Opening Address – David Locke, Chief Ombudsman and Chief Executive Officer

I am delighted to once again speak to you, our members, for the first of eight member forum sessions. At AFCA, we firmly believe our role is to work in partnership with members to help you resolve difficult and complex disputes with customers and clients – issues that might otherwise remain unresolved or end up in court.

Engaging with you beyond the dispute resolution process is a central part of the AFCA scheme. By hosting industry forums and webinars, publishing our monthly newsletters, and sharing information and resources, we hope to educate and inform members so that, together, we can improve practices and minimise disputes arising in the first place.

Overview of complaints

In November, AFCA will have been operating for four years. In this time, we have grown and matured rapidly, and we continue to work hard to achieve a fair outcome for all the parties involved in a complaint.

I am proud to say that between 1 July 2021 and 30 June 2022, AFCA helped to resolve more than 71,000 complaints.

In total, we received 72,358 complaints in the 2022 financial year, bringing the total number of complaints dealt with by AFCA to more than 270,000 since we opened our doors just over three and a half years ago on 1 November 2018.

The number of financial firm licensee members with a complaint against them, I’m delighted to say, fell this year – from 1,706 in FY21 to 1,628 in FY22. This is around 15% of financial service provider licensee members, which also means 85% received no complaints against them.

During FY22, the most complained about products were about credit cards, personal transactions, home loans, home building insurance and motor vehicle insurance.

Around 5% of complaints were lodged by small businesses, with the remaining complaints lodged by consumers. Nearly 4,500 complaints involved financial difficulty, or financial hardship, a decrease from more than 5,000 last financial year. We think that really does reflect the work that the banking sector has done to support consumers in recent years. In the coming year, AFCA will be working with industry and consumer groups as we monitor the impact of cost-of-living pressures and higher interest rates.

As we are all aware, the flooding and storms that have taken place along the East Coast of Australia over the last six months have significantly impacted many communities in New South Wales and Queensland.

Of the complaints lodged with AFCA in the last year, more than 1,500 were related to natural disasters like floods, which is more than double the complaints from such disasters in the previous year. We extend our deepest sympathies to those who have lost their homes and businesses due to the floods, including any of our members who have been impacted by these events.

AFCA has activated its significant event response plan to each insurance catastrophe and will continue to work closely with the insurance industry to monitor the ongoing situation.

Independent Review – findings summary

As you know, last year AFCA underwent an Independent Review by Treasury, which assessed whether we are meeting our statutory objectives of resolving complaints in a way that is fair, efficient, timely and independent.

The previous Government’s Minister for Superannuation, Financial Services and the Digital Economy, and Minister for Women’s Economic Security, Senator Jane Hume, released the review findings on 25 November 2021.

In summary, the report was a very positive report card for AFCA, confirming that we are, “performing well in a difficult operating environment and a changing regulatory landscape” and reaffirmed AFCA’s impartiality and its fairness jurisdiction, acknowledging that this approach underpins our “critical” role as an efficient alternative to a tribunal or court for consumers, small businesses and financial firms.

It also confirmed that the average time to resolve complaints at AFCA compares favourably with the performance of our UK counterpart and AFCA’s predecessor schemes, FOS, the CIO and SCT. In the last 12 months, the average time to resolve a complaint brought to AFCA was 72 days.

AFCA was pleased to take part in the Independent Review of its functions and performance and I would like to thank all those members and industry stakeholders that provided submissions to the Review.

While we welcome the report’s endorsement, we also acknowledge the important recommendations and insights into how AFCA can improve now and in the future – so that we can strengthen our service to complainants and members.

I am pleased to report that AFCA already has a significant program of work underway to address each of the review’s recommendations, with key projects addressing 9 of the 14 recommendations.

I would like to take this opportunity to update you on some of those projects and initiatives.

If you would like to learn more about our response to the Independent Review, you can also visit our website. We have created a dashboard that will be updated every quarter on the progress we are making on each recommendation.

Funding model – Recommendations 7 and 8

In early 2021, AFCA appointed PwC to undertake a review of its previous funding model and develop a new model that would be fit-for-purpose, sustainable, and fair to all AFCA members.

In developing the new model, AFCA and PwC took your feedback into account and considered recommendations 7 and 8 of the Independent Review – with a particular focus on a “user-pays” approach. It was really important that we reduced the burden on smaller members and those industries who are not heavy users of AFCA, minimised cross-subsidisation across sectors, and supported firms to better forecast and budget for complaints.

Following an extensive consultation in March and April – with more than 60 one-on-one meetings with peak bodies and members, five webinars, and 11,000 individual, tailored impact assessments – AFCA finalised its new funding model this year.

I would like to extend a huge thank you to all 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.

We were pleased that the majority of participants supported the model and its “user-pays” approach, and the feedback and concerns raised helped us improve and refine the final design.

The new model is now in effect and applies to complaints closed from 1 July – with a vast majority of financial firms paying the same or less under the new fee structure.

We will continue to monitor the performance of the new model over the coming year, including ensuring positive, fair and equitable behaviours are occurring by both members and complainants under the new model. As part of the response to Independent Review recommendation 8, we will also publish additional financial information in the AFCA Annual Review to better illustrate how funds are spent to support the delivery of AFCA's service.

If you would like to learn more about the new funding model you can visit our website.

Rule A8.3 merits assessment – Recommendations 4 and 7

AFCA’s new process for applying AFCA Rule A.8.3 is another critical project, which responds to recommendations 4 and 7 of the independent review – addressing poor conduct by some paid advocates and ensuring our funding model does not disincentivise firms from defending complaints.

You may recall AFCA conducting a pilot program between 1 April and 30 June 2021, that assessed the merit of certain kinds of complaints at the very early stages of our Fast Track system.

The pilot program was in direct response to your feedback, with some members telling us the cost of paying for a determination can outweigh the initial service or product offered to a customer. As a result, some members found they were conceding to complaints for commercial reasons, rather than fairness.

I am pleased to confirm that after a successful pilot program, AFCA has now made its Case Management merits assessment a permanent feature of its system – allowing us to assess complaints without merit and use our discretion under Rule A.8.3 to decline to consider the complaint during Case Management before progressing to a Preliminary Assessment or formal Decision.

Under Rule A.8.3, AFCA can cease consideration of a complaint in certain circumstances, where: 

  • The complaint is without merit 
  • The complainant has suffered no loss (or has been appropriately compensated for such loss and AFCA would not award any further amount)
  • The financial firm has committed no error.  

This means in circumstances where a complaint may be within jurisdiction and has proceeded to Case Management, an AFCA case worker will consider the nature of the complaint and supporting information to decide if it is appropriate to consider the complaint further. 

Between 1 July 2021 and 30 June 2022, AFCA considered more than 840 complaints under this new process.

AFCA will also be updating the Member Benchmarking Dashboard so that members will be able to view closures by Rule A.8.3 case management merits assessments. This will provide greater visibility to each member on how many complaints close every month because a merits assessment was issued, as well as a trend over time.

You can find out more about Rule A.8.3 on the AFCA website via the Member News feed.

Systemic Issues – Recommendations 12 and 13

AFCA plays a critical role in the broader consumer protection framework through the identification, remediation and reporting of systemic issues and possible serious misconduct to regulators ASIC, APRA and the ATO. Recommendations 12 and 13 of the Independent Review provided feedback on AFCA’s systemic issues function.

As we have mentioned at previous Member Forums, AFCA had already completed its own review of the systemic issues function prior to the independent review and initiated the Systemic Issues Transformation project which addresses the different roles AFCA and regulators play and looks at how we can improve transparency in public reporting.

This project will focus our work to:

  • Transition to a more proactive research and data-based approach to identifying potential systemic issues.
  • Develop better guidance for financial firms about AFCA’s approach and the nature of the systemic issues and remediation work.
  • Improve transparency of the systemic issues work.
  • Work with regulators and other agencies, particularly ASIC and industry Code Compliance Committees to minimise overlap and duplication of investigations and enhance appropriate two-way information sharing.

Next, AFCA will be engaging with ASIC to investigate options to increase the visibility and clarity of our role in managing systemic issues, and where necessary, update the AFCA Rules and Operational Guidelines if our role changes.

Fairness and AFCA Approaches – Recommendations 2 and 11

Prior to the Independent Review, AFCA started work on a Fairness Jurisdiction Project in 2019. AFCA started this project to provide greater certainty about how AFCA assesses what is fair in a way that is clearly understood by our staff, our members and complainants. 

In May this year we published the Fairness Jurisdiction Project Outcomes report, which outlines the resources AFCA has already developed to ensure its Fairness jurisdiction is easily understandable and that it is applied consistently and independently, and in a way that is fair to all parties.

These include:

  • A new Fairness Jurisdiction Tool which ensures AFCA can discuss important issues for resolution with the parties in plain English.
  • New decision templates to clearly explain how AFCA has applied the fairness tests in its complaint handling and why decisions made are fair in all the circumstances of the case.
  • An apprehended bias policy to ensure AFCA’s people remain impartial when working with the parties to resolve complaints.
  • The AFCA Engagement Charter which clearly sets out expectations of how parties should engage with each other and AFCA to ensure a fair process.
  • A revised AFCA Approach library providing members and complainants with easy-to-understand information about how we handle specific types of complaints.
  • New processes to calculate and capture fair outcomes once achieved.

The AFCA Independent Review also contained a recommendation that AFCA should ensure consultation is undertaken on each Approach Document prior to final publication.

AFCA is already working on several approach documents which it will be consulting with members and industry and consumer groups on over the coming year

Independent Assessor – Recommendation 10

AFCA is also making progress on addressing recommendation 10, which states AFCA should increase the visibility of the Independent Assessor function.

To date, AFCA has already made improvements to visibility and accessibility of information about AFCA’s Independent Assessor and our service complaints process. These include: 

  • Refreshed information on how AFCA handles feedback and complaints about our service, published on our website and the Member Portal; and 
  • New information on the Independent Assessor, with additional information on steps to follow when lodging a complaint, as well as updated frequently asked questions. 

In the next quarter, AFCA will also publish two new videos about the Independent Assessor and our service complaints and feedback process to ensure this information is available in multiple accessible formats.

You can find more information about the Independent Assessor on the Member Portal.

Timeliness – Recommendation 5

Recommendation 5 of the review outlines how AFCA can improve transparency and reporting of timeliness. Specifically, it says AFCA should:

  • continue to publish data on its timeliness and start publishing data on the full range of complaints it resolves, including those that extend beyond 12 months
  • better manage expectations around timeframes in its communication with parties to a complaint
  • focus on improving the timeliness of complaints that remain unresolved beyond 12 months.

AFCA already has a range of work underway to address recommendation 5, including a continuous improvement program focused on improving operational efficiency and effectiveness, replacing our complaint management system, and upgrading the Member Portal as part of our IT transformation project. We also have an internal working group focused on addressing aged complaints.

Significantly, the average time to resolve a dispute is down from 76 days in FY21 to 72 days in FY22. This is a great result and indicates that AFCA’s recent work is having an impact on complaint closures and shows that members are continuing their efforts to resolve complaints in a timely manner as well. We have also made significant progress on closing aged cases in the last 12 months, reducing these cases from 4% of all complaints at AFCA to just 2.4%. We continue to work on this.

Upcoming work, especially within our IT transformation program, will continue to improve timeliness.

In terms of transparency, our IT transformation work will also allow us to use data, analytics, and automation to improve processes and provide greater insights on complaints and how they progress though AFCA’s process.

We will also continue to report annually on complaints, including on the timeliness of complaints handling, and we are looking at other ways we can regularly share data with you and other stakeholders.

That brings me to the end of my presentation today. 

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