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So you’ve been taken to AFCA – what are your rights and responsibilities?

Receiving a complaint from the Australian Financial Complaints Authority (‘AFCA’) can be confronting and stressful. Understanding the AFCA process can help you successfully navigate the experience and obtain a fair outcome.

When does a complaint go to AFCA?

AFCA expects your clients to complain directly to you first and allow you time to resolve the complaint. Therefore any complaint you receive through AFCA should relate to a complaint you have already sought to resolve with the client – if this is not the case, you should alert AFCA.

Most complaints can be made within six years of the relevant conduct taking place. If the client’s complaint is out of time you should notify AFCA. It is within AFCA’s discretion to hear a claim outside the six year timeframe.

AFCA will often ask you for further details, information or documents in order to decide how to resolve the complaint. You must comply with AFCA’s requests for information, except in a circumstance where compliance would breach a duty of confidentiality to a third party and you have not been able to obtain their consent. It is crucial to have good record-keeping practices in place – AFCA will not look kindly upon records that are inaccurate or incomplete.

What can AFCA do?

In the first instance, AFCA will encourage you and the client to reach an agreement. If agreement is not possible AFCA can also determine an appropriate outcome.

AFCA’s determination powers are extensive. Depending on the claim it can:

  • Award sums with interest.
  • Require forgiveness or variation of a debt.
  • Require you to compensate the client for non-financial loss or the costs incurred in pursuing their complaint (that is, travel or legal expenses).

Although AFCA has compensation limits for complaints that do not relate to superannuation it can and has awarded unspecified amounts such as ‘reasonable travel costs’ or ‘all repayments, fees and charges’.

Can I appeal an AFCA determination?

Complainants may have AFCA determinations reviewed where they are unsatisfied with the outcome. The same right is not extended to AFS Licensees – if the client accepts AFCA’s determination, the licensee is bound by it.

If you do not comply with the determination AFCA is obliged to report the non-compliance to ASIC who may investigate the matter further.

While a determination by AFCA will not be binding if the client does not accept it the client may still pursue their claim in court. A complaint though AFCA does not prevent clients from commencing legal proceedings. However, information put before AFCA cannot be used in court except where the court requires it.

What should I do?

  • Know your legal obligations and AFSL conditions, and have policies that enable you to comply with them.
  • Have a robust mechanism for resolving disputes internally – by communicating with the client early and often, this can reduce the chances of a client being unsatisfied and complaining to AFCA.
  • Keep complete and accurate records – this should help you demonstrate compliance with your obligations if a complaint is brought before AFCA.
  • Be ready for ASIC’s enforceable internal dispute resolution regime which comes into operation on 5 October 2021.

Contact Us for assistance with handling an AFCA complaint or building a robust framework for handling complaints.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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