A new Australian Financial Complaints Authority is set to launch in November, replacing three out of date regulators.
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Why does it take so long before they get started?
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Excellent. I agree with @Airsie. Why wasn’t this sorted long ago?
Also, I always worry when they say funding is coming from the industry being regulated:
“AFCA will be an independent body operating as a nonprofit. It will receive funding from the businesses populating the financial services industry, such as banks and superannuation companies,”
It leads to a level of connectedness that is unhealthy in my opinion. Examples of this are TGA and ANZFA where both authorities seem to be incredibly lenient toward their industry cohort, rather than providing strong leadership that looks after consumers.
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I’m not too sure about the timeframe issues @Airsie, but I suppose it’s in keeping with most bureaucracies in that they tend to move slowly. It would be great if things could go along more quickly.
I think the funding follows the ombudsmen model, where the businesses involved in the complaints are also the ones funding the dispute process and with a board of directors split between consumer advocates and industry. While I agree the funding creates a potential for uneasiness or issues, the other options I can see would be to fund through the tax system or to create a ‘user pays’ system, which also raises problems. Generally, CHOICE as an organisation supports ombudsmen services as a tool for consumers to raise disputes and get resolutions more easily than through other means, but I know that they don’t always work. For those who have been treated unfairly, it’s easy to understand the frustration at these services.
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I agree with @meltam that there is a perceived, if not real, conflict of of interest, where supposed regulatory bodies are funded by the very companies they are supposed to be regulating. Its like putting Dracula in charge of the Blood Bank.
While not wanting to digress or hijack from the main thread, another organisation that riles me is FSANZ - Food Standards Australia & NZ. They are weak and ineffective in bringing food manufacturers to heel, when they are supposed to be acting in the interests of all consumers and NOT food manufacturers. They kick and struggle every time Choice make suggestions to them about changing food labeling that provides details about the food we have a right to know.
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Thanks @BrendanMays for your detailed response. I understand and appreciate what your saying, and that course of action makes sense to me…
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Let’s hope this authority actually has some teeth. Looks like they’re following the old facilitative; advisory; and determinative model so anyone who’s tried NCAT or ASIC to resolve things will know how that works (or doesn’t work). i.e. you spend all your time and resources trying to work with the system in place, the other side sends a legal employee who will do/say anything required to stop you.
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It is not easy to build a complete government entity from scratch. It involves, for instance:
- Pass legislation in Parliament, creating new entity and specifying how it will operate (board? CEO? etc.)
- Set up transition team in parent entity;
- Develop purpose of and budget for new entity;
- Recruit chief executive;
- Recruit new entity transition team;
- Start recruiting for key positions;
- Develop policy documents, legal documents (e.g. MOU with parent entity for provision of the services it has been delivering for the last three months and for the services it will need to continue providing for a year or two to come);
- Get all major policies cleared by the lawyers. Start developing processes and systems;
- Go Live! What did we forget? Do we have access to any money yet? What about our staff - who employs them? Panic stations!!!
This is a brief summary, that misses most of what is involved in creating a new government entity from scratch. It can be done more quickly in some cases (e.g. Royal Commissions, for which the legal basis already exists), but generally twelve to eighteen months is a decent period for establishing and commencing a new Commonwealth entity - even in many cases when it replaces an existing entity.
I obviously have not addressed the ‘why wasn’t this done years ago’ question, but don’t think that was what you were asking, were you?
This is commonly referred to as ‘regulatory capture’ - in which the regulating entity is seen as beholden to the interests of the people who pay the bills rather than the broader community. Should the entity instead be paid for out of our taxes? Should complainants pay? There is always a trade-off when deciding how best to fund such an entity; presumably it will be established in such a way that the funding and decision-making processes are completely separated - and with a board that adequately represents the community.
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Thank you @postulative for your very detailed reply. Clearly I hadn’t properly understood and appreciated the amount of work that has to be done to set up an organisation like this.
Let’s hope that when it gets up and running, that it properly, fairly and equitably protects the interests of people that it was set up to do.
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No problem, @Airsie. I have been there for a couple of these, and there is serious work and long hours involved in a new government entity’s creation. Of course, most of this work is behind the scenes - so most people don’t really know (or care) about it.
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The new Australian Financial Complaints Authority has been busy in its first five months of operation, handling 29,873 complaints and resolving 55% of them, according to a snapshot of activities covering November 2018 to March 2019. Most of the complaints (10,395) had to do with banks, followed by general insurers (home, car, pet, etc.) and credit providers. In 45% of cases, the financial product in question was a super account. All up, the external dispute resolution service says it has arranged $67 million in compensation for victims of financial wrongdoing.
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