Australian Financial Complaints Authority (AFCA) is a new one-stop financial service external dispute resolution (EDR) scheme which commenced on 1 November 2018. It replaced the two then existing ASIC approved schemes – the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO)– and the statutory Superannuation Complaints Tribunal (SCT).
All Australian Financial Services Licensees, Australian Credit Licensees, Authorised Credit Representatives and Superannuation Trustees are required to be a member of AFCA under their financial services licence conditions. Obtaining membership can be done via the AFCA website, www.afca.org.au.
The Minister of Revenue and Financial Services has set the membership deadline for joining AFCA last 21 September 2018. ASIC has closely monitored the membership list and has followed up on firms who have not met the deadlines. Before the registration deadline, ASIC had issued several reminders and notices to the financial firms to prioritise obtaining the AFCA membership. It has warned that financial firms who do not apply for membership could lose their authority to act as financial services and credit representatives as they would be in serious breach of law.
In addition, ASIC has also extended the deadline for credit representatives, including mortgage brokers that lodge the application but did not receive the approval before the deadline. Further, ASIC has warned that it would not be providing further relief if credit representatives failed to become members before 1 November 2018. Despite these, several firms have failed to obtain their membership.
ASIC, under the Corporations Act, has the power to revoke an AFS licence if a licensee does not comply with its obligation. Two NSW-based financial services providers have had their licences revoked effective 14 and 15 February this year after failing to obtain memberships of the Australian Financial Complaints Authority. Both firms failed to lodge their annual financial statements, with one firm subsequently taking steps to comply with their financial reporting obligations. More recently, a Sydney-based financial services provider has also had its Australian Financial Services Licence suspended this month as not only did it breach its financial reporting and audit obligations, but also failed to obtain an AFCA membership.
Reflecting on these cancellations, ASIC Commissioner Danielle Press said:
“These cancellations are significant because this is the first-time ASIC has cancelled licences for non-compliance with AFCA membership requirements. AFCA is crucial to the protection of Australia’s financial consumers. Licensees need to be aware that failure to meet AFCA membership is a serious breach of the law and ASIC will take action where licensees fail to meet this important obligation”.
As such, it is vital to ensure that your business is meeting its financial and legal obligations. Should you have further questions about your obligations please do not hesitate to contact your relevant ESV engagement partner on 02 9283 1666.
