AFCA receives its first report card

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Rachel Erlich Senior Associate Linkedin

The Australian Financial Complaints Authority (“AFCA”) has received its first report card since it commenced operations on 1 November 2018.

The legislation establishing AFCA required the Minister (for Superannuation, Financial Services and the Digital Economy) to cause an independent review of AFCA (“Review”) to occur as soon as practicable after AFCA had been operating for 18 months.  The Review was required to take into account feedback provided by complainants relating to whether their complaints were resolved in a manner that was “fair, efficient, timely and independent”.

Treasury undertook the Review, which was conducted between February and August 2021.  While AFCA commenced its operations on 1 November 2018, the Review did not occur until 2021 because of the impact of the COVID-19 pandemic.  The final report was handed to the Minister on 26 August 2021 and was tabled in Parliament as required by legislation and released on 24 November 2021.

The Review considered submissions made to Treasury by complainants (past and current), financial firms, consumer advocacy groups, industry bodies and others.  These submissions were not published by Treasury.

The Review considered how AFCA had tracked against several themes, including:

  • fairness
  • independence
  • timeliness
  • jurisdiction
  • accountability
  • transparency

How has AFCA performed?

Overall, AFCA was found to be “performing well in a difficult operating environment and a changing regulatory landscape”.   The Review acknowledged that while AFCA was performing well in its “establishment phase”, there was work to be done to develop and improve its processes.

In responding to the final report, AFCA’s Chief Ombudsman and Chief Executive Officer said:

We know there are areas where we can improve as we move out of our establishment phase, and some of these have been identified in the Review….  We have a number of projects under way, including investments in technology and process improvement, along with a review that is looking at ways to modernise our interim funding arrangements.  We will use the insights and analysis from the Review to further inform this work.

Thirteen of the Review’s fourteen recommendations are directed to AFCA.  They are aimed at enhancing AFCA’s transparency and decision-making process to enable AFCA’s operations to better address the needs of AFCA stakeholders.


The Review acknowledged that Treasury received many submissions concerning whether AFCA was affording procedural fairness in the way that it handled complaints lodged with it.  The review found that there was no evidence of a systemic issue in relation to procedural fairness.

However, Recommendation 1 of the Review goes to the heart of procedural fairness.  The Review recommends that AFCA should provide clearer guidance on the circumstances under which a further issue identified during the complaint process would revert to a financial firm for consideration through its internal dispute resolution process.

While waiting for AFCA to release such further guidance, where a new issue is raised or identified during the AFCA complaint process that is not related or connected to the initial complaint, financial firms should consider requesting that AFCA allow the newly identified issue to be dealt with under their internal dispute resolution process.

The Review also considered AFCA’s fairness jurisdiction.  AFCA’s Rules (see AFCA Rule 14.2) provide that when determining a complaint (other than a superannuation complaint), the AFCA decision maker “must do what the AFCA Decision Maker considers is fair in all the circumstances having regard to” legal principles, applicable industry codes or guidance, good industry practice, and previous decisions of AFCA or predecessor schemes.

The Review considered that it is appropriate for AFCA’s jurisdiction to enable it to make decisions taking into account matters that go beyond strict legal principles.  However, the Review recommended that in exercising its fairness jurisdiction, AFCA should consider what is “fair in all the circumstances” having primary regard to legal principles, applicable industry codes, good industry practice and previous decisions.

Financial Firms should be mindful of this recommendation when reviewing Preliminary Views (Recommendations) and Determinations issued by AFCA.  If a financial firm believes that an AFCA case worker or decision maker has failed to have primary regard to the matters set out in AFCA Rule 14.2, the financial firm should consider raising its concern directly with AFCA.


Recommendation 3 touched on the requirement for AFCA to deliver its services in a procedurally fair and independent manner.  The Review recommended that AFCA should not advocate for, nor act in a manner that otherwise advantages, one party to a dispute.

Accordingly, if you take the view that an AFCA case worker is acting in a way that jeopardises AFCA’s independence, for example actively advocating for the complainant, consider raising your concerns with the case worker’s manager.


One of AFCA’s key objectives is to provide a timely service.

The Review acknowledged that AFCA has experienced issues with timeliness, noting that the key drivers of delay were the pandemic, initial complaint flows exceeding expected volumes and the introduction of AFCA’s legacy jurisdiction (which is no longer available).

The Review recommended that AFCA should take steps to better manage the parties’ expectations as to timeframes in its communications with the parties to the complaint.

The Review identified that much of the delay is being experienced between the issue of a Preliminary View (Recommendation) and the issue of the final Determination.  If this is a financial firm’s experience and it wishes to bring finality to a dispute, say, for example, where the complainant continues to contact the financial firm unreasonably, the financial firm should consider making enquiries with AFCA as to the progress of the complaint and the expected timeframe until the Determination (or Preliminary View/Recommendation) will be made.


AFCA’s Rules provide it with the discretion to exclude a complaint lodged by a complainant who is a wholesale client (as defined in the Corporations Act 2001).  However, at page 150 of the AFCA Operational Guidelines AFCA states that it will not exercise its discretion to exclude a complaint “merely because it is submitted by a wholesale client”.

The Review did not consider it appropriate for AFCA to be required to exclude all complaints lodged by wholesale clients.  In this regard the review identified that an unsophisticated consumer with low levels of financial literacy may be classified as a wholesale client merely because the complainant has assets (such as the family home and superannuation) with a value exceeding $2.5 million.

Accordingly, the Review recommends that AFCA should exercise its discretion to exclude complaints lodged by sophisticated investors or professional investors unless there is evidence that the complainant was incorrectly or inappropriately so classified.

If a client that is a professional investor or sophisticated investor lodges a complaint with AFCA, a financial firm should consider immediately raising a jurisdictional objection with AFCA by requesting that AFCA exercise its jurisdiction to exclude the complaint.  The financial firm should be prepared to provide AFCA with information to demonstrate that the complainant was correctly and appropriately classified as a professional investor or a sophisticated investor.


It is well known that once AFCA issues a Determination, the Determination is not subject to a merits review.  It is a little known fact, however, that AFCA’s Operational Guidelines provide for a review of the underlying approach taken by AFCA in a Determination.  That is, it is possible to request that AFCA consider whether it should change its approach to a particular issue in future decisions.

The current Operational Guidelines provide for an informal review process and a formal review process.  Currently, a formal review application must be accompanied by legal advice from external counsel that AFCA made an error of law.

The Review recommended that an AFCA Determination should continue to be reviewable with respect to its application to future cases, and that a person seeking such a review should not be required to demonstrate that the Determination in question contains an error of law.  The review further recommended that a forward looking review should be available where a person can demonstrate that the Determination adopts an approach that could have a significant impact across a class of consumers, businesses or transactions.

Financial firms should familiarise themselves with the informal and formal review mechanisms in AFCA’s Operational Guidelines (pages 75-76).  Whilst the financial firm may not be able to challenge the merit of an adverse Determination, it may be able to have AFCA reconsider its approach to similar complaints going forward.

The Review also recommended that AFCA should improve the visibility of the Independent Assessor as part of its communications with the parties to a complaint.  This recommendation was made as the existence of the Independent Assessor appears not to be well known.

A financial firm can lodge a service complaint with AFCA’s Independent Assessor having first made a complaint to AFCA.  While AFCA’s Independent Assessor cannot assess the merits of a decision or finding of AFCA, the Independent Assessor can consider complaints about the standard of service delivered by AFCA when handling a complaint.

If a financial firm has raised a concern with AFCA about its service delivery and is not satisfied with the response received, it should consider whether it wishes to make a complaint to the Independent Assessor.


The Review recognised that “parties will have a legitimate expectation that the material relied on by the decision maker is available to them, including policies, procedures or guidance being applied by the decision maker.”

AFCA publishes Approach documents on its website.  These documents set out the approach that AFCA will take in relation to a specified issue or type of complaint.  For example, AFCA has published Approach documents in relation to the adequacy of statements of advice, calculating loss in financial advice, financial difficulty and terms of settlement.

The Review acknowledged that AFCA currently consults with industry and consumer representatives in relation to its Approach documents and recommended that AFCA put in place a formal process for consultation on each Approach document before its final release.

A formal consultation process for Approach documents will provide more opportunity for financial firms to engage with AFCA and inform the approach that AFCA will take to certain issues and complaint types.  Accordingly, financial firms should keep a look out for, and consider contributing to, such consultations.

So, where to now?

Now we must wait and see what steps AFCA will take to implement the recommendations made by the Review.  In the meantime, take the time to read the final report so that you are better placed to raise any concerns you have with AFCA and its processes.  The service that AFCA offers is important but it must deliver those services with a focus on accessibility, independence, fairness and accountability.  It must also be efficient and effective.

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Author: Rachel Erlich (Senior Associate)