Compliance

The AFCA complaints process and restrictions on financial firms

BY   |  FRIDAY, 9 FEB 2024    8:00AM

There is no doubt the current economic climate is precarious. Continuing mortgage stress and cost-of-living pressures caused by the Reserve Bank of Australia's (RBA) series of rate increases is likely to result in more complaints being lodged with the Australian Financial Complaints Authority (AFCA) against financial firms, particularly in the lending industry.

This makes it even more important for financial firms to understand the scope and power of AFCA and what steps need to be taken when a complaint is lodged with it.

In the second part of this series, Demystifying AFCA, we examine the role of AFCA, the complaints process and the powers and remedies available to AFCA. In this paper, we examine the complaints process and explore the restrictions placed on financial firms during the complaint period.

The complaints process

Once an AFCA complaint has been lodged the details will be forwarded to the financial firm. This generally occurs within one to two business days of the complaint being lodged. The notification will include details of the complainant, a short summary of the issues raised, and the remedy sought.

Ordinarily, AFCA will give the financial firm a timeframe to either resolve the complaint with the complainant directly or provide its submissions. This is known as the 'refer-back period.' The refer-back period is typically between 21 to 90 days depending on the type of complaint.

In some rare circumstances, AFCA will proceed to immediately investigate a complaint without allowing for the refer-back period. This is typically only deployed when there is an immediate risk to a complainant, that is, where a lender has obtained judgment and is looking to immediately enforce its judgment by taking possession of or selling a security property.

If the complaint has not been resolved at the end of the refer-back period, then AFCA will encourage parties to resolve the matter by participating in a conciliation conference. If this fails, then the next stage of the complaints process will be enlivened. For example, AFCA may provide a preliminary assessment of the complaint.

This may be accompanied by a recommendation as to how the parties should resolve the matter. In some limited circumstances, AFCA may determine the complaint without the parties attending a conciliation conference.

It is important for complainants to understand that AFCA can assist with a broad range of financial problems and may be able to assist if there is an allegation a financial firm has acted unfairly in some circumstances.

However, AFCA is not a legislative body and therefore cannot involve itself with matters that would be better dealt with by a court or tribunal or have already been dealt with by a court of tribunal, but the outcome was not favourable to the complainant.

While AFCA can determine complaints where a financial firm has acted unfairly in breaching a law or relevant Code of Practice, it cannot make a finding against a financial firm that attracts any civil or criminal penalties as these can only be ordered by a court or tribunal.

AFCA has a wide range of remedies it is empowered to impose when determining complaints, which will be discussed in the third part of this series.