An Introduction to AFCA – the new ‘one stop shop’ for dispute resolution in the financial services industry

The Australian Financial Complaints Authority (AFCA) is the new external dispute resolution scheme for the financial services industry. It replaces three previous schemes, namely the Financial Ombudsman Service (FOS), Credit and Investments Ombudsman and Superannuation Complaints Tribunal.

This article will provide a high level overview of the new AFCA scheme, highlighting some of the important differences from its predecessor schemes, particularly FOS.


AFCA is an independent, non-profit body established by the authority of the Minister for Revenue and Financial Services. AFCA began accepting complaints from 1 November 2018.

One of the primary goals of the new AFCA scheme is to improve the way in which financial disputes are dealt with, allowing for greater access to complainants and efficiency in dealing with complaints. The AFCA Complaints Resolution Scheme (AFCA Rules) prescribe how complaints to AFCA are handled. The AFCA Rules are publicly available and can be accessed from AFCA’s website.

AFCA’s members consist primarily of large banking and lending institutions. By joining AFCA, these institutions have agreed to be subject to AFCA’s jurisdiction to hear complaints against them by aggrieved customers. For most institutions, AFCA membership is a prerequisite to them providing financial services to customers.

AFCA is largely funded by its members and there is no cost associated with a customer lodging a complaint against an AFCA member.

In just over three months of operation, AFCA has reported over 11,500 complaints from aggrieved customers. AFCA further reports that the majority of these complaints have been against major bank, credit providers and general insurers.  This represents a marked increase from the predecessor schemes. The likely explanation for this surge in the number of complaints is the increased monetary limits applicable to AFCA complaints compared to the previous limits under the replaced schemes. This change is consistent with one of the key aims of the new AFCA scheme, namely greater access to potential complainants.

Important changes under the AFCA scheme

Under the old FOS scheme, complaints against financial institutions were generally limited to $500,000.

Under the new AFCA scheme, the monetary limits applicable to different categories of complaint range between $1,000,000 and $5,000,000. In the case of superannuation complaints and certain claims made by guarantors to have a guarantee set aside (namely guarantees pursuant to which the guarantor’s place of residence was provided as security), there is no monetary limit.

It is important to distinguish between monetary limits applicable to making an AFCA complaint, and the maximum amount of compensation that AFCA can award against a financial institution. For example, in the case of a complaint arising from a credit facility provided to a small business, the credit facility limit is $5,000,000. However, the maximum amount that can be awarded by AFCA is $1,000,000.

Another important change under the AFCA scheme is the new definition of ‘Small Business’. The AFCA Rules define ‘Small Business’ to include any business that has less than 100 employees at the time of the conduct giving rise to the complaint. This new definition significantly broadens the scope of AFCA’s jurisdiction to hear complaints from small and even mid-sized businesses.

Am I eligible to make a complaint to AFCA?

In order for AFCA to hear your complaint, there are a number of preliminary requirements that must be satisfied:

(a)   The complaint must be lodged by an ‘Eligible Person’ against an AFCA member. ‘Eligible Person’ is defined in the AFCA Rules to include individuals, partnerships, corporate SMSF trustees and ‘Small Business’.

(b)   The complaint must arise from a customer relationship between the AFCA member and the Eligible Person, or other circumstance that brings the complaint within AFCA’s jurisdiction. Relevantly, guarantors of credit facilities will ordinarily satisfy this requirement, despite not being a direct customer of the AFCA member;

(c)   The complaint must be submitted within the relevant time periods prescribed by AFCA (usually within 2 years of the conduct complained of); and

(d)   The complaint must have a sufficient connection with Australia.

Even if the above requirements are met, the AFCA Rules set out a number of mandatory exclusions for certain claims that would otherwise have fallen within AFCA’s jurisdiction.

AFCA also has discretion not to consider an otherwise eligible complaint. However, the AFCA Rules prescribe that AFCA shall only use this discretion in cases where there are compelling reasons for deciding that it should not consider the complaint.

How does this change affect my current FOS claim?

All current FOS disputes at the time of the establishment of AFCA are to be managed by AFCA under the previous FOS Terms of Reference. However, any complaint made after 1 November 2018 will be determined under the new AFCA scheme.

Going forward

AFCA is still in its very early stages of operation. Accordingly, it is difficult to ascertain how AFCA will handle complaints differently the schemes it has replaced. It also remains to be seen how willing AFCA will be to use its discretion to refuse to hear complaints.

The above information is meant as a guide only. If you believe that you may be entitled to make a complaint to AFCA and would like more specific advice, we recommend you contact Edwards Mac Scovell.