From 10 March to 22 April 2022, AFCA invited members, industry bodies and other stakeholders to submit feedback and questions to its funding model consultation.
This page includes information on the consultation, the feedback and questions raised, and changes made to the proposed model in response.
About AFCA’s proposed funding model
In early 2021, AFCA appointed PwC to undertake a review of its current funding model and develop a new model that would be fit-for-purpose, sustainable, and fair to AFCA members.
In developing the new model, AFCA and PwC took AFCA member feedback into account and considered the key findings and recommendations of the recently published AFCA Independent Review – with a particular focus on a “user-pays” approach that reduces the burden on smaller members and those industries who are not heavy users of AFCA, minimising cross subsidisation across sectors, and supporting firms to better forecast and budget for complaints.
Consultation: 10 March to 22 April 2022
To give members and stakeholders multiple opportunities to learn about the model and provide feedback, AFCA adopted a new consultation approach designed to be flexible to member needs, share information in different formats, and provide details on the change impact for specific industries and business sizes.
As part of the consultation, AFCA published resources online, hosted webinars and meetings, and shared indicative individual impact assessments with members based on historical data.
AFCA is mindful that not all financial firms have the time and resource to provide full written submissions, so AFCA also considered single-issue feedback and comments received in emails and during meetings.
“Thank you to all those who took part in the funding model consultation. The number of members and stakeholders who attended webinars, visited the funding model resources, and submitted questions and comments was the highest AFCA has ever received during a consultation.
AFCA was pleased that the majority of participants supported the model and its “user-pays” approach, and the feedback and concerns raised have helped us improve and refine the final design.”
David Locke
CEO and Chief Ombudsman
Consultation results
Change summary
As a result of the feedback and concerns raised during the consultation, AFCA has made the following adjustments to the funding model.
- The rules fee will not be included in the new funding model.
- To provide clarity AFCA has published a guide to the user charge, proposed changes, and how it is calculated.
- The calculation of the user charge will not include the complaints discounted by the funding model’s five free complaints in the previous year.
- Members with a user charge over a certain threshold will be able to opt-in to progressive invoicing over a financial year.
‘User pays’ approach
The proposed funding model’s “user-pays” approach means that heavy users pay their fair share towards AFCA’s service, while firms and industries which receive few or no complaints pay less.
Consultation feedback
- Members and industry bodies strongly support reducing the burden on smaller members and those who are not heavy users of the scheme.
- There is broad support for closely linking fees to use of AFCA’s service to reduce industry cross-subsidisation.
- Members noted that the link to service use, along with simplified fees, will support their dispute resolution process and assist with forecasting and budgeting.
AFCA’s response
AFCA is pleased that the model’s core ‘user-pays’ approach is widely supported, and stakeholders see the benefits to linking service use closely to fees. AFCA has been very mindful of the strong support for this principle when considering the feedback and concerns raised about specific elements of the model.
Five free complaints
The proposed model introduces five free complaints for financial firm members. This will address the feedback AFCA received from members, as well as in the AFCA Independent Review, by reducing the burden on small members who can be disproportionately affected by an unforeseen complaint under the current model.
Consultation feedback
- Broad support across AFCA’s membership, especially amongst small financial firms who commented that it would reduce pressure to resolve complaints early.
- Some members requested flexibility to select which complaints were free, or for it to only apply to stages later in AFCA’s process.
AFCA’s response
AFCA is pleased that the five free complaints received support and members agree that it will provide significant relief to small firms.
When developing the new model, AFCA worked to address member feedback and requests for a more simplified fee structure and fee calculation methodology. To maintain this simplicity in the model, the five free complaints will be applied to the first five complaints closed within a financial year.
Complaint fees
The funding model includes a simplified complaint fee structure that will reduce complexity and encourage early resolution.
Consultation feedback
- The simplification and reduction of complaint fees is broadly supported.
- Members and stakeholders provided comment on how to ensure the fees structure promotes effective and timely resolution, without pressuring financial firms to resolve complaints for commercial reasons.
- Some members asked how AFCA could reduce the financial impact of unmeritorious complaints and prevent them from progressing though AFCA’s process.
AFCA’s response
AFCA believes the new fee structure strikes the right balance between encouraging high-quality dispute resolution and avoiding disincentives to continue in AFCA’s process. For members who are infrequent users of AFCA’s service, the five free complaints will reduce pressure on members to resolve complaints early for commercial reasons.
In addition, outside of the funding model, AFCA has introduced a merits assessment to its Case Management stage that identifies unmeritorious complaints as early as possible. This will prevent unmeritorious complaints progressing through AFCA’s process.
User charge
Under the proposed funding model, the user charge is a fixed annual amount that is calculated at the start of the financial year based on the preceding financial year’s complaint volume and closure points. The user charge considers both the volume of complaints registered for a firm along with the time being taken to resolve those complaints. This matches AFCA’s approach to the user charge under the current funding model.
Consultation feedback
- Members were receptive to increasing the proportion of AFCA’s costs covered by the user charge.
- Members raised questions about the user charge calculation and the inclusion of complaint fees discounted under the five free complaints.
AFCA’s response
Model updated: AFCA has published a new guide to the user charge, proposed changes, and how it is calculated.
Model updated: The calculation of the user charge will not include the complaints discounted by the funding model’s five free complaints in the previous year.
Rules fee and its application
The proposed funding model includes the introduction of a nominal $100 fee applied to complaints that are assessed by the AFCA Rules team and found to be out of AFCA"s jurisdiction. This fee would help ensure this part of AFCA’s process is funded by those members who use it.
Consultation feedback
- Members and stakeholders expressed concerns about the rules fee applying to complaints found to be out of jurisdiction.
- Members requested clarity around what type of complaints found to be outside of the rules would and would not incur this fee.
- Some members did not think complaints closed through a rules assessment should be included in the 5 free complaints or user charge.
AFCA’s response
Model updated: The rules fee will not be included in the new funding model.
AFCA understands the concerns about the introduction of the rules fee and has explored other options available to implement a ‘user-pays’ rules assessment. Based on feedback and to ensure the simplicity of fee structure AFCA has decided to remove the proposed fee from the model. AFCA has made a small increase to its Case Management and Decision fees to account for the removal of the rules fee.
Flexible invoicing
At present, user charge invoices are calculated and issued at the start of the financial year.
Consultation feedback
- Members who frequently receive complaints requested to pay the user charge in instalments throughout the year.
AFCA’s response
Model updated: AFCA has introduced the option for progressive invoicing for members with a user charge over a certain threshold.
Members with a user charge of over $25,000 will be automatically invoiced monthly, however, these members can opt to receive their user charge invoices quarterly, bi-annually or annually.
To reduce the administrative burden on members and AFCA, members with an annual user charge below the $25,000 threshold will receive a single invoice at the start of the financial year.
Transparency of costs
The proposed model is designed to be simpler and the calculations more transparent and easier to understand.
Consultation feedback
- Members support the new simplified fee structure and commented that it would help with budgeting.
- Some members and stakeholders requested more information on how AFCA uses the funds raised under the funding model.
AFCA’s response
Following this consultation, and as part of the response to Independent Review recommendation 8, AFCA will publish additional financial information in the AFCA Annual Review to better illustrate how funds are spent to support the delivery of AFCA's service.
Implementation timeline
AFCA’s new funding model is due to apply from 1 July 2022.
Consultation feedback
- Some members requested a delayed or phased implementation to assist with budgeting.
- Some superannuation members expressed concerns that they had already paid for current complaints via the superannuation levy, so a transitional arrangement was required to avoid “double-charging”.
AFCA’s response
To maintain the simplicity of the new model and avoid a potentially confusing transitional model, AFCA has decided to progress with the 1 July 2022 implementation date. The new fee structure, with lower complaint fees, will apply to complaints closed from 1 July 2022. The new fee structure does not apply to legacy complaints.
During the consultation, AFCA provided members with an indicative individual impact assessment to allow them to assist with budgeting.
Model updated: To assist with budgeting, members with a user charge of over a certain threshold will be able to opt into progressive invoicing over a financial year.
In regards to the superannuation levy, the levy is not attributed to, or related to, complaint closures. It is a levy that is paid by superannuation trustees to access AFCA’s services for a given year and is based on assets under management and is not related to complaints received. If a new model was not being implemented, superannuation members would pay a new levy from 1 July.
