Australian govt consults on new dispute resolution framework for financial sector
The government invites comments on matters like the regulatory burden related to the new rules and the compensation caps for certain financial products.
As FinanceFeeds reported last week, the Australian government has unveiled plans to establish a one-stop shop for financial dispute resolution. All financial services firms, including Forex and CFD brokers, will have to become members of the new body, named the Australian Financial Complaints Authority (AFCA). It is set take over from the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal and to become operational by July 1, 2018.
Today, the Australian government launched public consultation into the new dispute resolution framework. This includes the Treasury Laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017.
The government has also published a Consultation paper to seek feedback on a number of problems, including whether the compensation caps for certain financial products, like mortgages and general insurance products, should move straight away to $1 million upon the launch of AFCA. The government also requests feedback on the implications of removing the requirement for credit representatives to be members of the new EDR body.
The government is concerned about the regulatory impact of the new EDR framework for the industry. Areas where the government expects a regulatory burden increase for the industry include:
- updating disclosure material;
- training staff;
- the obligation on superannuation funds to be members of a scheme;
- firms having to deal with a bigger number of complaints as a result of increased claim limits;
- the cost of providing IDR data to ASIC.
The Australian government invites all interested parties to make a submission by June 14, 2017.
AFCA will be based on an ombudsman model and will be established by industry as a company limited by guarantee. It will operate under a coregulatory framework. This means that whereas the AFCA board will make its own decisions regarding funding, staffing and dispute resolution processes, it must comply with legislative and regulatory requirements set by the government and ASIC.