The Credit Industry Ombudsman (CIO) has declined a government invitation to join an expert reference panel on the transition towards a ‘one stop shop’ for external dispute resolution (EDR).
The government plans on amalgamating the CIO, the Financial Ombudsman Service (FOS) and the Superannuation Complaints Tribunal (SCT) into a single body: the Australian Financial Complaints Authority (AFCA).
On Tuesday (22 August), Minister for Revenue and Financial Services Kelly O’Dwyer announced that the expert reference panel will be led by former assistant governor of the Reserve Bank of Australia Malcolm Edey. Members will include FOS chief ombudsman Shane Tregillis, SCT chair Helen Davis, Self Employed Australia director Robin Buckham and SCT Advisory Council consumer member John Berrill.
CIO CEO Raj Venga has explained the CIO’s position, saying it will not participate in any transitional discussions until full details have been released by the government and the Bill has been passed in Parliament.
“It is entirely inappropriate for the Minister to activate a transition team even before submissions from stakeholders have been released and industry has had an opportunity to debate it publicly and transparently,” he said.
“Further, none of the representatives on the expert reference panel are from industry. Instead, the panellists have been chosen from the existing EDR schemes, consumer groups and small business users.”
Financial services providers who will be funding and using the AFCA have been ignored entirely, he said, leaving the endeavour without any industry “ownership”.
“It is outrageous that industry is not being represented on the expert reference panel.”
He criticised the government for ignoring strong objections to AFCA by industry bodies and failing to even release the industry’s submissions to the related exposure draft bill.
“I expect Treasury will only release them just before the Bill is introduced into Parliament in order to limit if not stifle any debate,” he said.
The proposed AFCA structure will be “old wine in a new bottle”, Venga added, saying that it will have the same powers and jurisdiction as the CIO, FOS and SCT with “a few bells and whistles”.
“The reality is that AFCA will neither provide better consumer outcomes nor be able to address past, or prevent future, financial scandals. It is not equipped to weed out poor entrenched corporate culture or address the string of financial scandals that regularly grace the pages of our newspapers.”
According to CIO estimates, AFCA will cost $137m in its first year of operation alone – far higher than the $57m per year required for the current three schemes. AFCA will also need around 1,000 staff to handle the 117,000 complaints it will receive in its first year of operation.
“As if this was not bad enough, the last resort compensation scheme has been estimated to cost industry at least $100m annually despite the fact that the unpaid determinations of FOS and CIO (accumulated over several years) are less than $14m,” Venga said.
Edey will hold his first meeting with the reference panel in the coming weeks following prior meetings with stakeholders.
“It is important that the AFCA transition team draw on existing dispute resolution expertise and a wide range of views, to make sure the AFCA is fit for purpose and meets the needs of consumers, small business and industry,” O’Dwyer said.
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