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- Dealing with AFCA complaints can be a costly, time consuming
and daunting experience. Sound legal advice and in-depth knowledge
of AFCA’s process is a key success factor when facing
- Ensure AFCA has jurisdiction to hear a complaint, before
beginning to defend allegations.
- At least some decisions and conduct by AFCA are
- In establishing business structures, consideration should be
given to minimising exposure to AFCA complaints.
- ClarkeKann has had success defending Financial Firms from AFCA
complaints, particularly on the basis of jurisdiction.
What is AFCA?
The Australia Financial Complaints Authority
(AFCA) is a federal authority which deals with
complaints against entities in the financial services and insurance
industry (Financial Firms). AFCA was established
in 2018 by consolidating a number of external dispute resolution
schemes: the Financial Ombudsman Service, the Credit and
Investments Ombudsman; and the Superannuation Complaints
What sort of complaints can AFCA receive?
AFCA can only consider complaints made against Financial Firms
that are members of AFCA. Certain types of Financial Firms such as
AFSL (Australian Financial Services Licence) holders that deal with
retail clients or ACL (Australian Credit Licence) holders must be
members of AFCA. Other Financial Firms can choose to be
AFCA can deal with complaints from all over the financial
services industry. Complaints vary widely in their substance and
subject matter and AFCA has taken the view that it can hear
complaints in relation to any financial service provided by a
Financial Firm that is a member. Usually a consumer or small
business will lodge a complaint in relation to a financial product
or the conduct of a Financial Firm, however we have seen complaints
lodged by sophisticated customers in relation to complex commercial
matters in reliance on AFCA having jurisdiction because the
Financial Firm is a member.
Why would an applicant make a complaint to AFCA?
There is no fee to lodge a complaint with AFCA. Complainants are
encouraged to be self-represented, with proceedings being held with
minimal formality. There are no financial risks for a complainant
if their complaint is unsuccessful: a Financial Firm cannot seek a
costs order against a complainant. Until a complaint is finalised,
the Financial Firm cannot take any enforcement or other court
action against the complainant.
AFCA makes decisions on the substantive aspects of complaints
based on what it views as the ‘fair’ outcome in the
circumstances. It is not required to adhere to a strict application
of the law. What makes it even more enticing to a complainant is
that any decision by AFCA is not binding on the complainant. They
can simply decide not to accept AFCA’s decision.
Not so for the Financial Firm – under AFCA’s rules a
decision by AFCA is binding on the Financial Firm and cannot be
appealed (although a recent Supreme Court case has opened the
appeal door slightly, as we discuss below).
What powers does AFCA have?
AFCA is bound by its Rules and its Constitution. Both dictate
what type of complaints AFCA can consider, the time limits within
which a complaint must be lodged for AFCA to consider them, and the
type of conduct that can be the subject of a complaint which AFCA
The Rules also set up the manner in which AFCA can consider
complaints. The subject matter of an AFCA complaint ought to be
dealt with on its merits, supported by submissions and evidence
from each party. Whilst AFCA does not have to strictly follow
substantive law, AFCA does have to afford procedural
fairness to parties, remain impartial and deal with complaints in a
It is of key importance to assess and raise with AFCA if any
part of a complaint falls outside the jurisdiction established by
AFCA’s Rules. There is no guarantee that AFCA will address
jurisdictional and procedural fairness issues unless they are
specifically raised. This should be done as soon as possible.
AFCA is able to impose a range of remedies, including a simple
apology, payment of a sum of money, forgiveness of a debt and
setting aside a contract. Whilst there are caps on how much
compensation AFCA can award, complainants can make any number of
complaints. Therefore, claims for compensation can run into the
millions per complainant.
The service provides a welcome and important avenue for
individuals and small businesses to pursue recourse against large
and powerful firms who would otherwise stonewall complainants or
drown them in complex and expensive litigation. We have assisted
complainants through the AFCA process who had previously been
ignored by the Financial Firm from whom relief was sought, or who
were otherwise dissuaded from taking action at all, due to the cost
and stress it would bring.
However, the ability to lodge a complaint without consequence
does increase the risk of vexatious complaints being made
against Financial Firms, and AFCA’s informal process makes it
vulnerable to abuses of its processes. Of particular concern is the
use of the AFCA complaints process by sophisticated customers to
frustrate efforts by a Financial Firm to exercise its contractual
rights in complex commercial matters. AFCA is not equipped to
handle such complaints (being a consumer focussed organisation) and
the AFCA process represents a significant transaction risk that
Financial Firms should take into account.
What impact can AFCA complaints have on a Financial Firm?
AFCA complaints can be disruptive to businesses, particularly if
the Financial Firm does not have the resources to deal with them.
Many Financial Firms are small businesses, and also include funds,
which means that the other investors in the fund can be indirectly
affected by an AFCA complaint. We have also observed that the
presence of open AFCA complaints against a Financial Firm can
contribute to higher premiums or non-renewal of insurance, even
after the majority of complaints are withdrawn. It can also result
in a serious negative impact on a firm’s reputation, or a
firm’s ability to raise capital, seek investors, market
products and dispose of assets. Given the uncertainty as to how and
when a complaint will be resolved, it is very difficult for
Financial Firms to manage the fallout from having complaints lodged
In our experience, a thorough knowledge of the AFCA Rules and
sustained advocacy to ensure that AFCA abides by its rules can make
all the difference to ensure that Financial Firms are treated
fairly and complaints are dealt with efficiently. Isolating
business lines by setting up separate entities to provide financial
services that do not require membership of AFCA is another way of
avoiding costly and time consuming AFCA complaints.
Can AFCA’s decisions be appealed?
Up until November 2020, it was widely considered that AFCA’s
decisions could not be appealed: their Rules provide that AFCA
decisions are final.
In the NSW Supreme Court’s November 2020 decision in DH
Flinders Pty Limited v Australian Financial Complaints Authority
Limited,1 the Court confirmed that at least certain
decisions of AFCA were open to appeal to the Courts. The Court
confirmed that AFCA is bound to follow their Rules and
Constitution, and only has jurisdiction to the extent that their
Rules and Constitution say they do. The Court declared that AFCA
did not have jurisdiction over DH Flinders Pty Ltd (DH
Flinders) with respect to certain complaints, because the
person whose conduct formed the basis of the complaints, was not
acting within the authority of DH Flinders.
DH Flinders also raised a range of allegations of failures by
AFCA to afford it procedural fairness and to be impartial. The
evidence showed that AFCA had been encouraging complainants to
bring a complaint against DH Flinders despite the fact that the
original complaint was made against another party. The Court
considered that AFCA had ” ‘entered the fray’ and was
acting in an advisory relationship with the
Complainants.”2 In obiter, the Court said AFCA
would have been found to have acted “in breach of its
obligation of impartiality and fairness” had a ruling on that
point been necessary.3
It remains to be seen what would happen if a party sought relief
from a Court solely on the basis of AFCA’s failure to afford
procedural fairness or to be impartial. Reassuringly, we now at
least have confirmation that AFCA can be held to account,
and it appears that Courts will also be willing to provide relief
where natural justice has been denied to a party in an AFCA
Where to from here?
AFCA is also taking industry feedback on board. It recently
concluded a pilot program for triaging insurance related
complaints, where a complainant suffered no loss, or the Financial
Firm had not made an error. The program commenced after insurance
brokers alleged that complainants were gaming the system with
baseless claims and firms were paying disproportionate costs for
complaints with no merit. The pilot program successfully declined
106 complaints for lack of merit, and AFCA intends to make the
program a permanent part of their procedure.
We have seen how effective a tribunal like AFCA can be, to
restore some balance to ‘David and Goliath’ negotiations
between consumers and Financial Firms. Nevertheless, some Financial
Firms are not ‘Goliaths’, and it can require
advocacy and knowledge of AFCA’s rules and processes to ensure
that AFCA’s rules and jurisdiction are respected and fairness
is afforded to all parties, including the Financial Firm.
As a Financial Firm, the key to successfully dealing with a
complaint is having a thorough understanding of AFCA’s rules
and how AFCA has interpreted those rules. If you are a Financial
Firm that is dealing with an AFCA complaint we can help you. We
have been successful in having multiple complaints closed without
any adverse decision against the Financial Firm.
1 NSWSC 1690.
2Ibid  (Stevenson J).
3Ibid  (Stevenson J).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.