The government will scrap the Superannuation Complaints Tribunal, as it merges three organisations to create a one-stop shop external dispute resolution body for the financial services industry.
From July 1, 2018, the Australian Financial Complaints Authority (AFCA) will replace the Financial Ombudsman Service (FOS), the Superannuation Complaints Tribunal (SCT) and the Credit and Investments Ombudsman.
The new body will give retail investors, financial services consumers and small businesses access to a free and binding (on Australian financial services licensees) resolution scheme.
AFCA members will be required to report to the Australian Securities and Investments Commission (ASIC) on the results of internal dispute resolution efforts.
A review of the existing dispute resolution framework, by professor Ian Ramsay, recommended that disputes the resolution body received first be referred back for internal resolution, and that the external body should have the power to monitor progress and intervene when resolution is taking too long. The government has adopted this resolution.
The AFCA will have higher limits on the value of disputes it can hear and the compensation it can award.
The Ramsay Review also recommended a single external resolution body for all financial disputes and that it have the capacity to hear disputes of up to $1 million, with a compensation cap of $500,000 for disputes other than those involving superannuation. It recommended continued “unlimited monetary jurisdiction” for superannuation disputes.
A budget fact sheet provides the example of a small business dispute valued at $5 million being resolved by AFCA, which awards the complainant compensation of $1 million.
As under the old external dispute resolution model, AFCA will be funded by industry, via levies.
ASIC will receive additional funding of $4.3 million over four years, from 2017-18, to develop mechanisms for the reporting of internal dispute resolution. This will be offset by an increase of $3.6 million over three years, from 2018-19, under ASIC’s Industry Funding Model, and also by a reduction in funding as the SCT winds down.
The wind-down of the SCT will also lead to a reduction in the Australian Prudential Regulation Authority’s Financial Institutions Supervisory Levies, which superannuation funds pay.