The Australian Financial Complaints Authority (AFCA) will introduce a new, user-pays funding model that will remove cross-subsidisation and result in most member firms only paying an annual registration fee.
AFCA announced the new model, to be implemented from 1 July, was recently approved by the authority’s independent board following a seven-week consultation with users of the dispute resolution scheme and industry bodies running from early March to late April.
According to the authority, the new model will result in around 90 per cent of members of the scheme seeing no increase or a reduction in fees, while the 10 per cent of members that are heavy users of the scheme will experience a rise in costs in line with their usage.
Most AFCA member firms will pay only the annual registration fee, while others making higher use of the ombudsman service may also incur a user charge based on their activity in the past 12 months, along with individual complaint fees. All member firms will qualify for five free complaints a year.
“The model minimises the cross-subsidisation across sectors that was occurring under the interim model put in place at AFCA’s inception in 2018 by considering both the volume of complaints registered for a firm along with the time taken to resolve them,” the authority stated.
“Overall, 95 per cent of licensed financial firm members of the AFCA external dispute resolution scheme will pay only their annual registration fee, which has been set at $375.55 for the coming financial year.”
AFCA chief ombudsman and chief executive David Locke said the funding model was “fair, transparent and equitable” and members welcomed the changes.
“Members welcomed the fact the model rewards good complaints resolution performance and that it apportions fees fairly based on use of AFCA’s services,” Locke said.
“Ultimately, firms have control over the fees they pay by taking a resolution mindset when managing complaints.”
He added AFCA would monitor the performance of the new model over the coming year and work with member firms to resolve complaints and reduce their overall number.
“Our user-pays approach incentivises firms to use internal dispute resolution to decrease complaints to AFCA,” he said.