With the announcement of a Royal Commission into the financial service sector, the Credit and Investments Ombudsman (CIO) has called for a halt to the government’s proposed external dispute resolution body, the Australian Financial Complaints Authority (AFCA).
Raj Venga, CEO and Ombudsman said that the need for the incoming Royal Commission acknowledges that AFCA is “not fit for purpose” as it cannot address past financial scandals nor prevent future ones.
With the terms of reference referring to “the effectiveness of mechanisms for redress for consumers of financial services”, Venga said it was not clear why AFCA should not be shelved until the Commission’s findings are known.
“AFCA is, after all, a mere rebranding of the existing dispute resolution bodies (CIO, Financial Ombudsman Service and the Superannuation Complaints Tribunal), with a few bells and whistles attached.”
The federal government would be “irresponsible and reckless” to establish AFCA without considering the findings of the Royal Commission, he said.
“These are likely to suggest what powers, jurisdiction, governance and funding a dispute resolution body needs to provide effective consumer redress in the wake of financial scandals.”
As is, the proposed resolution body would be disruptive for small businesses and consumers and will not deliver benefits in the short-term, he said.
“In all likelihood, the Royal Commission will find that AFCA will need to be unwound or otherwise significantly reshaped.”
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