay.

The Charter also sets out how we will respond to financial firms and complainants that fail to comply with these expectations. As stated in our Rules, we can, at our discretion, stop engaging with a party in exceptional circumstances.

The Charter is a living document and is available on our website. It will also be part of our member onboarding experience. We thank all those members who have consulted with us on this project over the last 12 months, and who took the time to provide a written submission during our public consultation period earlier in the year. It has helped us to build a stronger and more meaningful document.

Timeliness

As AFCA’s Chair has outlined, the AFCA Management team are very focused on the time that some cases are taking, particularly those that are taking over a year. There are only 1,489 cases over 365 days at AFCA, 56% of which are deliberately paused awaiting federal government legislation of a Compensation Scheme of Last Resort, test cases, or because the financial firm has been expelled. Many of the other files in this category are in the final stages of the process.

Some cases are extremely complex due to factors out of AFCA’s control – for example, complainants with significant mental and/or physical health challenges and delaying behaviours from financial firms or complainants and their paid representatives.

We have also been cognisant during the COVID–19 pandemic of granting extensions of time to firms and customers who have been unable to meet deadlines and get relevant information to us.

However, as we know, timeliness is a key part of fairness. Accordingly, we have introduced a series of initiatives to reduce delays in complaint handling. These initiatives include the development of specialist teams, strengthened workflow management and triage mechanisms, the introduction of enhanced exception reporting, reiterating aged file prioritisation, implementing timeliness Key Performance Indicators (KPIs) and enhancing our communication strategies to ensure the parties are kept informed about progress.

We expect these initiatives, along with the broader strategic initiatives that Professor Pollaers has outlined in his message, to have a positive impact on the time it takes to handle complaints.

Complaints lacking merit

We received feedback from a number of members, particularly those running small- and medium-sized businesses that, at times, they are faced with complaints lodged against them that, on the surface, appear to lack merit.

We have listened to this feedback and taken action. We recently ran a pilot to measure and test a different approach to dealing with complaints, particularly those in our Fast Track stream. Using our existing Rules, we established a new process to better scrutinise complaints at the very early stages of our process.

This pilot saw both the time taken to resolve the complaint reduced, along with the cost associated.

We believe this has demonstrated the process is faster, cheaper and fair to all parties involved.

We are making this change a permanent feature of our scheme.

Systemic Issues

Finally, I want to discuss our Systemic Issues function.

AFCA doesn’t just handle individual complaints. It plays a critical role in the broader consumer protection framework through the identification, remediation and reporting of systemic issues and possible serious misconduct to three regulators. These regulators are the Australian Securities and Investments Commission (ASIC), Australian Prudential Regulation Authority (APRA) and the Australian Taxation Office (ATO).

AFCA commissioned an independent review of this function in early 2021. This was to confirm it was fit for purpose, aligned to the regulatory priorities of the regulators to whom AFCA reports, and to recommend ways it could be enhanced and clarified, including the development of a risk-based framework, and digital and data transformation.

As a result of this transformation process, financial firms can expect a more interactive and proactive systemic issues investigation process, instead of the formal paper-based approach we have adopted in the past.

We will also work with our stakeholders to share information in a transparent manner around the role and function of the systemic issues and remediation team, so the process is clearly understood by all. We will clearly explain our specific role, as distinct from that of the regulators and will develop better guidance for financial firms about our team’s approach.

Finally, I would like to thank AFCA’s Board for their diligent, wise and professional governance and to all of AFCA’s staff for their hard work and resilience over the last year. Your ongoing commitment to AFCA’s purpose and vision has meant that day in and day out, we have done our very best to deliver high-quality services to consumers and members. We have provided support to the Australian community and to industry when they needed us.

I look forward to continuing our work in 2021–22.

David Locke
Chief Executive Officer and Chief Ombudsman

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