On 20 April 2016, the Government announced a package of measures to enhance the operation of the Australian Securities and Investments Commission (ASIC) and to improve consumer outcomes in the financial system. As part of his package, the Government announced a review of the external dispute resolution and complaints handling framework.
The purpose of this review was to ensure that the existing external dispute resolution bodies were working as effectively as possible to deliver the best possible outcomes for consumers and small business. On 8 August 2016 the Government released the terms of reference for the review led by an expert panel, chaired by Professor Ian Ramsay (the Ramsay Review).
The Ramsay Review found that:
- the existence of multiple EDR schemes with overlapping jurisdictions means that it is difficult to achieve comparable outcomes for consumers with similar complaints;
- multiple EDR schemes give rise to a duplication in costs for both industry and ASIC;
- the monetary limits and compensation caps ($500,000 and $309,000 respectively) that apply to financial disputes (other than superannuation complaints) are inadequate;
- small business does not have adequate access to EDR schemes because the existing monetary limits ($500,000 for the value of a general claim and $2 million in relation to credit facilities) are too low for many disputes; and
- there are long-standing problems with the arrangements for resolving superannuation complaints in the SCT.
As a result of the Ramsay Review, on 9 May 2017 the Government accepted all 11 recommendations made by the Panel. These recommendations include the establishment of a one-stop shop for all financial disputes.
The Government has now released the Treasury Laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017 for consultation. In addition, the Government has also released a consultation paper to seek additional feedback on a range of matters, such as compensation caps.
The draft legislation amends the Corporations Act and associated legislation to include rules for the creation and operation and approval by the Minister of a new External Dispute Resolution (EDR) Body – to be called the Australian Financial Complaints Authority (AFCA).
It is expected to be operational by 1 July 2018 and will replace the three existing bodies:
- the Financial Ombudsman Service (FOS),
- the Credit and Investments Ombudsman (CIO); and
- the Superannuation Complaints Tribunal (SCT).
These proposals in effect give ASIC significant power and create a breach reporting backdoor that is inconsistent with the self-reporting proposals currently being reviewed by Government.
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