BILLS DIGEST NO. 55, 2017–18              4 December 2017

Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017

Juli Tomaras
Law and Bills Digest Section 

Date introduced: 14 September 2017

House: Senate

Portfolio:  Treasury

Commencement: Sections 1–3 commence on Royal Assent.

Schedule 1 and Schedule 2: Parts 1 and 2, items 33–41 and item 44 commence on the day after Royal Assent.

Schedule 1, Parts 4 and 5; items 42 and 43 commence immediately after the commencement of Schedule 2.

Schedule 3 commences on a day to be fixed by proclamation, or four years after Royal Assent (whichever is earlier).

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at December 2017.

Glossary

Table 1: abbreviations and acronyms

Abbreviation or acronym

Definition

ADJR Act

Administrative Decisions (Judicial Review) Act 1977

AFCA

Australian Financial Complaints Authority

AFSL

Australian financial services licence

APRA

Australian Prudential Regulation Authority

APRA Act

Australian Prudential Regulation Authority Act 1998

ASFA

Association of Superannuation Funds of Australia

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 2001

CIO

Credit and Investments Ombudsman

EDR

External dispute resolution

FOS

Financial Ombudsman Service

FSC

Financial Services Council

FSP

Financial Service Providers

IDR

Internal dispute resolution

PI

Professional indemnity

RSA Act

Retirement Savings Accounts Act 1997

SIS Act

Superannuation Industry (Supervision) Act 1993

SCT

Superannuation Complaints Tribunal

Purpose of the Bill

The purpose of the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 (the Bill) is to amend the Corporations Act 2001 and other related legislation, to implement the central recommendations of the Ramsay Review[1] for:

•       the establishment of a new one-stop-shop external dispute resolution (EDR) framework—the Australian Financial Complaints Authority (AFCA)—replacing the Superannuation Complaints Tribunal (SCT) and the existing EDR schemes approved by the Australian Securities and Investments Commission (ASIC)—the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) and

•       an enhanced internal dispute resolution (IDR) framework

•       to deal with all consumer financial disputes about products and services provided by financial firms, including superannuation disputes.

Structure of the Bill

Schedule 1 of the Bill amends the Corporations Act and associated Acts to introduce a new EDR framework for the financial system.

Part 1 makes a number of amendments to the Corporations Act and other Commonwealth legislation. This includes adding definitions that are required for the new EDR framework in the Corporations Act and specifying the amount of penalties applicable to new offences introduced by these amendments.

The Corporations Act is amended to create a new Part 7.10A ‘External Dispute Resolution’, which comprises of three Divisions:

•       Division 1 of Part 7.10A creates a new authorisation framework which:

–      enables the Minister (expected to be the Minister for Revenue and Financial Services[2]) to authorise a new one-stop-shop EDR scheme (to be known as AFCA) if the Minister is satisfied that the scheme fulfils the mandatory requirements

–      empowers the Minister to set out conditions in relation to the authorisation of the EDR scheme

–      empowers the Minister to vary or revoke the authorisation of the EDR scheme at any time

–      outlines the mandatory requirements and general considerations that relate to the authorisation of the EDR scheme.

•       Division 2 sets out the powers of the Australian Securities and Investments Commission (ASIC) in regulating the AFCA scheme and AFCA’s reporting obligations to relevant authorities

•       Division 3 sets out additional provisions required to resolve superannuation complaints and secrecy obligations of AFCA staff members in relation to information obtained under these provisions.

Parts 2 to 5 make a number of minor and consequential amendments to a number of Commonwealth Acts to update various provisions to take into account the new EDR framework and to repeal provisions that are no longer necessary.

Amendments are made to ensure that the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) does not apply to decisions or determinations made by AFCA in relation to superannuation disputes.

Amendments are also made to allow officers and other staff members of APRA, ASIC and the Australian Taxation Office to disclose protected information to AFCA to assist it to perform its functions.

Part 3 makes it a requirement that all financial firms, including superannuation funds, are members of the AFCA scheme.

Schedule 2 of the Bill will amend the Corporations Act, Australian Securities and Investments Commission Act 2001 (ASIC Act), National Consumer Credit Protection Act 2009, Retirement Savings Accounts Act 1997 (RSA Act) and the Superannuation Industry (Supervision) Act 1993 (SIS Act) to introduce an enhanced IDR framework.

Schedule 3 of the Bill will repeal the Superannuation (Resolution of Complaints) Act 1993, and as a result, abolish the Superannuation Complaints Tribunal. It will also make corresponding and necessary consequential amendments.

Background

Responsibility for financial regulation in Australia is mainly allocated between the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA).[3] ASIC

administers and enforces a range of legislative provisions relating to financial markets, financial sector intermediaries and financial products. ASIC's aim is to protect markets and consumers from manipulation, deception and unfair practices and, more generally, to promote confident participation in the financial system by investors and consumers.’[4]

In practice, one of the mechanisms through which this protection and oversight function happens is through ASIC’s oversight of External Dispute Resolution schemes (EDRs). The most well-known EDR is the Financial Ombudsman Service Australia (FOS) which received 39,479 disputes in the 2016–17 financial year.[5] The second is the Credit and Investments Ombudsman (CIO), which received 5,892 complaints in the 2016–17 financial year.[6]

Most disputes with financial services providers in Australia are resolved through internal dispute resolution between the customer and the relevant bank, credit provider, insurance company or other financial services provider. However if a dispute is not able to be resolved directly, then a consumer can take up the complaint with one of the relevant EDRs. The complainant may accept or reject the determination within 30 days of receiving it, if the complainant accepts the determination, it is binding on both parties.[7] Dispute resolution by the FOS is free of charge for consumers.[8]

Current arrangements for consumer financial disputes about products and services, including superannuation disputes

Banks and Financial Services Providers

The Corporations Act provides that a person (whether an individual or corporate entity) carrying on a financial services business in Australia must either hold an Australian financial services licence (AFSL) issued to that person by ASIC or fall within a licensing exemption.[9]

The regulated ‘financial services’ for which an AFSL is required are:

•       providing financial product advice to clients

•       dealing in a financial product for example, buying or selling shares on behalf of a client or issuing interests in a managed investment scheme

•       making a market for a financial product

•       operating a registered managed investment scheme

•       providing a custodial or depository service in respect of financial products

•       providing a crowd-funding service

•       providing a traditional trustee company services for example, preparing estate management functions.[10]

AFSL holders are required under subsections 912A(1)–(2) of the Corporations Act to:

•       have an IDR procedure that complies with standards and requirements made or approved by ASIC and which ‘covers complaints against the licensee made by retail clients in connection with the provision of all financial services covered by the licence’ and

•       be a member of one or more ASIC-approved EDR schemes which cover retail client complaints in connection with financial services covered by the licence (other than complaints that may be dealt with by the Superannuation Complaints Tribunal (SCT)).

As an AFS licensee, an entity must comply with the following general obligations under sections 912A and 912B:

•       do all things necessary to ensure that the financial services covered by its AFS licence are provided efficiently, honestly and fairly

•       have adequate arrangements in place to manage its conflicts of interest and

•       comply with its AFS licence conditions.

IDR system requirements

ASIC's Regulatory Guide 165 mandates the key requirements for a licence holder's IDR system.[11] These are:

•       commitment to an effective IDR system

•       quick and direct resolution of complaints

•       fairness in the process

•       adequate resources, including appropriate training of staff

•       visibility and transparency of the process

•       facilitate ease of understanding and accessibility of the procedures to customers

•       the ability to assist a complainant with their complaint, by way of filling in forms and expressing their grievance

•       responsiveness to the issues and to a complainant, including timely acknowledgement and articulation of time frames

•       free-of-charge IDR

•       fair and appropriate remedies, considering legal principles and industry best practice

•       analysis and evaluation of complaints and information obtained for the early identification of systemic issues or defects

•       accountability by provision of reports and actions taken, to senior management

•       regular and independent review of the IDR system to identify areas of improvement.

Internal Dispute Resolution (IDR)

Early resolution of disputes – time limits

Before complaining to one of the EDR schemes about the conduct of a bank or financial services provider, consumers must try to resolve the dispute directly with the entity through its own IDR service.

ASIC’s Regulatory Guide 165 also sets out time limits for the resolution of disputes. Where a complaint has been lodged, a licence holder must take the complaint through its IDR process and a decision must be made within 45 days. This timeframe is shorter for disputes involving default notice and resulting in hardship (21 days) and longer for trustee companies providing ‘traditional services’ (90 days).[12]

Where a complaint is not resolved within the 45 day period, the licence holder is obliged to explain the delay to the complainant and refer the complainant to the licence holder's subscribed EDR body. If the licence holder does not comply with this requirement, this may result in a breach of the licence holder's duties.[13]

External Dispute Resolution (EDR)

EDR schemes are designed to provide a cost-free, relatively quick and independent service to resolve disputes between consumers and providers of financial services or credit. EDR schemes represent an alternative to the often costly and time consuming effort of going to court.

EDR schemes may assist in resolving complaints through the use of negotiation or conciliation and requests for further information in order to help a complainant deal with a dispute. The outcome of an EDR process may be a decision that is binding on the financial services or credit provider, if it is accepted by the consumer. This may include ordering compensation be paid to a consumer if they have suffered a loss, or the dispute may be resolved in some other way.

As mentioned, there are currently two EDR schemes for banks and financial services providers, the FOS and the CIO. The salient features and distinctions between the two schemes are outlined below.

Financial Ombudsman Service (FOS)

FOS is an independent dispute resolution service for individuals and small business holders. The FOS is governed by an independent board of consumer representatives and financial services industry representatives. It is typically the larger banks and their insurance arms which are members of FOS.[14]

The FOS can generally hear disputes if:

•       the dispute is between an individual or small business and a bank or financial institution (including credit unions)

•       the financial services provider is a member of FOS

•       the dispute relates to:

–      an act or omission by a financial services provider in relation to a financial service in Australia or

–      a claim whose monetary limit does not exceed $500,000

–      a dispute involving a claim for more than $500,000 if all parties and FOS agree

–      the event to which the dispute relates occurred no more than six years earlier.[15]

The FOS is unable to consider particular disputes, including commercial judgments and policies about fees, interest rates and branch closures.[16] Its remit is limited to disputes in relation to financial services provided by banks and non-bank members who are members of the FOS scheme. Thus it can receive complaints about insurers, and other financial services providers, provided they are FOS members.

The role of the FOS is to investigate a complaint and attempt to resolve it by negotiating between the financial services provider and customer. Where this negotiation or mediation is unsuccessful, the FOS may recommend a resolution for the parties to consider. If this fails to yield an outcome, the FOS may reach a determination in relation to the dispute.[17] The types of remedies that the FOS may decide that the financial services provider or the applicant undertake include the payment of a sum of money, forgiveness or variation of the debt, repayment, waiver or variation of a fee, or the reinstatement or rectification of a contract.[18] FOS may decide that the financial services provider should compensate the applicant for direct financial loss or damage.[19]

If the customer accepts the determination, it becomes binding on the financial services provider, and the customer forgoes the right to have the dispute decided by a court.[20] However, if the customer does not accept the award, the financial services provider cannot enforce that award. The customer may then exercise the option of having their dispute decided by a court.[21]

FOS is also obligated to report any ‘systemic, persistent or deliberate conduct’ that it identifies to ASIC.[22] Systemic issues relate to issues that have implications beyond the immediate actions and rights of the parties to the complaint or dispute.[23] This enables ASIC to become aware of matters that may impact multiple consumers. FOS will also take action to work with financial services providers to improve compliance, change culture and compensate consumers.

FOS experienced a 16 per cent increase in disputes over the past financial year to a record 39,470, in relation to the quality of advice and service customers are receiving.[24] The Chief Ombudsman Shane Tregillis stated that ‘much of the work was dealing with systemic issues, rather than just one-off problems.’[25] Mr Tregillis said that FOS had ‘identified and referred 192 possible systemic issues to financial services providers for response and resolved 66 definite systemic issues.’[26]

Credit and Investments Ombudsman (CIO)

The CIO operates in a similar manner to FOS. Its key goal is to provide consumers a cost-free alternative to legal proceedings for resolving disputes they may have with their financial service provider. Participants of the scheme include credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, investment managers, debt services and a wide range of other financial services and product providers.[27] CIO operates mainly in the credit sector and its membership profile consists of 24,000 members, about 97 per cent of which are sole traders and small businesses.[28] That membership is mainly comprised of:

non-bank lenders, mortgage brokers, debt purchasers, finance companies, consumer lease providers, credit reporting bureaus, time share operators and small amount lenders.[29]

Superannuation Complaints Tribunal

The Superannuation Complaints Tribunal (SCT) is an independent statutory tribunal. The SCT is not subject to ASIC’s approval and only deals with complaints against trustees and certain insurers in relation to superannuation funds, annuities and deferred annuities, and retirement savings accounts, by virtue of the relevant provisions under the Superannuation (Resolution of Complaints) Act 1993.[30] As explained by Industry SuperFunds:

Complaints about superannuation that are dealt with at the SCT are different to complaints about other financial products and services dealt with by other financial services’ external dispute resolution schemes:

-          Unlike the other schemes, the SCT is a statutory authority established under the Superannuation (Resolution of Complaints) Act 1993 (SRC Act). Its decisions are subject to administrative and judicial review.

-          The jurisdiction of the SCT is not subject to any monetary limits.

-          Determinations are enforceable, which avoids the problem of unpaid determinations that is a feature of Financial Ombudsman Service (FOS).

-          The SCT is funded by Government (although funding recovery occurs via annual APRA financial sector levies).

-          The ability to appeal determinations to the Federal Court on a question of law.

Many complaints do not involve the fund member... For example:

-          complaints about the distribution of a superannuation death benefit are brought by potential beneficiaries of the member’s superannuation death benefit

-          complaints about the denial of total and permanent disability claims are brought by the member but also involve an insurer.

In addition, the statutory foundation of the SCT means that the SCT, its members and staff are subject to federal legislation such as the Freedom of Information Act 1982.[31]

Calls for a Royal Commission into Banking

On 8 April 2016, following a mounting number of allegations of misconduct, scandals and evidence of a problematic culture in the banking and financial services industry, Opposition Leader Bill Shorten called on the Coalition Government to establish a Royal Commission into banking.[32] Mr Shorten said that if the Government failed to do so, then a Labor government would.[33] Significantly, the inquiry into the financial sector would cover banks, insurance providers, and superannuation funds, given the particular problems identified in relation to the specific products and services they provide.[34]

Mr Shorten was quoted as saying:

Many Australians have suffered through the decisions of banks and financial institutions.

Retirees had lost their savings, small businesses had lost their livelihood, families had lost hundreds of thousands of dollars and insurance beneficiaries had been denied justice and legitimate claims. There are literally tens of thousands of victims, if not more.[35]

In a joint media release, Messrs Shorten, Bowen, Dreyfus and Chalmers said the royal commission would focus on:

·          how widespread instances of illegal and unethical behaviour are within Australia’s financial services industry

·          how Australia’s financial services institutions treat their duty of care to consumers

·          how the culture, ethical standards and business structures of Australian financial services institutions affect the behaviour of these institutions

·          whether Australia’s regulators are really well equipped to identify and prevent illegal and unethical behaviour in the sector

·          comparable international experience with similar financial services industry misconduct and best practice responses to those incidents and

·          other events as may come to light in the course of investigating the above.[36]

Bob Katter MP supported the ALP’s call for a Royal Commission into banking, though he stated that this should have happened a year earlier when Mr Katter himself had called for such an inquiry.[37]

Treasurer Scott Morrison responded by asserting that Mr Shorten was engaging in a ‘reckless’ distraction that put at risk confidence in the banking system. Instead, Mr Morrison suggested that Australia needed a ‘proportional response’ to misconduct in the banking sector, arguing that the existing regulators were ‘a tough cop on the beat’.[38]

From 20 April 2016 the Coalition government’s response to the misconduct in the financial sector was reflected in a range of announcements in relation to improving the operation and accountability of the Australian financial industry. The joint announcement by the Treasurer Scott Morrison and the Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer related to a raft of changes to ASIC.

This announcement included:

…. investing $61.1 million to enhance ASIC’s data analytics and surveillance capabilities as well as modernis[ing] ASIC’s data management systems. An additional $9.2 million will also be made available to ASIC and Treasury to ensure they can implement appropriate law and regulatory reform.[39]

[Committing] $57 million to enable increased surveillance and enforcement on an ongoing basis in the areas of financial advice, responsible lending, life insurance and breach reporting.[40]

The Government also announced that it would move ASIC to a full user-pays funding model from the second half of 2017.[41] ASIC had recommended the introduction of a ‘user pays’ funding model in 2014, arguing that the revenue collected by Government from the new sectors under the ASIC’s jurisdiction was misaligned.[42] In May 2015, the then Assistant Treasurer Josh Frydenberg—in response to the findings of Senate Committees and the Murray Inquiry into the Australian Financial System—also made the suggestion for ASIC to move to a full user-pays model.[43]

Most of these enhancements and changes to ASIC were outcomes of the ASIC Capability Review, which was itself was recommended by the 2014 Murray Inquiry.[44]

On 30 November 2017, Prime Minister Malcolm Turnbull announced a Royal Commission into the banking sector, stating:

The only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.

It will cover the nation's banks, big and small, wealth managers, superannuation providers, insurance companies.

It will be a comprehensive inquiry.[45]

The Prime Minister’s announcement followed the release of a letter to the Treasurer by the Chairpersons and chief executives of the ANZ, Commonwealth, NAB and Westpac banks, calling for the establishment of a ‘properly constituted inquiry’ into the banking sector, ‘led by an eminent and respected ex judicial officer’.[46]

Ramsay Review of the Financial System’s External Dispute Resolution and Complaints Framework

On 20 April 2016, the Government announced a review of the financial system’s external dispute resolution and complaints framework (the Financial Ombudsman Service (FOS) and other external dispute resolution schemes). This is where average Australians take up disputes in relation to the banking and finance sector in relation to carelessness and wrongdoings by entities in that sector. An expert panel comprised of Professor Ian Ramsay, Julie Abramson and Alan Kirkland was appointed to undertake the review.[47] Announcement of the review had been interpreted by some commentators as part of an effort to stave off Labor’s call for a royal commission into the banking sector.[48]

The Terms of Reference for the Ramsay Review were:

•       To examine dispute resolution and complaints arrangements of three bodies (FOS, CIO and SCT) and consider whether changes to current dispute resolution and complaints bodies in the financial sector are necessary to deliver effective outcomes for users in a rapidly changing and dynamic financial system.

•       The review was to have regard to: efficiency; equity; complexity; transparency; accountability; comparability of outcomes; and regulatory costs.

•       The review was to make recommendations on

–      extent of gaps and overlaps between the bodies

–      the bodies’ role in working with government, regulators, consumers, industry and other stakeholders to improve the framework to deliver better user outcomes and

–      relative merits and any issues associated with different models in resolving disputes.[49]

The review was originally to make observations, but not recommendations, on the establishment of a statutory compensation scheme of last resort. However, on 2 February 2017, the Terms of Reference were amended to require the review to make recommendations on the establishment, merits and potential design of such a scheme.[50]

On 9 September 2016, the Panel released an Issues Paper, which received 127 submissions from stakeholders.[51] These submissions informed the Panel’s Interim Report, which was released for consultation on 6 December 2016 and sought stakeholder views on 11 draft recommendations.[52] Fifty-six submissions were received.[53]

In their responses to the first Issues Paper, a number of stakeholders made submissions on this issue of the establishment of a statutory compensation scheme of last resort. These submissions informed the Panel’s view in the Interim Report that there is substantial merit in establishing an industry-funded compensation scheme of last resort. As set out above, the Review’s Terms of Reference were amended in February 2017 to expand the panel’s remit in this regard.[54]

On 3 April 2017, the Panel provided to the Government its Final Report on matters covered by the original Terms of Reference (other than that relating to a compensation scheme of last resort).

On 9 May 2017, the Government released the Panel’s Final Report on the matters covered by the original Terms of Reference (other than that dealing with a compensation scheme of last resort) and the Government’s response to that Report. The Report made 11 recommendations which represent an integrated package of reforms that will see the EDR framework well placed to address current problems and ensure it is designed to withstand the challenges of a rapidly changing financial system.[55]

The Panel’s key recommendation was the establishment of a new one-stop-shop EDR body for all financial disputes (including superannuation disputes) to replace FOS, CIO and SCT. This is to be implemented via the establishment of AFCA.[56] As under the existing EDR scheme, AFCA would be funded by industry via levies. AFCA would be based on an ombudsman model and will be established by industry as a company limited by guarantee.[57]

The Government’s proposed changes to the existing scheme have been guided and informed by the regulatory impacts of various reform options by the Ramsay Review. The Explanatory Memorandum to the Bill advises that ‘Treasury has certified that the Ramsay Review and subsequent consultation as a process and analysis equivalent to a Regulation Impact Statement’.[58]

In his second reading speech for the Bill, Senator McGrath described the proposed for a one-stop-shop EDR (AFCA) as:

…part of the Government’s broader commitment to ensuring that the banks and other financial institutions are held to account when they fail to meet community expectations…Where these expectations are not met and consumers wrongfully suffer a loss, it is critical that those who have been wronged have access to redress in a timely manner.[59]

Establishment of AFCA transition team

On 26 July 2017, the Minister for Revenue and Financial Services announced the establishment of a ‘transition team’ to lead the establishment of AFCA. The transition team is led by Dr Malcolm Edey, a former Assistant Governor of the Reserve Bank.[60]

Matters to be addressed in AFCA's terms of reference

The Minister for Revenue and Financial Services has stated that AFCA's operating rules (terms of reference) will set out the way in which AFCA will meet its duties and requirements under the law and how it will operate, including:

•       monetary limits - the increased monetary limits and compensation caps (AFCA's monetary limit of $1 million and compensation cap of $500,000 are almost double the existing limits) for both small business credit facility and other non-superannuation disputes will be set out in AFCA's operating rules. In addition, the transition team will consult on sub-limits (such as for disputes about general insurance broking), for inclusion in the rules

•       decision-making processes - AFCA will be required to take a consistent approach to decision-making so that consumers and financial firms know what to expect from AFCA

•       internal dispute resolution requirements - before AFCA will consider a dispute, it will refer all complaints back to the financial firm for a final opportunity to resolve the dispute in a defined timeframe (subject to certain exceptions), to ensure that the IDR process has the opportunity to work and

•       an independent assessor - AFCA will have an independent assessor to investigate complaints regarding the way in which a dispute was handled, to ensure procedural fairness.[61]

To ensure that AFCA is accountable for the fees it charges to members, as a condition of authorisation, AFCA will be required to report to the responsible Minister annually on any decisions to vary fees.

The Minister stated:

This reporting requirement, along with the requirement for independent reviews and the enhanced governance arrangements (including ASIC's directions power, AFCA's board structure, and the requirement for AFCA to establish an independent assessor), is designed to ensure that AFCA is transparent and accountable to both industry and consumers.[62]

Committee consideration

Senate Economics Legislation Committee

On 14 September 2017, the Senate Selection of Bills Committee referred the Bill to the Economics Legislation Committee for inquiry and report.[63] Details of the inquiry are at the inquiry homepage.

The               Senate Economics Legislation Committee tabled its report on the Bill on 17 October 2017 and recommended the passage of the Bill.[64] However, the Committee acknowledged the concerns raised by stakeholders and discussed in Chapter 3 of its report. (These concerns are discussed below.) It advised that the AFCA transition team should be cognisant of these concerns, and whether they are able to be reasonably and adequately dealt with in the terms of reference for AFCA.[65]

The Committee is of the view that the new arrangements should be reviewed after a year and again after five years.[66]

Labor Senators issued Additional Comments, recommending that the Bill be amended to ensure that the SCT is not abolished, and continues to handle superannuation complaints.[67]

Senate Standing Committee for the Scrutiny of Bills

The Scrutiny of Bills Committee reported on the Bill in its Scrutiny Digest 7 of 2017.[68] It identified concerns with some of the Bill’s proposed provisions, to which the Minister for Revenue and Financial Services, Kelly O’Dwyer, has provided responses. [69] The concerns and responses are summarised below.

Use of non-disallowable notifiable instrument

The Bill provides for the requirements for authorisation, variation and revocation of authorisation of an EDR scheme to be specified by the Minister in a non-disallowable notifiable instrument (proposed subsections 1050(1) and 1050(5)(b) of the Corporations Act, at item 2 of Schedule 1 to the Bill). The Committee queried why it is proposed that the authorisation of the EDR scheme, and the specification of conditions relating to the authorisation, will not be subject to parliamentary disallowance.

Minister’s response

Minister O’Dwyer advised:

The Ministerial power to authorise an EDR scheme does not involve the exercise of a power that is legislative in character because it does not determine or alter the content of a law (rather, the authorisation will merely determine the circumstances in which the relevant law will apply). Accordingly, the exercise of that power will not be disallowable.[70]

Committee rejoinder

The Committee acknowledged that it is not always easy to draw a distinction between a decision of an administrative versus legislative character. However, the Committee noted that the authorisation decision, in combination with the decision to specify conditions form the basis of ‘accountability requirements for a scheme for external dispute resolution, which is part of a broader framework of public regulation’.[71] The Committee considered those conditions ‘to be accountability requirements which may be considered to have a legislative character’ and stated:

The Committee therefore remains concerned that the Parliament will have insufficient oversight of important policy considerations relating to the operation of the EDR scheme, given that its authorisation and the specification of conditions will not be subject to disallowance.[72]

Creation of strict liability offences

The Bill creates two strict liability offences:

•       for failure to comply with a requirement, set out in a written notice given by AFCA, to provide information or documents relevant to a superannuation complaint (proposed subsection 1054A(4) at item 2 of Schedule 1 to the Bill).

•       for failure to comply with the secrecy provisions relating to the unauthorised disclosure, access or production of documents related to a superannuation complaint (proposed subsection 1058(1) at item 2 of Schedule 1 to the Bill).

Noting that the Explanatory Memorandum did not provide justification of why these offences are subject to strict liability, the Committee sought a detailed justification from the Minister.[73]

Minister’s response

In relation to the two strict liability offences, the Minister drew to the attention of the Committee that the penalties comply with the requirements of the Guide to Framing Commonwealth Offences.[74] In particular, the offences are not punishable by imprisonment, the maximum penalties are below the maximum allowable for strict liability offences and ‘the offences are likely to significantly enhance the effectiveness of the enforcement regime by supporting AFCA's ability to effectively obtain information required to resolve a superannuation complaint’ as well as having a deterrent effect.[75]

Committee rejoinder

The Committee noted the Minister's advice that strict liability is appropriate in both instances and asked for the key information provided by the Minister to be included in the Explanatory Memorandum to the Bill.[76]

Exclusion of Judicial Review

Item 11 of Schedule 1 to the Bill proposes to amend the ADJR Act to exclude decisions or determinations made by AFCA in relation to superannuation disputes from judicial review under that Act. The Committee sought advice on the ‘decisions or conduct of the SCT that is currently reviewable under the ADJR Act and the rationale for proposing to exclude ADJR Act review of these types of decisions made by AFCA’, and whether the grounds for bringing an appeal on a 'question of law' will be narrower or more limited than those that would be available under the ADJR Act.[77]

Minister’s response

Minister O’Dwyer advised:

As the Superannuation Complaints Tribunal is a statutory authority established under the Superannuation (Resolution of Complaints) Act 1993, and as its decision-makers are considered 'officers of the Commonwealth', it is appropriate that these decisions are subject to judicial review.

By contrast, AFCA is a private review mechanism arising from private rights. Its decision-makers will not be 'officers of the Commonwealth', and as a result it is not appropriate for its decisions and conduct to be subject to judicial review. This is consistent with administrative law principles.

AFCA will have internal review mechanisms and an independent assessor to manage disputes relating to the processes and operations of AFCA.

[…]

The types of questions of law that may be appealed in any particular situation would depend on the particular legal context in which the decision is made, which may be broader than reviews provided by the ADJR Act as the grounds of review under the ADJR Act are expressly prescribed.[78]

Committee Rejoinder

The Committee noted the Minister’s response and asked for the key information provided by the Minister to be included in the Explanatory Memorandum to the Bill. The Committee stated:

With respect to the exclusion of decisions made by AFCA from judicial review under the ADJR Act, the Committee remains concerned as to whether the right to appeal on a question of law will provide an adequate substitute to judicial review under the ADJR Act.[79]

Accordingly, the Committee sought further advice from the Minister on whether ‘it is intended that errors related to a denial of a fair hearing (that is, errors which give rise to a procedural fairness ground of review) would give rise to a question of law (and so be subject to appeal)’.[80] At the time of writing this Digest, the Committee had not published a further response from the Minister.

Privacy

Items 13, 14 and 29 of Schedule 1 to the Bill propose amendments to the Australian Prudential Regulation Authority Act 1998 (APRA Act), the ASIC Act and the SIS Act to allow officers and other staff members of APRA, ASIC and the ATO to disclose protected information to AFCA to assist it to perform its functions. Noting that the Explanatory Memorandum does not clarify the type of information that may be disclosed to AFCA, whether this is likely to include personal or confidential information, and what safeguards have been put in place, the Committee considered that enabling protected information to be disclosed to a non-government body such as AFCA raises privacy scrutiny concerns’.[81] Accordingly, the Committee sought information from the Minister on these matters.

Minister’s response

Minister O’Dwyer advised:

The type of information that may be disclosed by the ATO to AFCA is limited to information that was obtained under or in relation to the Superannuation (Unclaimed Money and Lost Members) Act 1999. This is consistent with the type of information that the ATO is permitted to disclose to the Superannuation Complaints Tribunal under the current law, which may include personal or confidential information.

The legislation enables ASIC to share information, at ASIC's discretion, that will assist AFCA to perform its functions or powers. This may potentially include information that relates to an individual complaint, a systemic issue or membership of AFCA. The information may be personal or confidential information. Under the current law, ASIC is permitted to disclose this type of information to the Superannuation Complaints Tribunal.[82]

The Minister further advised that the each of the relevant legislative frameworks allowing the disclosure of protected information contains safeguards to ensure the confidentiality of information once disclosed by ASIC, APRA and the ATO.[83]

In addition, it is intended that AFCA’s terms of reference (discussed above) will include confidentiality obligations.[84]

Committee Rejoinder

Noting the Minister’s earlier advice that AFCA is to be a private review mechanism arising from private rights and its decision-makers will not be Commonwealth officers, the Committee advised that it:

… remains concerned about enabling protected information to be disclosed to a non-government body such as AFCA, particularly in circumstances where this information may include personal and confidential information.[85]

Significant matters in delegated legislation

Items 7 and 9 of Schedule 2 to the Bill repeal and replace provisions of the RSA Act and the SIS Act that require written reasons for decisions to be provided to complainants to IDR systems. The proposed provisions will allow ASIC to set requirements about providing written reasons for IDR decisions in a legislative instrument, rather than this being contained in primary legislation as currently. Failure to comply with these requirements will be an offence with a maximum penalty of 100 penalty units ($21,000).[86]

The Committee raised concerns about the proposed approach of moving requirements from primary legislation to a legislative instrument, particularly given the fact that contravening these requirements will remain an offence. Accordingly, the Committee sought advice from the Minister on the appropriateness of this approach.[87]

Minister’s response

The Minister advised that the approach taken is designed to:

provide ASIC with the flexibility to develop and consult on the content of its legislative instrument so as to provide for greater consistency between the requirements around giving reasons for internal dispute resolution decisions made by these trustees and the requirements that will apply for other internal dispute resolution firms.[88]

Committee Rejoinder

The Committee noted the Minister's advice that the details that ASIC may specify in the legislative instrument are clearly circumscribed in the Act and will be readily obtainable on the Federal Register of Legislation.[89]

The Committee stated that significant matters, such as requirements that may result in an offence, should generally be included in primary legislation. It concluded that it did ‘not consider that providing flexibility for ASIC is a sufficient justification for setting out requirements in delegated legislation where breach of those requirements will constitute an offence’.[90]

Policy position of non-government parties/independents

In additional comments on the Bill in the Senate Economics Legislation Committee report, the Australian Labor Party maintained its position that the Turnbull Government should establish a Royal Commission into Australia's banking and financial services sector, ‘because it is the one thing that can get to the bottom of the systemic failures and cultural issues within the banking and financial services sector’.[91] Labor Party senators consider that the one-stop-shop will in substance, be ‘another ombudsman in the form of an industry-established private company limited by guarantee that is approved by the Minister’.[92] They also state that ‘ASIC has confirmed that the Bill grants AFCA no new or additional powers to resolve disputes that the existing ombudsman schemes do not already have’.[93]

The Labor Party has signaled that it is opposed to the SCT being included in the new one-stop-shop EDR, stating that it will result in weakened outcomes and protections for consumers.[94]

At the time of writing, the Australian Greens and independent members of Parliament do not appear to have announced a position on the substantive provisions on the Bill.

Position of major interest groups

The views of major interest groups are set out in their submissions and evidence to the Senate Economic Committee’s inquiry into the Bill, which received 31 submissions.[95] Some of those views are summarised below while the remainder are incorporated into the analysis of the Bill’s Schedules where relevant.

Support for the Bill

ASIC has stated that it supports the creation of a one-stop-shop EDR and believes ‘that it will ultimately benefit consumers and industry stakeholders’.[96] However, it considers:

there is important work still to be done in finalising the underlying Terms of Reference/Rules of the new scheme which will flesh out its detailed operation.[97]

ASIC acknowledges though that there is clearly years of relevant operational experience to make use of from the existing scheme.[98] ASIC points out that while the core business of an EDR scheme is to resolve consumer complaints, such schemes ‘do in practice identify trends in systemic issues arising out of disputes lodged with them’. ASIC is nonetheless clear that ‘the role of the scheme is not to “fix” industry culture or prevent misconduct or mistakes from happening’.[99] A similar point is made by the CIO, which pointed out that ‘like FOS, AFCA will only be able to look at problems after the event and it will not be able to prevent the re-occurrence of financial scandals’.[100]

The Australian Bankers’ Association (ABA) supports the one-stop-shop for external dispute resolution and states that the ‘enhanced IDR framework will complement industry efforts to improve culture, practices and behaviour through the better banking program’.[101]

Other key interest groups and organisations that indicated their support for the Bill included the FOS, Self-Managed Super Fund (SMSF) Association and Westpac.[102] The broad view of these groups was that the measures included in the Bill would strengthen the superannuation system and protect consumers. Support for the establishment of a one-stop-shop for financial complaints was in most cases based on the consistency for consumers and AFCA members, and the accessibility, ease and speed with which consumers would be able to use the system. These factors are considered to be fundamental to trust and confidence by consumers in the banking system.[103] However, there was also an emphasis placed on the importance of maintaining adequate consultation in developing the detail around the terms of reference and implementation.

Qualified support for the Bill

Australian Lawyers Alliance (ALA)

Professional indemnity (PI) insurance is a consumer protection mechanism designed to compensate consumers or clients of Financial Service Providers (FSPs) in the event they suffer loss due to an act, error or omission as a result of financial services provided by an FSP. Most FSPs will hold PI insurance.

In the context of non-superannuation complaints, the Australian Lawyers Alliance (ALA) has raised concerns that ‘there have been an unacceptable level of determinations made by FOS’ in favour of the consumer which have not been paid, thus leaving the consumer with a hollow victory.[104] ALA has stated that the issue of enforcement of determinations needs to be addressed otherwise AFCA will face similar problems to FOS. ALA has suggested making it a requirement that PI insurers are required to be members of AFCA, and that AFCA be empowered ‘to join professional indemnity insurers of FSPs to a complaint and bind them to the determination’.[105] In relation to this concern, ALA notes that currently there does not appear to be a transparent accessible mechanism by which a complainant is able to ascertain whether a PI insurer exists in relation to the claim. In this regard, it is suggested that part of AFCA’s mandate should be responsibility for administering a register of PI insurers, linking them to their FSP members and making the register searchable by consumers.[106]

The Ramsay Review found that an ombudsman model may have particular advantages over the existing framework, namely a ‘relatively simple process, led by the ombudsman, negating the need for formal legal representation’.[107] However in relation to superannuation complaints, ALA noted that the Superannuation (Resolution of Complaints) Act 1993 does provide for representation in defined circumstances. ALA also pointed out that FSP typically have access to significant legal resources throughout any complaint process. Thus failing to carry across the existing arrangements and provide complainants with an equal right to legal representation, may create a shortcoming in the proposed arrangements.[108] As a related matter, the Bill does not address the matter of costs, which were also not recoverable via the SCT and the ALA considers this to be an impediment to a complainant’s ability to pursue superannuation complaints in an effective and efficient manner. ALA points out that having legal representation and enabling cost recovery may result in consumers being encouraged to seek legal advice prior to lodging complaints, which may assist in filtering out complaints that are either unworthy or have limited prospect of success.[109]

The ALA also suggested that consumers in non-superannuation complaints should be given the right of appeal to the Federal Court on a matter of law.[110]

Australian Small Business and Family Enterprise Ombudsman (SBFEO)

In 2016, at the request of the Minister for Small Business, the SBFEO undertook an inquiry into the impairment of customer loans. It found that around a third of the cases reflected poor bank practices and possible unconscionable conduct on the part of banks. Among the recommendations it made in response to its findings, the SBFEO included providing access to a one-stop-shop for EDR for small business which was accessible, affordable and efficient.[111] However, the SBFEO believes that the Bill in its present form lacks some significant inclusions, ‘namely the role of third party agents (such as valuers, investigating accountants and receivers)’.[112] The SBFEO also has ‘reservations about the interaction with farm debt mediation schemes and the treatment of cases which fall outside the proposed terms of reference for AFCA’.[113]

The SBFEO also proposed a few amendments to strengthen the operation of the Bill. It recommended a maximum timeframe (for example, six months) for the resolution of disputes, in order to provide smaller businesses some reasonable ability to plan.[114]

Consumer legal centres

A number of consumer legal centres made a joint submission with other consumer groups stating that they are broadly supportive of the legislation, acknowledging that their ‘case workers have seen inconsistent outcomes in a multi-scheme environment, as this causes confusion for consumers and inefficiencies for their advisors, who must be across different rules and procedures for the three existing schemes’.[115] They consider the scheme will yield positive outcomes, though this would appear to be subject to the requirement that there be meaningful ongoing consultation by government with stakeholders. The consumer legal centres suggest particular amendments to the Bill, including:

•       requiring AFCA to monitor and address systemic issues, in addition to referring such matters to regulators

•       requiring AFCA to refer certain matters to other relevant authorities or industry code monitoring committees

•       requiring membership for debt management firms, including debt agreement administrators, and permitting voluntary membership.[116]

Council for Small Business Australia

The Council for Small Business is supportive of the proposed changes, though it emphasises that for the proposed system to be workable for Australian finance brokers, it should be ‘low-cost, have a dedicated small business team’ and reflect an appreciation of small business concerns in relation to its operation.[117]

Insurance Council of Australia

The Insurance Council of Australia notes that ‘the Bill details AFCA’s high-level objectives while leaving much of the operational requirements to AFCA’s terms of reference’.[118] It considers that the terms of reference and practical implications of transitioning to an AFCA scheme will largely determine the ability of AFCA’s ability to deliver results superior to those under the existing system. It supports the government’s approach subject to adequate consultation with stakeholders and sufficient lead times for proposed changes.[119]

Other key interest groups which indicated their qualified support for the Bill were the Financial Services Council (FSC) and the Association of Superannuation Funds of Australia (ASFA).

In the superannuation context, the FSC is particularly concerned that:

appropriate safeguards such as rights of appeal and review exist and that the higher monetary limits and compensation caps than currently exist for FOS and CIO matters can be justified.[120]

ASFA ‘remains of the view that the SCT is the preferred model for superannuation complaints resolution.’[121] ASFA also argued that:

SCT has, within its historic and current funding and operational constraints, served the industry and consumers well.[122]

ASFA pointed out that it has made ongoing calls for an improvement in the SCT’s funding levels, emphasising the vital importance of enhancing the SCT’s operations and outcomes, by increasing resourcing:

and enhancements to its governance structure and operating procedures. We also expressed our concerns that key protections for consumers and fund trustees, along with critical experience and expertise, may be lost if handling of superannuation complaints is moved to an EDR body with a generic (that is, not superannuation-specific) operating model.[123]

Opposition to the Bill

There were also submissions which were less sanguine about the merits a one-stop-shop EDR scheme, favoured the retention (though improvement) of current arrangements, and/or did not believe that the Ramsay Review had sufficiently made the case for such a change yielding superior outcomes.[124]

The Credit and Investments Ombudsman (CIO), which is proposed to be replaced by the one-stop-shop EDR scheme has expressed its opposition to the Bill. CIO argues that it is inefficient to make such changes prior to undertaking a royal commission or other inquiry into banking and being guided by those findings.[125]

CIO states that ‘[t]here is no precedent anywhere in the world for dispute resolution bodies charged with resolving disputes about superannuation or pensions to be other than a statutory tribunal’.[126]

CIO’s reasons for opposing the Bill include the following:

As a non-statutory monopoly, AFCA will be far less accountable and transparent to its stakeholders than either a statutory scheme which is subject to appropriate checks and balances or the present two ombudsman scheme model which acts as a check on the broad discretions and powers of FOS and CIO which ‘compete’ with each other in the same sector.[127]

The current exemption protecting insurance contracts from the operation of any law which provides relief for unfair contracts or unconscionable conduct is retained in the Bill.[128]

In relation to a superannuation complaint, AFCA will not be able to make a decision which would be contrary to the terms and conditions of the insurance contract. Consequently, an out-of-date, unreasonable or excessively restrictive medical definition can still be the basis of denying a consumer a life insurance payout on a superannuation policy (CommInsure case). The only exception is if the sale of the product was unfair or unreasonable.[129]

AFCA will not deal with complaints against unprincipled property spruikers because advice relating to investment in real property is an unregulated activity and so not a financial service for the purposes of mandatory EDR membership. Consumers have suffered significant losses over the years as a result of this regulatory gap.[130]

CIO considered that the Review placed undue emphasis on the views presented by consumer advocates and did not seem to appreciate the risk that a monopoly scheme may not be able to deliver fast and effective resolution of disputes involving smaller businesses.[131]

Views on the inclusion of the Superannuation Complaints Tribunal (SCT) into AFCA

The Community and Public Sector Union (CPSU), CIO, ACTU and FSU do not consider there to be a compelling case for the inclusion of the SCT into AFCA.[132] The CPSU is mindful that superannuation is or will be the greatest asset in retirement for the overwhelming majority of Australians. It is also universal and compulsory, so any changes to existing arrangements have the potential to affect all Australians.[133] The CPSU therefore believes that if a problem arises in relation to that superannuation, complainants should have access to a ‘robust and independent external complaints body’.[134]

The CPSU notes that the number of superannuation complaints lodged with the SCT is ‘dwarfed by those handled by FOS and CIO’, and that ‘unlike the finance sector, there are no widespread calls for reform in the superannuation sector’.[135] It points out that despite this, the amendments proposed by the Bill seem to reserve the most significant changes for the superannuation industry. CPSU acknowledges that there have been delays in processing superannuation complaints and considers that this is due to the widely acknowledged underfunding of the SCT.[136] CPSU and CIO consider the underfunding to be the outcome of a funding model which needs to be fixed as it is ‘indirect, inefficient and lacking in transparency’.[137]

The CPSU is concerned that the move from a tribunal system to a private company may weaken the consumer protections provided by the SCT, in particular, access to decisions that are open to judicial review and processes subject to the requirements of administrative law. The FSU and Australian Institute of Superannuation Trustees have expressed similar concerns that scheme participants will be ‘worse off’.[138] AFCA as a private company is also exempt from the requirements of the Freedom of Information Act 1982 (Cth).[139]

The FSU supports initiatives to improve the performance and effectiveness of FOS and CIO to resolve consumer complaints. However, it considers that the ‘specialist expertise needed to resolve superannuation complaints, particularly disputed claims in respect of a beneficiary of a superannuation fund will be lost.’[140] The CPSU shares this view.[141] The FSU and CPSU recommend maintaining the SCT in its current form but equipping it with the resources required to provide effective resolution for customer complaints.[142]

The final issue for the CPSU—also a concern shared by the ACTU and ASFA—is that the inclusion of the SCT in AFCA may result in the already underfunded SCT ‘cross-subsidising complaints from the […] financial services and credit elements of the AFCA’.[143] This concern about cross-subsidising also ‘relates to the proposed compensation scheme of last resort’.[144]

Overall the CPSU considers that while the Bill provides some new powers for ASIC, these basically pertain to regulating AFCA and not directly the finance sector itself.[145]

For the reasons outlined above, ASFA has suggested that it is important that the effectiveness of the AFCA scheme is actively monitored and formally reviewed to ensure it achieves appropriate outcomes, especially in relation to superannuation complaints. ASFA proposed a review of the scheme after 12 months of operation.[146]

Superannuation Complaints Tribunal (SCT)

The SCT notes with concern that the Bill does not make it a requirement that a complaint made by a consumer relating to a life insurance policy held by a trustee, be a superannuation complaint.[147] The SCT points out that this may be significant for two reasons:

•       the consumer may lose access to unlimited jurisdiction and remedies

•       it enables circumvention of the Superannuation Industry Supervision Prudential Standards, which impose specific obligations on trustees in relation to insurance, by not including the trustee in the dispute.[148]

Financial implications

The Explanatory Memorandum states that the measure is estimated to have the following financial impact over the forward estimates period:

2016-17

2017-18

2018-19

2019-20

2020-21

-

-$1.8m

$0.8m

$0.4m

..

(a)                 – Nil

(b)                 .. not zero but rounded to zero.[149]

Source: Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 3.

The Explanatory Memorandum also states that the measure is estimated to have a compliance cost impact of $43.85 million each year.[150]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[151]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise any human rights concerns.[152]

Key issues and provisions

Schedule 1—External dispute regulation

Part 1—Amendments to the Corporations Act 2001 applying from the day after Royal Assent

Division 1 of Part 7.10A—Authorisation of an external dispute resolution (EDR) scheme

Item 2 of Schedule 1 to the Bill inserts new Part 7.10A into the Corporations Act. Division 1 of Part 7.10A creates a new EDR authorisation framework. According to the Explanatory Memorandum:

As an industry body, key elements of AFCA’s operations will be set out in its operating rules or ‘terms of reference’. The Minister for Revenue and Financial Services established a transition team, chaired by Dr Malcolm Edey, to lead the creation of AFCA. Dr Edey will provide advice to the Minister on the terms of reference, governance and funding arrangements, as well as transitional arrangements and the authorisation process. The transition team will consult extensively with ASIC, the existing EDR bodies, industry and consumer groups, thereby ensuring a smooth transition from the existing framework to AFCA.[153]

The terms of reference will provide important and clarificatory operational detail. The articulation of this detail has yet to be completed and/ or made publicly available.

ANZ has stated that it supports the operation of the AFCA scheme being determined by AFCA’s Board and set out in its terms of reference. [154]

Authorisation of the EDR scheme

Within proposed Part 7.10A, proposed subsection 1050(1) enables the Minister to authorise a new one-stop-shop EDR scheme if the Minister is satisfied that the scheme fulfils the mandatory requirements under proposed section 1051. Once the scheme is authorised by the Minister, it will be known as AFCA.

Proposed subsection 1050(2) provides that, in considering whether to authorise an external dispute resolution scheme, the Minister:

•       must take into account the general considerations for an EDR scheme under proposed section 1051A and

•       may take into account any other matter the Minister considers relevant (whether or not those other matters are consistent with those general considerations).

Only one authorisation of an EDR scheme may be in force at any one time (proposed subsection 1050(3)).

Power to set conditions of EDR scheme including variation and revocation

Proposed subsection 1050(5) sets out the power of the Minister to specify conditions in relation to the authorisation of the EDR scheme.

Proposed subsection 1050(5) gives the Minister (rather than ASIC)[155] the power to vary or revoke the conditions of an EDR scheme specified by the Minster by notifiable instrument at any time, with the requirement for specification of the day the variation or revocation comes into force. Proposed subsection 1050(4) gives the Minister the power to vary or revoke the authorisation of an EDR scheme. The Explanatory Memorandum to the Bill clarifies the parameters of the discretion of the Minster’s powers in this regard:

The Minister may vary or revoke the authorisation of the EDR scheme by notifiable instrument for any reason.[156] [Emphasis added]

Mandatory requirements and general considerations

Mandatory requirements

Proposed section 1051 outlines the mandatory requirements that relate to the authorisation of the EDR scheme. These are organisational requirements (proposed subsection 1051(2)); operator requirements (proposed subsection 1051(3)); operational requirements (proposed subsection 1051(4)) and compliance requirements (proposed subsection 1051(5)). These are examined in turn below.

The organisational requirements set out in proposed subsection 1051(2) will require the authorised EDR scheme to have the following attributes:

–      the scheme has an independent assessor

–      membership of the EDR scheme is open to every entity that is required by relevant laws to be a member of an EDR scheme

–      the EDR scheme is financed by compulsory member contributions and

–      consumers and small business have free access to a single EDR scheme, thus complainants are to be exempt from payment of any fee or charge, to the operator of the scheme or to any other entity, in relation to a complaint.

Proposed paragraph 1051(2)(c) requires the scheme to have an independent assessor, but provides no further detail on what the role of that assessor is to be. The Explanatory Memorandum provides that the scheme:

must have an independent assessor to assess the handling of complaints, with a focus on reviewing the service provided to users in the handling of the disputes (if the assessor determines that the complaint was not handled satisfactorily, the assessor may recommend that AFCA take certain actions).[157]

On this point, ANZ and the Australian Bankers Association have suggested that there needs to be clarification as to the nature of the role of the independent assessor, and in particular, whether that assessor will have any right of review in respect of the merits of a decision.[158]

AFCA and its decision-makers would operate independently of ASIC and there would be no role for ASIC to intervene or review individual decisions. ASIC therefore is supportive of ‘the mandatory requirement of an independent assessor to deal with complaints about service standards in the handling of disputes’.[159]

The operator requirements set out in proposed subsection 1051(3) are:

•       the operator of the scheme commissions the conducting of independent reviews of the scheme’s operations and procedures

•       the operator of the scheme is a company limited by guarantee and must not operate for profit

•       the operator’s constitution provides that there are equal numbers of directors with experience in representing consumers and experience in carrying on the kinds of businesses operated by members of the scheme

•       the operator’s constitution provides that the Minister may, within six months of the authorisation of the AFCA scheme, appoint any director (including the independent Chair of the board) if the total number of directors appointed by the Minister (including the Chair) would be less than half the total number of directors.

Comment

ANZ considers that the Board structure and composition ‘has worked well for FOS, ensuring confidence in FOS from consumer and industry groups alike and provided longevity and stability to the organisation.’[160]

The Australian Institute of Superannuation Trustees states that the fundamental differences between the retail and profit-to-member superannuation industry warrant the allocation of at least one board position for a representative from the profit-to-member superannuation industry.[161]

The operational requirements set out in proposed section 1051(4) are:

•       the complaints mechanism under the scheme is appropriately accessible to persons dissatisfied with members of the scheme. The Explanatory Memorandum provides no further detail or guidance by way of example, as to what this might mean in practice.

•       complaints against members of the scheme must be resolved (including by making determinations relating to such complaints) in a way that is fair, efficient, timely and independent. The Explanatory Memorandum provides that ASIC will be given powers necessary for regulatory monitoring and will be enabled to take appropriate measures to ensure disputes are resolved in a manner that is consistent with these principles[162]

•       appropriate expertise must be available to deal with complaints

•       ‘reasonable steps’ are taken to ensure compliance by members of the scheme with determinations

•       determinations made by the operator of the scheme must be binding on members of the scheme, but not binding on complainants

•       for superannuation complaints, there are no limits on:

–      the value of claims that may be made under the scheme or

–      the value of remedies that may be determined under the scheme. The Bill provides a clarificatory note to the effect that this is subject to Division 3 of proposed Part 7.10A, which has additional provisions relating to determinations about superannuation complaints. These qualifications reflect the large sums of money and complexity often involved in superannuation complaints.

Comment

In relation to the operational requirement that there be ‘appropriate expertise’ to deal with both superannuation and non-superannuation complaints, the ALA has suggested that the ‘availability of independent experts who have the confidence of both parties’ would better facilitate the timely and effective resolution of a dispute. In practical terms the ALA suggests an amendment to the Bill ‘to require AFCA to consult the parties to a complaint and take into account their preferences as to the nature and even identity of the expert(s) to be engaged’.[163]

The Financial Planning Association of Australia recognises that financial disputes can involve complex issues and use of expertise is important in the proper understanding of professional practice and standards. Accordingly it recommends a change to the drafting of proposed paragraph 1051(4)(c) from a requirement that ‘appropriate expertise should be available to deal with complaints’ to ‘appropriate expertise is used to deal with complaints’. The Association argues that this change would ‘focus attention on expected performance rather than mere capability’.[164]

The Australian Small Business and Family Enterprise Ombudsman believes the drafting of the requirement for AFCA to take ‘reasonable steps’ to ensure compliance by members of the scheme with the determinations, is unsatisfactory given that consumers and small businesses cannot afford to go to court. [165] As already mentioned, this potential shortcoming has also been identified by ALA.[166] It has been suggested that as a starting point, there should be an enforceable time limit for determinations to be actioned.[167]

The compliance requirements set out in proposed subsection 1051(5) are:

•       the operator is under an obligation to ensure compliance in relation to the following:

–      conditions of the authorisation of the EDR scheme specified by the Minister

–      regulatory requirements issued by ASIC under proposed section 1052A

–      directions by ASIC under proposed sections 1052B or 1052C

–      requirements to refer certain matters to appropriate authorities under proposed section 1052E

•       material changes to the scheme are not to be made without the approval of ASIC under proposed section 1052D.

General considerations

Proposed section 1051A specifies the general considerations that the Minister must take into account when considering the authorisation of the EDR scheme. These are the accessibility, fairness, independence, accountability, efficiency and effectiveness of the scheme.

The Bill itself contains no further articulation of what factors may inform these considerations under proposed section 1051A. Instead, some guidance is offered by the Explanatory Memorandum which states, for example:

When considering whether the EDR scheme is ‘accessible’, the Minister may consider matters such as:

•        whether the scheme will make it easy for consumers and small businesses to lodge a complaint;

•        whether the scheme will be actively promoted to ensure that consumers and small businesses are aware of the scheme’s existence; and

•       whether the [terms of reference] for the scheme sets out the types of complaints that can be considered by the scheme.

When considering whether the EDR scheme is ‘independent’, the Minister may consider matters such as:

•        whether the decision-making will be independent; and

•       whether there will be sufficient funding for the scheme

When considering whether the EDR scheme is ‘fair’, the Minister may consider matters such as whether the complaints handling procedures of the scheme will accord with the principles of natural justice and industry best practice.[168]

It is unclear as to why such helpful guidance has not been included in the actual Bill.[169]

Division 2—Regulating the AFCA scheme

ASIC will be in charge of ongoing oversight of AFCA, making certain that AFCA satisfies the standards set out in the legislation. Accordingly, this Division of proposed Part 7.10A sets out ASIC’s powers in regulating the AFCA scheme and AFCA’s reporting obligations to relevant authorities, as well as providing ASIC with a general directions power to compel AFCA to comply with standards in the legislation and in regulatory requirements.

Proposed section 1052 provides that AFCA must ensure that the mandatory requirements for the AFCA scheme under section 1051 are complied with.

Proposed section 1052A provides that ASIC may, by legislative instrument, issue to AFCA regulatory requirements relating to compliance with the mandatory requirements or any of the general considerations for the AFCA scheme. The Explanatory Memorandum states that this provision is intended to have ‘a broad application so that ASIC has the flexibility to determine the requirements that AFCA must comply with in order to effectively comply with the mandatory requirements and the general conditions.’[170] Furthermore, ‘ASIC may issue and update the regulatory requirements at any time.’[171]

ASIC will also be given the power to issue directions to AFCA requiring it to increase prospectively monetary limits for the value of claims or remedies (proposed section 1052B).

Comment

Concern has been raised that the increased monetary limits and compensation caps could have a flow-on effect on the cost of professional indemnity insurance premiums. This may give larger banks and insurers a competitive advantage over smaller financial firms.[172]

ASIC’s general directions power

Where ASIC considers that AFCA has not done all things reasonably practicable to ensure compliance with the mandatory requirements of the scheme, a condition of the authorisation of the AFCA scheme imposed by the Minister, or regulatory requirements issued under proposed section 1052A.

Proposed section 1052C gives ASIC a general directions power to give AFCA written notice of its intention to give a specified direction. That notice must set out specific measures that the direction will require AFCA to take to comply with the requirements or condition and provide reasons for the notice of intention to issue a direction (proposed subsections 1052C(1) and (2)). If, after receiving the notice, AFCA does not take the specified measures, ASIC may give the direction if it is still considered appropriate to do so (proposed subsection 1052C(3)). This general directions power is aimed at ensuring compliance with the requirements or conditions of the AFCA scheme. AFCA may vary or revoke such a general direction (proposed subsections 1052C(8) to (10)).

Time to comply and compliance with a general direction

ASIC’s direction to AFCA must state the time by which, or the period during which, that direction is to be complied with. The time or period must be reasonable (proposed subsection 1052C(4)).

The direction issued by ASIC is not a legislative instrument and if AFCA fails to comply with the direction, ASIC may apply to a court for an order that AFCA comply with the written direction (proposed subsections 1052C(5) and (7)).

Failure to comply with a direction may also result in the Minister revoking the authorisation of the AFCA scheme (proposed subsection 1052C(6)).

ASIC’s approval of ‘material’ changes to the AFCA scheme

A key mandatory requirement of the AFCA scheme is that a material change must not be made to the scheme without ASIC’s approval (proposed paragraph 1051(5)(b)). AFCA may request ASIC to approve a material change to the AFCA scheme and ASIC may approve such changes by providing a written notice to AFCA (proposed subsections 1052D(1) and (2)).

In considering whether to approve the change, ASIC must take into account the mandatory requirements and the general considerations for the scheme, and any other conditions imposed by the Minister on the authorisation of the scheme (proposed subsection 1052D(3).

Referring matters to appropriate authorities

Proposed subsection 1052E(1) provides that if AFCA becomes aware, in connection with a complaint under the AFCA scheme, that

•       a serious contravention of any law may have occurred

•       a contravention of the governing rules of a regulated superannuation fund or an approved deposit fund may have occurred

•       a breach of the terms and conditions relating to an annuity policy, a life policy or an RSA may have occurred or

•       a party to the complaint may have refused or failed to give effect to a determination made by AFCA.

AFCA must give particulars of the contravention to ASIC, APRA and/or the Commissioner of Taxation, as appropriate. In similar circumstances as those outlined above, where a complaint relates to the scheme provided for by the Australian Defence Force Cover Act 2015, such particulars must be provided to the Ministers administering that Act and the Public Governance, Performance and Accountability Act 2013 (proposed subsections 1052E(1) and (2)).

If a complaint made under the AFCA scheme is settled between the parties, AFCA may also give the particulars of the settlement to APRA, ASIC and/or the Commissioner of Taxation if AFCA believes that the settlement requires further investigation by any of these agencies. If AFCA considers there is a systemic issue arising from the consideration of complaints under the AFCA scheme, AFCA must give particulars of the issue to one or more of APRA, ASIC or the Commissioner of Taxation, as appropriate (proposed subsections 1052E(4)).

Division 3—Additional provisions relating to the resolution of superannuation complaints

This Division sets out additional provisions required to resolve uniquely complex superannuation complaints, in addition to imposing secrecy obligations on the part of AFCA staff in relation to information obtained under these provisions.

Superannuation complaints

As superannuation complaints will transition from a tribunal structure to an ombudsman-type scheme, key features of the existing complaints handling model, including the requirements for handling death benefit complaints (with time limits), the decision-making test and the unlimited monetary jurisdiction are basically reproduced in this Bill. This reflects the particular nature of and requirements for appropriately handling such complaints, in addition to the need for certainty to be given to stakeholders. Including additional provisions in relation to superannuation complaints will ensure that AFCA is established with the required processes in place to properly handle these types of disputes.

When complaints relating to superannuation can be made under the AFCA scheme

Proposed section 1053 provides that, subject to section 1056[173] under the AFCA scheme, a person can make a complaint relating to superannuation only if the complaint relates to one of the specified decisions or types of conduct and the complainant alleges that the decision or conduct was unfair or unreasonable. Examples of the types of decisions or conduct enumerated under proposed section 1053 are:

•       a complaint that the trustee of a regulated superannuation fund or of an approved deposit fund has made a decision in relation to a particular member or former member, or a particular beneficiary or former beneficiary, of the fund

•       a complaint relating to decision, by a trustee maintaining a life policy that covers a member of a life policy fund, to admit the member to the fund

•       a complaint relating to the conduct (including an act or omission) of an insurer or a representative of an insurer in relation to the sale of an annuity policy

•       a complaint relating to the conduct (including an act or omission) of an RSA provider or a representative of an RSA provider in relation to opening an RSA.

Specific additional powers relating to superannuation complaints

The Bill provides for the following specific additional powers that will apply in relation to superannuation complaints:

Joining other parties to a superannuation complaint

Proposed subsection 1054(1) generally gives AFCA the power to join any of the following parties to a superannuation complaint:

•       a person who has applied to become a party to the complaint

•       a trustee of a regulated superannuation fund or an approved deposit fund

•       an insurer

•       an RSA provider

•       a superannuation provider and

•       a person responsible for determining either or both the existence and extent of a person’s disability.

Power to obtain information and documents

Proposed subsection 1054A(1) provides that if AFCA has reason to believe that a person is capable of giving information or producing documents relevant to a superannuation complaint, AFCA may, by written notice, require the person to give such information, or produce such documents at a specified date and time. If the person fails to comply they commit an offence (of strict liability) and will be liable to a maximum penalty of 30 penalty units, unless they have a reasonable excuse (subsections 1054A(3), (4) and (5)).[174]

Comment

The SBFEO considers that power to obtain relevant information is critical to the proper assessment and handling of superannuation complaints. However, it notes that this power to obtain information and documents does not similarly exist for non-superannuation complaints. The SBFEO points out that the ability to obtain information and documents exists under current arrangements, and the inclusion of such an explicit power in the Bill would provide the necessary certainty as to the EDR’s ability to obtain information in a dispute.[175]

Power to require attendance at conciliation conferences

If AFCA thinks it desirable to do so, it may give notice in writing to each party to a superannuation complaint and any other person who AFCA believes is likely to be able to provide information relevant to the settlement of the complaint or whose presence at a conciliation conference would, in AFCA’s opinion, be likely to be conducive to settling the complaint, to require the party or other person to attend the conference (proposed subsection 1054B(1)).

If the complainant fails to attend the conference, AFCA may deal with the complaint as if it had been withdrawn by the complainant (proposed subsection 1054B(3)). A person (other than the complainant) commits an offence if he or she does not attend a conference when required to do so, and will be liable to a maximum penalty of 30 penalty units (proposed subsection 1054B(4)).[176]

Placing matters before the Federal Court

Proposed subsection 1054C(1) provides that AFCA may, on its own initiative or on the request of a party in relation to a superannuation complaint, refer a question of law arising in relation to the making of a determination relating to the complaint to the Federal Court for decision.

When superannuation complaints relating to death benefits cannot be made under the AFCA scheme

Proposed section 1056 provides that a person cannot make a complaint in relation to a decision about the payment of a death benefit in the following circumstances:

•       the person does not have an interest in the payment of a death benefit

•       the person received notice that the decision-maker proposed to make the decision and that the person may object within 28 days of receiving that notice, and the person did not object in writing within that time period

•       the person received notice of the decision-maker’s final decision relating to the payment of a death benefit, and that notice specified that the person must make a complaint to AFCA within the period of 28 days after receiving notice, the person did not make the complaint within that 28 day period.

Thus, a person who received a notice of the decision-maker’s proposed decision and notice of the final decision cannot make a complaint to AFCA unless two limbs are satisfied:

•       the person objected to the proposed decision within 28 days after receiving the notice and

•       the person made a superannuation complaint about the final decision to AFCA within 28 days after receiving the notice.

The Explanatory Memorandum states that the 28 day limitation period is designed to provide ‘the death benefit decision-maker and the beneficiaries with a degree of certainty about the final decision to pay the death benefit’.[177]

However, the ALA has suggested that the 28 day limitation period may be insufficient ‘time for the consumer to engage a legal representative, enable that representative enough time to consider the available evidence and take instructions on matters which may have been longstanding and complex and then prepare and issue appeal proceedings’.[178] ALA proposed an amendment recommending the appeal period be extended to at least 35 days.[179]

Proposed subsection 1057(1) provides that a party to a superannuation complaint may appeal to the Federal Court, on a question of law, from AFCA’s determination of the complaint.

Determinations of superannuation complaints

In making a determination in relation to a superannuation complaint, AFCA will generally have all the powers, obligations and discretions conferred on the trustee, insurer, RSA provider or other decision-maker who made the original decision or engaged in conduct to which the superannuation complaint relates (proposed subsection 1055(1)). The Explanatory Memorandum states that ‘this is consistent with the current powers of the SCT’.[180]

Affirming decisions or conduct

AFCA must affirm a decision or conduct (except a decision relating to the payment of a death benefit) if AFCA is satisfied that the decision, in its operation in relation to the complainant, or the conduct was fair and reasonable in all the circumstances (proposed subsection 1055(2)).

AFCA must affirm a decision relating to the payment of a death benefit if AFCA is satisfied that the decision, in its operation in relation to the complainant and any other person joined under subsection 1056A(3) as a party to the complaint, was fair and reasonable in all the circumstances (proposed subsection 1055(3)).

AFCA may also make a determination which varies the original decision, or sets aside the decision and substitutes a new decision. It may also set aside the original decision and remit the decision back to the original decision-maker with directions (proposed subsections 1055(4) and (5) and paragraphs 1055(6)(a) and (b)).

Limitations on determinations

AFCA must not make a determination of a superannuation complaint that would be contrary to law, the governing rules of a regulated superannuation fund or approved deposit fund, or the terms and conditions of the annuity policy, contract of insurance or RSA to which the complaint relates (proposed subsection 1055(7)).

Comment

The SCT has noted and clarified that while proposed section 1055 broadly provides for the same powers when making a determination as those currently available to the SCT, it does not replicate section 37A of the Superannuation (Resolution of Complaints) Act 1993. Significantly, section 37A ‘provides a power to cancel the membership of a life policy fund if the SCT finds the conduct relation to the selling of that fund was unfair or unreasonable’.[181]

Written reasons for determinations

Proposed section 1055A imposes a mandatory requirement on AFCA to provide written reasons for its determination of a superannuation complaint.

Secrecy

Proposed Subdivision F of Division 3 of new Part 7.10A contains a number of secrecy provisions. All personal information provided to AFCA will be subject to the Privacy Act 1988, which regulates how personal information is handled.[182]

As already mentioned, AFCA will be given statutory powers that can be used to compulsorily obtain information in relation to a superannuation complaint. Subject to specified exceptions, the secrecy provisions make it an offence to disclose or make records of information, or produce or permit access to documents, compulsorily acquired by an AFCA staff member under proposed section 1054A in connection with a superannuation complaint or obtained during a conciliation conference (proposed section 1058).

Part 2—Amendments applying once the first authorisation of an external dispute resolution scheme comes into force

The key amendment under this part is item 11, which provides that the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) will not apply to decisions or determinations made by AFCA in relation to superannuation disputes.

The Explanatory Memorandum states:

As is the case for determinations made by ASIC approved industry schemes, the Administrative Decisions (Judicial Review) Act 1977 will not apply to determinations by AFCA in relation to financial disputes (non-superannuation financial disputes). This is because those determinations would not be made under an enactment.[183]

The SCT, CPSU, FSU and the Australian Institute of Superannuation Trustees have expressed concern about the loss of appeal rights for parties by this amendment to the ADJR Act to remove ‘the right for an effected person to appeal a decision exercising a statutory power.’[184]

Schedule 2—Internal dispute resolution

Under the existing laws, financial and credit service firms, superannuation funds and approved deposit funds are required to have an internal dispute resolution (IDR) scheme which complies with ASIC standards and requirements. Retirements Savings Accounts providers face similar requirements under section 47 of the Retirement Savings Accounts Act 1997 (RSA Act).[185] IDR is the first and the primary avenue for aggrieved consumers to seek resolution of their complaint and a gateway to EDR.[186] The Ramsay Review was asked to provide recommendations on:

the role, powers, governance and funding arrangements of the dispute resolution and complaints framework in providing effective complaints handling processes for users, including linkages with internal dispute resolution [emphasis added].[187]

The Ramsay Review made the following findings which have informed the proposed amendments under Schedule 2.

No comprehensive, consistent, comparable, publicly available IDR data.

Data on IDR outcomes is limited and inconsistent, which means that it is difficult to determine the effectiveness of IDR and whether it is leading to improved consumer outcomes over time.[188]

ASIC does not have the power to collect recurring data about financial firms’ IDR activities. Firms are not currently required to report this information externally unless they subscribe to an industry code of practice.[189]

There is no public reporting of complaints dealt with by superannuation funds at IDR.[190]

To address this situation:

The Panel’s draft recommendation was to require financial firms to publish information and report to ASIC on their IDR activity, with ASIC having the power to determine the content and format of IDR reporting.[191]

Informed by the Ramsay Review findings and recommendation, Schedule 2 proposes amendments to the ASIC Act, Corporations Act, National Consumer Credit Protection Act 2009, RSA Act and the SIS Act, to create an enhanced IDR framework by inserting provisions with requirements for improving transparency and accountability of firms' IDR practices. The amendments also provides for ASIC to publish IDR data, including firm-level data that identifies firms. The Explanatory Memorandum provides that ‘this will allow ASIC to improve transparency about the performance of financial firms in relation to their IDR activities.’[192]

IDR Firms subject to IDR Enhanced Framework

‘IDR firms’ are all financial firms that are required to participate in the enhanced IDR framework. Where a firm is an AFS licensee, product issuer for the purposes of section 1017G of the Corporations Act or an Australian credit licensee, generally the enhanced framework will apply (items 2, 4 and 5 of Schedule 2). Trustees of regulated superannuation funds or approved deposit funds and RSA providers are required to be part of the new IDR framework (items 6 to 9). Furthermore, it is a requirement that each trustee of a regulated superannuation fund other than a self -managed superannuation fund, or of an approved deposit fund, and RSA providers have an IDR procedure that complies with the standards and requirements mentioned in subparagraph 912A(2)(a)(i) of the Corporations Act in relation to financial services licensees (items 7 and 9 of Schedule 2, proposed paragraph 47(1)(b) of the RSA Act and proposed paragraph 101(1)(b) of the SIS Act).

IDR reporting requirements

As part of the enhanced requirements, IDR firms will be required to provide ASIC with any information specified in an ASIC legislative instrument relating to the operation of the firm’s IDR procedures (items 2, 4, 5, 7 and 9 of Schedule 2).

As already indicated, ASIC will be given the power to specify, by way of legislative instrument, the information that IDR firms must provide about their IDR procedures and the operation of those procedures. However, ASIC cannot require IDR firms to include in their reports, ‘personal information’ within the meaning of the Privacy Act (item 3).

ASIC may publish internal dispute resolution data

Proposed section 243C of the ASIC Act, at item 1 of Schedule 2, provides that ASIC may publish information relating to IDR, including information that is derived from such data.

Requirements for certain trustees and RSA providers to provide written reasons for decisions in relation to complaints

Currently, section 101 of the SIS Act imposes a requirement on the trustees of regulated superannuation funds (other than SMSFs) and approved deposit funds to give written reasons for decisions they make in response to complaints made by beneficiaries, former beneficiaries and other interested parties. Item 9 of Schedule 2 repeals these requirements in section 101 of the SIS Act and replaces them with amendments that empower ASIC to specify requirements about providing reasons for IDR decisions in a legislative instrument (proposed subsections 101(1), (1A) and (1B) of the SIS Act). Item 7 makes a similar amendment in relation to RSA providers (proposed subsections 47(1), (2) and (2A) of the RSA Act).

Schedule 3—Repeal of the Superannuation (Resolution of Complaints) Act 1993

Part 1 of Schedule 3 to the Bill contains one item which repeals the whole of the Superannuation (Resolution of Complaints) Act 1993. That Act provides the basis for the establishment and function of the SCT as an independent statutory body, with functions of providing for the conciliation of complaints and for the fair, economical, informal and quick review of the decisions of trustees, if required.[193] This body is being abolished and replaced by AFCA.

Part 2 of Schedule 3 makes a number of necessary consequential amendments to give legal and practical effect to the repeal made by item 1.

The proposed amendments in Schedule 3 commence on a day to be fixed by proclamation. However, if a day has not been fixed by proclamation within a period of four years, the repeal will automatically commence four years after the day of Royal Assent (Item 8 of commencement table at clause 2 of the Bill). According to the Explanatory Memorandum, the purpose of a transitional period of up to four years is to enable:

the SCT to finalise any complaints it has received before the day when it cannot receive new complaints. This will include dealing with any complaints which are remitted back to the SCT from the Federal Court during this period of time.[194]

Comment

The SCT acknowledges that time is needed for AFCA to become operational and the corresponding wind-up of the SCT. However, the SCT states:

the 2017-18 budget did not provide resourcing to enable the SCT to resolve existing complaints by 30 June 2020. Based on current resource levels and complaint volumes it is estimated that if AFCA receives complaints from 1 July 2018, open complaints at the SCT will not be finalised until December 2022.[195]

Item 32 of Schedule 3 provides that the repeal of the Superannuation (Resolution of Complaints) Act by Part 1 of Schedule 3 does not affect a determination made under that Act before the commencement of that Part. This is intended to provide certainty in relation to those determinations made by the SCT, which will ‘continue to have the same legal status and apply as if the amendments under Part 2 of Schedule 3 to this Bill had not been made’. [196]

Right to a fair trial

The Explanatory Memorandum seeks to clarify that the proposed repeal of the Superannuation (Resolution of Complaints) Act and the consequent abolition of the SCT, is not intended to impact on the right to a fair trial for persons with a superannuation complaint.[197] The proposed amendments to Schedule 1 of the Bill are intended to safeguard this right in the following way. It is proposed that the power of the Minister to authorise an EDR scheme is subject to a requirement that in doing so, the Minister must take into account, among other things, whether the EDR scheme will operate as an accessible, fair, independent, accountable and efficient scheme (proposed subsection 1051(4)).

Indeed, as the Explanatory Memorandum points out:

the requirement to provide fair, efficient, timely and independent dispute resolution is an ongoing requirement that AFCA must comply with. Where AFCA does not satisfy this requirement, ASIC has a general directions power that can be used to compel compliance.[198]

The SCT, as a statutory body, will continue operation for up to an additional four years to resolve all legacy complaints. The legislation also makes provision to allow FOS and CIO to continue operations for up to an additional 12 months to resolve legacy complaints.

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[1].              The Ramsay Review refers to the independent review by Professor Ian Ramsay of the financial system’s external dispute resolution and complaints framework announced on 5 May 2016, by the Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer. See K O’Dwyer (Minister for Small Business and Assistant Treasurer), New independent expert panel, media release, 5 May 2016.

[2].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 3.

[3].              “APRA is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies, and most of the superannuation industry. Its mandate is also to develop prudential policies that balance financial safety and efficiency, competition, contestability and competitive neutrality”. APRA, ‘About APRA’, APRA website.

[4].              Reserve Bank of Australia, ‘Australia's financial regulatory framework’, Reserve Bank of Australia website.

[5].              Financial Ombudsman Service Australia (FOS), Annual Review, FOS website, 2017.

[6].              Credit and Investments Ombudsman, ‘Annual report on operations 2017’, CIO website, 2017.

[7].              FOS, ‘Dispute resolution process in detail: Decision’, FOS website.

[8].              FOS, ‘What we do’, FOS website.

[9].              Section 911A of the Corporations Act 2001.

[10].              Corporations Act 2001, section 766A.

[11].              ASIC, ‘RG 165 Licensing: internal and external dispute resolution’, 2 July 2015.

[12].              See ASIC’s ‘Regulatory guide’ RG-165.87–RG-165.102 for further information on this requirement.

[13].              Ibid.

[14].              FOS, ‘About us’, FOS website.

[15].              FOS, Terms of reference, FOS website, 1 January 2010 (as amended 1 January 2015); FOS, ‘How FOS applies the monetary limit and compensation caps to claims’, FOS website, 2012.

[16].              FOS, Terms of reference, op. cit., para. 5.1.

[17].              Ibid., para. 7.1.

[18].              Ibid., para. 9.

[19].              Ibid., para. 9.2; M Legg, ‘A comparison of regulatory enforcement, class actions and alternative dispute resolution in compensating financial consumers’, Sydney Law Review,38(3), 2016, p. 311.

[20].              FOS, Terms of reference, op. cit., para. 8.8.

[21].              Ibid., para. 8.9.

[22].              ASIC, ‘ASIC Regulatory Guide 139: Approval and oversight of external complaints resolution schemes’, ASIC website, 13 June 2013.

[23].              Ibid., para. 11.2.

[24].              FOS, Annual Review, op. cit.

[25].              S Letts, ‘Financial Services Ombudsman complaints surge driven by insurance and credit card disputes’, ABC News, 5 October 2017.

[26].              Ibid.

[27].              Credit and Investments Ombudsman (CIO), ‘About CIO’, CIO website.

[28].              CIO, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 15], p. 7.

[29].              Ibid.

[30].              Superannuation Complaints Tribunal (SCT), ‘About the Tribunal’, SCT website.

[31].              Industry Super Australia (ISA), Submission to Treasury, Review of the Financial System External Dispute Resolution Framework, 7 October 2016, pp. 2–3.

[32].              In June 2014, a Senate inquiry into the performance as ASIC, which included a case study examination of practices of Commonwealth Financial Planning Limited (CFPL), part of the Commonwealth Bank of Australia Group (CBA), found that the CBA was involved in malfeasance resulting in thousands of customers experiencing significant financial loss, and recommended the Government ‘establish an independent inquiry, possibly in the form of a judicial inquiry or Royal Commission’ into the matters uncovered and raised by the inquiry in relation to the CFPL and CBA. See Senate Economic References Committee, Final report, Performance of the Australian Securities and Investments Commission, The Senate, Canberra, 26 June 2014, recommendation 7, pp. xx and 179.; S Ferguson, ‘Money for nothing’, Four Corners, ABC, 7 March 2016; A Ferguson, ‘ASIC to investigate Commlnsure’, The Australian Financial Review, 7 March 2016, p. 40; Parliamentary Joint Committee on Corporations and Financial Services, Report, Inquiry into the Impairment of Customer Loans, Parliament House, Canberra, 4 May 2016, p. xi; P McConnell, ‘War on banking’s rotten culture must include regulators’, The Conversation, 4 June 2015.

[33].              S Lane, ‘Labor takes aim at big banks, promising royal commission’, ABC1, 8 April 2016. In 2016, polling by Essential Media revealed that almost two-thirds of respondents (64%) were in favour of a royal commission into banking and financial services, see ‘Royal Commission into banking’, Essential report, 16 August 2016.

[34].              For example in the case of insurance, it has been argued that consumers may be paying too much for a ‘bloated financial sector’: See I McAuley, ‘The mounting case for a royal commission into banks and insurance companies’, New Matilda, 21 September 2016; J Owens, ‘Labor promises royal commission into the financial sector’, The Australian, 4 August 2016; B Shorten (Leader of the Opposition), C Bowen Shadow Treasurer), M Dreyfus (Shadow Attorney-General) and J Chalmers (Shadow Minister for the Arts), Labor calls on the Turnbull Liberal Government to hold a Royal Commission into misconduct in the banking and financial services industry, Press Conference, transcript, Melbourne, 8 April 2016.

[35].              Lane, ‘Labor takes aim at big banks, promising royal commission’, op. cit.; J Owens, ‘Labor promises royal commission into the financial sector’, The Australian, 8 April 2016.

[36].              B Shorten (Leader of the Opposition) et al., Royal Commission into the Banking and Financial Services Sector, op. cit.

[37].              B Katter, A Royal Commission into banks should have begun a year ago, media release, 9 April 2016.

[38].              The Australian, ‘Morrison slams Shorten’s call for royal commission into banks,’ The Australian, 8 April 2016.

[39].              S Morrison (Treasurer) and K O’Dwyer (Minister for Small Business), Turnbull Government bolsters ASIC to protect Australian consumers, joint media release, 20 April 2016.

[40].              Ibid.

[41].              Ibid.; M Grattan, ‘Morrison warns banks not to pass on new “user-pays” impost to finance ASIC reform’, The Conversation, 20 April 2016.

[42].              Insurance Business Australia, ‘ASIC calls for new “user pays” funding model’, InsuranceBussinessMag.com, 9 April 2014. In late 2013 the Australian Government announced the appointment of former CEO of the Commonwealth Bank, David Murray, to oversee a broad inquiry into the Australian financial system. The 350-page final report was released on 7 December 2014, making over 40 recommendations. The recommendation for a user-pays funding model was included in that report. See D Murray, Financial system inquiry: final report, The Treasury, November 2014, p. xxvi.

[43].              See Murray, Financial system inquiry: final report, op. cit.; J Durie, ‘User-pays model for ASIC ’, The Weekend Australian, 16 May 2015, p. 35.

[44].              See Murray, Financial system inquiry: final report, op. cit. As set out above, in late 2013 the Australian Government announced the appointment of David Murray to oversee a broad inquiry into the Australian financial system, in the aftermath of the 2008 global financial crisis. In general terms, the Murray Inquiry was charged with laying out a blueprint to foster an ‘efficient, competitive and flexible’ financial system over the next decade. The 350-page final report was released on 7 December 2014 and made 44 recommendations. Besides superannuation, there were no specific recommendations about governance. However there was a deal of discussion about the need to improve culture in financial institutions and an emphasis placed on the conduct of  organisational leaders in shaping and determining organisational culture. There was also no significant recommendations addressing the problematic issue of vertical integration - the structural flaw that has driven most of the financial planning scandals. In simple terms, the structural flaw in the financial system lies in the reality that the vast majority of Australia’s financial planners are either employed by or aligned to the big four banks and AMP. The report seemed to place some level of premium on efforts to improve culture and obligations to act in the interests of customers, as a means of mitigating the mis-selling risk that vertical integration might otherwise pose. ‘In the vertically integrated model, the institution gets fees and volume rebates from the financial planners for selling the product, and they earn money from the administration of the platform, and at the funds management level’. See A Ferguson, ‘Big banks face up to inherent flaw’, The Sydney Morning Herald, 1 September 2014.

[45].              L Sweeney and L Yabsley, ‘Malcolm Turnbull backflips on banking royal commission after big four call for inquiry to restore public faith’, ABC news, 30 November 2017.

[46].              P Coorey and J Eyers, ‘Big four bank chairmen back inquiry to end 'political uncertainty’, The Australian Financial Review, 30 November 2017; D Gonski, S Elliott, C Livingstone, I Narev, K Henry, A Thorburn, L Maxsted, and B Hartzer, Letter from Australia's leading banks to Scott Morrison [regarding a Royal Commission into the banking and finance sector], 30 November 2017.

[47].              K O’Dwyer (Minister for Small Business and Assistant Treasurer), New independent expert panel, op. cit.

[48].              J Mather, ‘PM's tribunal plans dealt blow by experts’, The Financial Review, 6 December 2016; Association of Securities and Derivatives Advisers of Australia Ltd (ASDAA), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 25 September 2017, [Submission no. 1], p. 2.

[49].              K O’Dwyer (Minister for Revenue and Financial Services), Review of external dispute resolution and complaints schemes, media release, 8 August 2016; The Treasury, ‘Review of the financial system external dispute resolution framework’, The Treasury website.

[50].              K O’Dwyer (Minister for Revenue and Financial Services), Review of external dispute resolution and complaints schemes, op. cit.; The Treasury, Review of the financial system external dispute resolution framework, Supplementary issues paper, May 2017, p. 3; J Eyers, ‘Ramsay gets more teeth for review’, The Australian Financial Review Weekend, 4 February 2017.

[51].              K O’Dwyer (Minister for Revenue and Financial Services), External dispute resolution framework issues paper released, media release, 9 September 2016; The Treasury, Review of the financial system external dispute resolution framework, Issue paper, The Treasury, 9 September 2016.

[52].              The Treasury, Review of the financial system external dispute resolution and complaints framework: interim report, The Treasury, Canberra, 6 December 2016.

[53].              The Treasury, Review of the financial system external dispute resolution framework, op. cit., p. 3.

[54].              K O’Dwyer (Minister for Revenue and Financial Services), Review of external dispute resolution and complaints schemes, op. cit.; The Treasury, Review of the financial system external dispute resolution framework, op. cit., p. 3.; Eyers, ‘Ramsay gets more teeth for review’, op. cit.

[55].              The Treasury, Review of the financial system external dispute resolution framework, op. cit., p. 3.

[56].              Ibid.

[57].              The Treasury, Review of the financial system external dispute resolution and complaints framework: final report, The Treasury, Canberra, 3 April 2017, pp. 10–11.

[58].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 59.

[59].              Senator J McGrath, ‘Second reading speech: Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017’, Senate, Debates, 14 September 2017, p. 7318.

[60].              K O’Dwyer (Minister for Revenue and Financial Services), Overhauling the dispute resolution framework, media release, 26 July 2017.

[61].              K O’Dwyer (Minister for Revenue and Financial Services), Putting consumers first – improving dispute resolution, media release, 14 September 2017.

[62].              Ibid.

[63].              Senate Standing Committee for Selection of Bills, Report, 11, 2017, The Senate, Canberra, 14 September 2017.

[64].              Senate Standing Committees on Economics, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, The Senate, Canberra, 17 October 2017.

[65].              Ibid., p. 25.

[66].              Ibid.

[67].              Ibid., p. 27.

[68].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 12, 2017, The Senate, 18 October 2017, p. 63.

[69].              Senate Standing Committee for the Scrutiny of Bills, ‘Ministerial responses’, Scrutiny digest, 13, 2017, The Senate, 5 November 2017, pp. 145–159.

[70].              Ibid., p. 146.

[71].              Ibid.

[72].              Ibid.

[73].              Senate Standing Committee for Selection of Bills, Report, 11, 2017, op. cit., pp. 64–5.

[74].              Attorney-General's Department, A guide to framing Commonwealth offences, infringement notices and enforcement powers, September 2011, pp. 22–5.

[75].              Senate Standing Committee for the Scrutiny of Bills, ‘Ministerial responses’, Scrutiny digest, 13, 2017, The Senate, 5 November 2017, pp. 147–8.

[76].              Ibid., p. 150.

[77].              Senate Standing Committee for Selection of Bills, Report, 11, 2017, op. cit., pp. 65–6.

[78].              Senate Standing Committee for the Scrutiny of Bills, ‘Ministerial responses’, Scrutiny digest, 13, 2017, op. cit., pp. 152–3.

[79].              Ibid.

[80].              Ibid., p. 154.

[81].              Senate Standing Committee for Selection of Bills, Report, 11, 2017, op. cit., pp. 66–7.

[82].              Senate Standing Committee for the Scrutiny of Bills, ‘Ministerial responses’, Scrutiny digest, 13, 2017, op. cit., p. 155.

[83].              Ibid., p. 155–6.

[84].              Ibid., p. 155.

[85].              Ibid., p. 156.

[86].              Subsection 47(3) of the Retirement Savings Accounts Act 1997 and subsection 101(2) of the Superannuation Industry (Supervision) Act 1993 set out the relevant offences. Section 4AA of the Crimes Act 1914 provides that a penalty unit is currently equal to $210.

[87].              Senate Standing Committee for Selection of Bills, Report, 11, 2017, op. cit., pp. 67–8.

[88].              Senate Standing Committee for the Scrutiny of Bills, ‘Ministerial responses’, Scrutiny digest, 13, 2017, op. cit., pp. 158–9.

[89].              Ibid., p. 159.

[90].              Ibid.

[91].              Senate Standing Committees on Economics, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 28.

[92].              Ibid., p. 27.

[93].              Ibid., p. 28.

[94].              Ibid., p. 30.

[95].              Senate Standing Committees on Economics, Submissions, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, The Senate, Canberra.

[96].              ASIC, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishing of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 2], p. 2.

[97].              Ibid.

[98].              Ibid.

[99].              Ibid.

[100].              Credit and Investments Ombudsman Ltd (CIO), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 15], p. 13.

[101].              Australian Bankers’ Association, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 13], pp. 1, 3.

[102].              Financial Ombudsman Service Australia (FOS), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 7], p. 4; SMSF Association, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 31]; Westpac, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 10], p. 1.

[103].              Financial Ombudsman Service Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., pp. 6-7.

[104].              Australian Lawyers Alliance, Submission to Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 17], p. 5.

[105].              Ibid., p. 6.

[106].              Ibid.

[107].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 62.

[108].              Australian Lawyers Alliance, Submission to Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 7.

[109].              Ibid.

[110].              Ibid., p. 8.

[111].              Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Submission to Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 26], p. 1.

[112].              Ibid.

[113].              Ibid.

[114].              Ibid., p.2.

[115].              Consumer Action Law Centre and others, Submission to the Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [submission no. 9], pp. 4–9. In contrast to this view, ASIC’s own submission to the Ramsay Review recognised that there was a lack of evidence of consumers being ‘shopped around schemes or potentially never getting to the scheme that can help them’. See Australian Securities and Investments Commission, Submission to the Review of the financial system external dispute resolution framework, Issues paper, October 2016, p. 41; ASIC, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 2].

[116].              Consumer Action Law Centre and others, Submission to the Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., pp. 4–9.

[117].              Council for Small Business Australia, Submission to the Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017 [submission no.24], p. 1.

[118].              Insurance Council of Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 19] p. 1.

[119].              Ibid., p. 2.

[120].              Financial Services Council, Attachment 1 to Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 14 June 2017, [Submission no. 20] p. 2.

[121].              ASFA, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 21] p. 3.

[122].              Ibid.

[123].              Ibid.

[124].              Mortgage and Finance Association of Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 5], pp. 2–3; Australian Collectors and Debt Buyers Association, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 3], p. 5; Association of Securities and Derivatives Advisers of Australia (ASDAA), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 2; Commercial Asset Finance Brokers Association of Australia (CAFBA), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 22], p. 2; National Insurance Brokers Association, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 18], p. 2.

[125].              CIO, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 15] p. 2.

[126].              Ibid.

[127].              Ibid., p. 5.

[128].              Ibid., p. 3.

[129].              Ibid.

[130].              Ibid., p. 4.

[131].              Ibid., p. 23.

[132].              CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 2 October 2017, [Submission no. 25] p. 2; CIO, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., pp. 7–8; ACTU, Submission to Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 29], p. 1; Financial Sector Union, Submission to the Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 3 October 2017 [submission no. 12], p. 1.

[133].              CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 2.

[134].              Ibid.

[135].              Ibid

[136].              Ibid.

[137].              Ibid; CIO, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 1.

[138].              Financial Sector Union, Submission to the Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 2; Australian Institute of Superannuation Trustees, Submission to Senate Economics and Legislation Committee, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 6], p. 3.

[139].              Financial Sector Union, Submission to the Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 1.

[140].              Ibid.

[141].              CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 3.

[142].              Ibid., p. 2; Financial Sector Union, Submission to the Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 1.

[143].              CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p.3; ACTU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 2; Association of Superannuation Funds of Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 21], p. 4.

[144].              CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p.3.

[145].              Ibid., p. 4.

[146].              Association of Superannuation Funds of Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, op. cit., p. 6.

[147].              Superannuation Complaints Tribunal, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 14], p. 7.

[148].              Ibid.

[149].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 3.

[150].              Ibid.

[151].              The Statement of Compatibility with Human Rights can be found at pp. 57–8 of the Explanatory Memorandum to the Bill.

[152].              Parliamentary Joint Committee on Human Rights, Report, 11, 2017, The Senate, 17 October 2017, p. 60.

[153].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 65–6.

[154].              ANZ, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First–Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 30], p. 2.

[155].              Since 1998, ASIC has played a lead role in setting and applying standards in the financial services EDR sector. In its submission to the Senate Inquiry into this Bill, ASIC pointed out that currently, ASIC has ‘the legislative power to approve and oversee the operation of industry-based EDR schemes (dealing with all non-superannuation related consumer disputes) and key mandatory reforms that were initiated by ASIC during this period include:

•        requiring schemes to operate independently of the industry sectors that funded them

•        introducing a requirement that approved schemes, identify, deal with and report systemic issues  and serious misconduct to the regulator and

•        formalising the requirement to hold reviews on a regular basis’.

ASIC, Submission to Senate Selection of Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 7], p. 1.

[156].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 16.

[157].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p.17.

[158].              ANZ, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 30], p. 2; Australian Bankers Association, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, September 2017, [Submission no. 13], p. 3.

[159].              ASIC, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 3.

[160].              ANZ, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 3.

[161].              Australian Institute of Superannuation Trustees, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 6,] p. 3.

[162].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 18.

[163].              Australian Lawyers Alliance, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 9.

[164].              Financial Planning Association of Australia, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 8], p. 1.

[165].              Australian Small Business and Family Enterprise Ombudsman, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 26], pp. 2–3.

[166].              Australian Lawyers Alliance, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit.

[167].              Australian Small Business and Family Enterprise Ombudsman, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First —Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., pp. 2–3.

[168].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 18.

[169].              Section 15AB of the Acts Interpretation Act 1901 (Cth) provides for the use of extrinsic material in the interpretation of an Act (to confirm where a provision is ambiguous or obscure) so that use may be made of the explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted.

[170].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 21.

[171].              Ibid., p. 22.

[172].              Credit and Investments Ombudsman Ltd (CIO), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, op. cit., p. 4.

[173].              Proposed section 1056 provides further limitations on when a superannuation complaint may be made to AFCA in relation to a decision about the payment of a death benefit.

[174].              Section 4AA of the Crimes Act 1914 provides that a penalty unit is currently equal to $210. This means the maximum penalty is currently $6,300.

[175].              Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 26], p. 3.

[176].              Section 4AA of the Crimes Act 1914 provides that a penalty unit is currently equal to $210. This means the maximum penalty is currently $6,300.

[177].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 38.

[178].              Australian Lawyers Alliance, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First —Establishment of the Australian Financial Complaints Authority) Bill 2017, 28 September 2017, [Submission no. 17], p. 8.

[179].              Ibid.

[180].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 33.

[181].              Superannuation Complaints Tribunal, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 14], p. 7.

[182].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 42.

[183].              Ibid., p. 44.

[184].              Superannuation Complaints Tribunal, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 14] p. 7; Financial Sector Union, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 12] p. 1; CPSU, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 2 October 2017, [Submission no. 25], pp. 2–3; Australian Institute of Superannuation Trustees, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 6], p. 9.

[185].              Section 47 of the RSA Act imposes a duty on RSA account providers to establish arrangements for dealing with inquiries or complaints by holders, or former holders, of an RSA, or the executor or administrator of the estate of a former holder of an RSA.

[186].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 49; Ramsay Review, Final report, op cit., p. 185.

[187].              The Treasury, ‘Terms of reference: Ramsay review’, 5 May 2016.

[188].              The Treasury, Review of the financial system external dispute resolution and complaints framework: final report, op. cit., p. 187.

[189].              Ibid., p. 186.

[190].              Ibid.

[191].              Ibid., p. 187.

[192].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 3.

[193].              Section 11, Superannuation (Resolution of Complaints) Act 1993.

[194].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 47.

[195].              Superannuation Complaints Tribunal, Submission to Senate Standing Committees on Economics, Inquiry into the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, 29 September 2017, [Submission no. 14], p. 2.

[196].              Explanatory Memorandum, Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, p. 48.

[197].              Ibid., p. 58.

[198].              Ibid.