Australia’s new dispute resolution body warns 86 financial firms are in breach of legal obligations

There are some troubles looming for 86 Australian financial firms as they have been found to be in breach of their legal obligations due to unpaid fees.

The new Australian dispute resolution body – AFCA, which opened for business on November 1, 2018, has earlier today announced that, due to outstanding fees – either from membership with the Credit and Investment Ombudsman (CIO), or from an unpaid AFCA membership levy – the AFCA membership application of 86 organisations have now been cancelled.

The body believes that all 86 organisations are required to be AFCA members as a condition of their financial services or credit licence and are now in breach of their legal obligations. These entities have previously been sent correspondence requesting that they pay the outstanding fees by November 16, 2018.

As AFCA has not received payment by the given deadline, it has now:

• Cancelled the membership applications of these 86 firms;
• Notified the Australian Securities and Investments Commission (ASIC), that they do not hold AFCA membership and are therefore in breach of their legal obligations;
• Advised members of the public that they do not hold AFCA membership.

In an announcement issued in November, ASIC said financial firms that are members of the Australian Financial Complaints Authority (AFCA) must notify the regulator of their AFCA membership by November 30, 2018.

Licensees who fail to notify ASIC will be in breach of their licence conditions and will face fees for late notification. Back then, ASIC estimated that more than half of AFCA’s 37,000 members were yet to notify ASIC of their membership details.

AFCA has taken over from the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Financial firms including AFS licensees that provide financial services to retail clients, credit licensees, most credit representatives, superannuation trustees and unlicensed product issuers are required by law to join AFCA. Some other firms operating under a licensing exemption may also be required to join the Australian Financial Complaints Authority (AFCA), including firms operating in the regulatory sandbox. The firms should have done so by September 21, 2018.