Transitioning to AFCA: the final tasks to complete

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Although opening the doors of Australia’s newest dispute resolution scheme – the Australian Financial Complaints Authority (AFCA) – was hardly front page news, it did represent a significant shift for the financial services industry.

Already more than 35,000 firms operating across the financial services, credit and superannuation sectors have joined AFCA.

While most practices are now AFCA members, there is still paperwork to be completed to ensure they’re fully compliant with the new regime, explains Chris Deeble, an Associate with financial services law firm, The Fold Legal.

“At the most basic level, practices should check they have received their membership certificate from AFCA and must by now have updated their website and complaint information to refer to AFCA,” he says.

Your AFCA to-do list

And AFCA is not the only interested body, ASIC expects all practices to be AFCA members and requires notification of their membership by 30 November 2018.

“If you don’t notify ASIC of your membership by 30 November 2018, late fees apply,” Deeble notes.

All website information and the general complaint brochures produced by the practice must have already been updated to meet the 1 November 2018 deadline.

The next item on the to-do list is updating all your documents to ensure they refer to AFCA. All internal dispute resolution (IDR) letters and RG 165.92 ‘delay letters’ must be changed to include contact details for AFCA, with all references to FOS removed.

“The IDR final response and delay letters, noting you have the right to complain to AFCA, must be done by 1 February 2019,” Deeble explains.

Practices have a little more time for their mandatory disclosure documents (like the FSG and PDS) and periodic statements. These all need to be updated to provide AFCA’s contact details by 1 July 2019.

Why it matters

Completing these administrative jobs may not seem important, but the consequences of failing to do so could be significant.

“It’s a breach of the practice’s AFS licence conditions if you don’t complete these tasks, and this would be of concern to ASIC,” says Deeble.

While AFCA may query non-compliant practices, ASIC is also taking a proactive stance.

“In a recent media release, ASIC noted it’s receiving membership updates from AFCA and will be following up firms not on the list or who aren’t responding to AFCA communications,” notes Deeble.

“Other than being a member of AFCA if you’re required to be, one of ASIC’s concerns is likely to be that clients are aware of a practice’s AFCA membership at the point they want to make a complaint.”

Updating your staff

Even if their paperwork is complete, practices need to ensure all staff interacting with clients understand how to manage complaints.

“It’s very important that practices ensure employees appropriately manage complaints,” explains Deeble.

“They need to realise they’re getting a complaint, know who to escalate it to and how to do that. They also should let the client know their complaint is being responded to and the timeframe for that.”

Providing updated coaching that revisits the practice’s IDR procedures may be sensible.

“It’s helpful to train staff on how to manage client expectations about the timeframe for receiving a response and how the process will work. This can be a cause of further tension if the client is expecting a rapid response,” says Deeble.

Attempting to resolve complaints internally, rather than allowing them to escalate and end up with AFCA, can be beneficial and could help save the client relationship.

“You have the opportunity to resolve it quite quickly if it’s handled internally and you can come up with a result you can live with, and also one the client can live with,” notes Deeble.

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. The Fold Legal is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by The Fold Legal and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties.