The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill (AFCA Bill) was passed on 14 February 2018.

The AFCA Bill amends the Corporations Act 2001 and other Acts to introduce a single new external dispute resolution scheme, known as the Australian Financial Complaints Authority (AFCA).

AFCA will replace the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal. This follows more than 20 months of public consultation and inquiry, commencing with the review of the dispute resolution framework by an independent panel led by Professor Ian Ramsay.

The changes will:

  • establish AFCA as the single body to resolve disputes about financial products and services provided by financial firms;
  • require that firms must participate in the enhanced internal dispute resolution (IDR) framework to report their IDR activities to the Australian Securities and Investments Commission (ASIC) in accordance with ASIC requirements;
  • provide ASIC with additional powers to determine the content and form of IDR reporting by IDR Firms and to publish this data at both the aggregate and firm level;
  • allow ASIC to specify, by legislative instrument, requirements for trustees and retirement savings account providers to provide written reasons for decisions in relation to complaints;
  • repeal the Superannuation (Resolution of Complaints) Act 1993;
  • have higher monetary limits and compensation caps, giving more consumers and small businesses (including for primary production businesses) access to a free and independent forum to resolve their complaints (once AFCA’s terms of reference are released).

When will AFCA commence?

The AFCA Bill provides that the Minister will be able to authorise a new one stop shop EDR scheme for the purposes of the Corporations Act that meets the relevant:

  • organisational requirements;
  • operator requirements;
  • operational requirements; and
  • compliance requirements,

set out in the AFCA Bill.

The scheme, which will be known as AFCA, will be subject to ongoing oversight by ASIC.

A proposal will need to demonstrate how the scheme will meet the requirements for authorisation set out in the AFCA Bill, including to provide a fair, independent, accessible, accountable, efficient and effective dispute resolution service for consumers and the financial services industry.

It is intended that AFCA will start accepting complaints no later than 1 November 2018.

To achieve a smooth transition, the Government is seeking a proposal for a not-for-profit company to operate the AFCA scheme to be lodged with Treasury by 15 March 2018 and a transition team has been implemented.

Once established we expect AFCA will issue its terms of reference.

Further details on the authorisation process and proposed AFCA terms of reference have yet to be announced at this time.

In order to maintain access to external dispute resolution for consumers in the lead up to commencement of AFCA, ASIC will monitor member compliance with existing EDR scheme requirements as well as the effectiveness of scheme operations.


ASIC will be consulting soon on updated Regulatory Guide 139 (REG 139), which will set out details of ASIC’s oversight of AFCA. This will be finalised and published when AFCA commences operations.

ASIC will also publicly consult on new IDR standards and the mandatory IDR reporting requirements that are also contained in the AFCA Bill – but this consultation will not take place until after AFCA commencement.

Current legislative IDR requirements will continue to apply in their current form until ASIC consults on and then issues updated IDR policy (RG 165).

A review of AFCA must be undertaken by the Minister as soon as practicable after 18 months to consider:

  • whether complaints handled by AFCA were resolved in a way that was fair, efficient, timely and independent;
  • the adequacy of the coverage of the scheme, including dispute limits and compensation caps;
  • the time limits for bringing complaints under the scheme;
  • the processes that the scheme will have in place to ensure compliance with its determinations and the remedies that can be provided under the scheme; and
  • the value of claims and remedies that may be made under the AFCA scheme about credit facilities for primary production businesses.


The Minster’s release notes that changes to the existing arrangements are expected to include:

  • expansion of the definition of a small business, so that any business with fewer than 100 staff can access AFCA;
  • small business primary production producers – defined in accordance with the Income Tax Assessment Act 1997 – will have access to compensation of up to $2 million for disputes about credit facilities of up to $5 million;
  • the cap on income stream insurance product disputes will be increased from $8,300 to $13,400 per month;
  • the cap on uninsured third party motor vehicle claims will increase from $5,000 to $15,000; and
  • the separate compensation cap for general insurance broker disputes will be increased from $174,000 to $250,000.

This increase for insurance broker disputes is limited in comparison to other non-super and non-small business lending disputes where a compensation cap of $500,000 will otherwise apply.

The new limits will apply to disputes lodged with AFCA after 1 November 2018.

It has not been decided at this stage whether existing disputes will be able to be transferred to AFCA; however our understanding is that if existing disputes are transferred to AFCA they will be determined under the limits and caps that applied under the EDR scheme (e.g. FOS) where the dispute was first lodged.

ASIC may also give AFCA a written direction requiring a limit or some of the limits to be increased by giving AFCA once months written notice of its intention to issue the direction to increase limits. Any increase in limits made by an ASIC direction will not apply in relation to complaints received by AFCA prior to receiving ASIC’s direction.

AFCA will also have a mandatory obligation to notify APRA, ASIC or the Commissioner of Taxation of matters such as serious contraventions or breaches of law, the terms or conditions of a life policy or refusal or failure to give effect to an AFCA determination by a scheme member


Members of each of CIO and FOS – including licensees and credit representatives – must continue to maintain their current EDR membership through the transition period, including paying membership and other scheme fees in full as required. ASIC has asked the two schemes to report any failure of members to do so.

A memorandum of understanding between CIO and FOS will prevent members inappropriately moving between the schemes in the transition period.

Licensees will also need to update and amend their IDR procedures in line with any ASIC revisions to RG 165 and the AFCA scheme rules once released.

Licensees need to be aware of the revised terms of reference and range and value of disputes that AFCA may hear once released.

Licensees will need to have professional indemnity insurance in place to meet the increased limits from AFCA’s commencement on 1 November 2018 to ensure all AFCA awards are fully covered. If an existing policy expires after that date, a new policy should be obtained, or an alteration will need to be made to the existing policy to cover the new caps.



This document is designed to provide helpful general guidance on some key issues relevant to this topic. It should not be relied on as legal advice. It does not cover everything that may be relevant to you and does not take into account your particular circumstances. It is only current as at the date of release. You must ensure that you seek appropriate professional advice in relation to this topic as well as to the currency, accuracy and relevance of this material for you.