The Australian Financial Complaints Authority (AFCA) has amended its rules regarding the obligations of licensees following a legislative instrument issued by the Australian Securities and Investments Commission (ASIC).

The Rules change reflects the judgment of the NSW Supreme Court in DH Flinders Pty Limited v Australian Financial Complaints Authority in November 2020. This case related to AFCA’s jurisdiction to consider a complaint against a licensee in relation to the conduct of its corporate authorised representative, specifically where the conduct of the representative was without or outside authority.

The judgment highlighted that AFCA’s Rules needed to be clearer to ensure that they reflected the same obligations and liabilities for licensees as set out in the Corporations Act.

At ASIC’s direction, the Rules now clearly reflect the same statutory liability for licensees regarding their authorised representatives as set out in the Corporations Act and the National Consumer Credit Protection Act.

The updated AFCA Rules apply to complaints received by AFCA from January 13, 2021 onwards.

Complaints received before January 13, 2021 will be handled by AFCA under the previous Rules. As the vast majority of complaints AFCA considers are between parties with a direct relationship (e.g. a bank to a bank customer) these complaints are not impacted by the Rules change. AFCA is currently reviewing a very small number of complaints received before January 13, 2021 which are potentially impacted by the judgment and is in contact with those complainants and financial firms to discuss the specifics of their complaint.

For the small number of complaints which may be outside AFCA’s Rules, AFCA will be encouraging the financial firms involved to consent to AFCA considering the complaint to achieve an early resolution and avoid the prospect of potential court or other action by the complainant.

AFCA is a one-stop shop for consumers and small businesses that have a dispute with their financial firm over issues such as banking, credit, general insurance, financial advice, investments, life insurance or superannuation.

On 1 November 2018, AFCA replaced the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT) as the one-stop shop for financial dispute resolution. All outstanding complaints with FOS and the CIO were transferred to AFCA and the body haas continued to finalise these matters.

According to the AFCA Annual Review, between 1 July 2019 and 30 June 2020 AFCA received 80,546 complaints from consumers and small businesses, which is a 14% increase in the monthly average compared to the last financial year. A majority of complaints (58%) lodged with AFCA in this period related to banking and finance, followed by general insurance (24%), superannuation (9%), investments and advice (6%) and life insurance (2%).

Investments and advice saw an increase of 22% in the average number of complaints received each month during the 2019–20 financial year, receiving a total of 4,615 complaints. This year, these complaints made up 6% of the total complaints received by AFCA.

Forex was the product at the core of most of the complaints in the Investments and advice category. AFCA received a total of 759 complaints about FX in 2019/20.