Small businesses could receive $1 million in compensation for financial disputes as AFCA opens its doors
Small business owners will now be able to pursue financial complaints through the Australian Financial Complaints Authority (AFCA).
Australian small business owners have been given another channel to find a resolution for financial complaints with the newly-minted Australian Financial Complaints Authority (AFCA) opening for business today.
Specifically aimed at consumers and small business owners, AFCA was announced earlier this year to be a “one-stop shop” for financial services complaints and will replace the now-deprecated Financial Ombudsman Service, the Credit and Investments Ombudsman, and the Superannuation Complaints Tribunal.
In the 2017 budget, then-treasurer Scott Morrison said AFCA was essential to “ensure consumers have access to free, fast and binding dispute resolution services”, and reduce the stress associated with pursuing complaints through the courts.
AFCA will first try to resolve complaints via informal methods such as mediation and conciliation, however, if this does not succeed, the authority has the ability to make binding rulings on financial firms and force them to take certain courses of action.
These include remuneration, debt forgiveness, fee repayment or waiving, contract rectification, and modification of insurance claims.
Newly appointed chief ombudsman and chief executive of AFCA David Locke told SmartCompany the new complaints authority will have a “very strong focus” on small business.
“We know that when small businesses experience financial issues, they need to be able to access dispute resolution services quickly, easily and appropriate to their specific needs. Due to the costs involved, the courts are not a practical option for most small businesses,” Locke says.
“This focus on support for small business is reflected in AFCA’s strategy; operationally we are providing additional resources to consider small business complaints as well as ensuring that the process for considering complaints from small businesses meets their needs and is efficient.”
Locke says AFCA is aiming to be focused more on consumer and SME engagement compared to its predecessors, hoping to be proactive in not only resolving complaints but to “educate and mitigate” their occurrence.
For SMEs hoping to use AFCA’s service, get ready to wrap your head around yet another government-mandated definition of what a ‘small business’ is. To take advantage of AFCA, a business must have fewer than 100 employees, with no restrictions on turnover.
Locke says this definition is more liberating in terms of what AFCA can cover, especially when compared to the Financial Ombudsman Service’s definition of having fewer than 20 employees.
“Additionally, the limit for a small business credit facility has increased from $2 million to $5 million and the compensation cap has more than tripled from $323,500 to $1 million, with a higher cap of $2 million for primary producers,” he says.
Chief ombudsman hoping AFCA goes out of business
It’s no secret confidence in the financial services sector has plummeted over 2018, with the banking royal commission laying bare the misconduct and foul play by Australia’s big four banks and superannuation trustees.
Locke says AFCA will play a role in restoring that trust for SME owners and consumers but notes the task is a big one.
“It is a big task to restore trust and confidence — and AFCA is a small part of a bigger picture. However we are committed to working with our members to develop and support standards, help our members understand regulatory challenges, and apply strong policies within their internal dispute resolution framework,” he says.
Looking to the future, Locke is expecting to see over 50,000 complaints in AFCA’s first year of operation but says long-term he’d be happy to see the whole authority go out of business entirely.
“This would mean our members are effectively resolving disputes with consumers and small business before they need to engage with us,” he says.
Small business and family enterprise ombudsman Kate Carnell welcomed the launch of AFCA, which will operate with oversight from ASIC.
“The consolidation of the AFCA addresses a key recommendation of our Small Business Loans Inquiry,” Carnell said in a statement.
“We will monitor the AFCA’s engagement with small business disputes and hope to see a significant reduction in the number of small businesses winding up in court.”
NOW READ: “It’s a win”: Government to commit to 20 day payment times for small business
Comments