The new Australian Financial Complaints Authority (AFCA) will take over the work of three external dispute resolution schemes and be able to consider claims of higher value when it comes into being in November, 2018.
AFCA will replace the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal.
They hear disputes involving banking, credit, insurance, investment and superannuation. Members of these industries pay fees that fund the schemes.
Industry members of FOS and the CIO will have to retain those memberships for 12 minutes after AFCA opens its doors, so existing matters can be processed.
The SCT has a backlog of complaints and will continue until June 2020.
Replacing three services with AFCA is intended to strengthen consumer protections.
Minister for Revenue and Financial Services, Kelly O’Dwyer, has announced AFCA will be able to hear consumer disputes involving amounts of up to $1 million and will have a compensation cap of $500,000. She says this is almost double the existing limits.
Small business will also have greater access to dispute resolution. Small business owners have complained that they cannot afford to take on credit providers when business loans turn sour.
Under AFCA, a small business will be able to lodge a dispute involving a credit facility of up to $5 million, and will be able to receive compensation of up to $1 million.