AFCA adopts merit test after pilot

The Australian Financial Complaints Authority (AFCA) has made early “merit assessment” a permanent feature of its process, saying a pilot program showed this made complaints handling faster, cheaper and fairer.

The change comes after brokers called for a more robust triage system to address potential gaming of the system and prevent firms paying disproportionately high costs in some low-value matters.

AFCA COO Justin Untersteiner says a small number of third-party paid representatives had been using questionable tactics, with complainants refusing to consider a reasonable resolution in the earlier stages of AFCA’s process.

The pilot was in direct response to feedback from members that the cost of paying for some determinations – the final, formal decision-making stage of the process – could outweigh the value of the initial service or product that was provided.

“Firms told us this meant they sometimes made a commercial decision to concede the complaint on the basis of cost, regardless of the merits of the case,” Mr Untersteiner said.

The new initial case management stage means complaints where there is clearly no error or financial loss can be identified early, and AFCA has discretion to exclude the complaint under Rule A.8.3.

During the three-month pilot, about 120 cases were identified for review and 106 were closed after AFCA determined the complainant had not suffered loss or the financial firm had not made an error.

AFCA says the time taken to resolve the selected cases was half that of comparable cases, and the fee charged was as much as 75% lower.

Merit assessment will now be applied in cases where sufficient information about a complaint is available at an early stage and it clearly shows there is no error and/or loss. Complaints that raise more complex issues, with significant documentation involved, would still require an investigation to reach a view on what has most likely occurred.

“The balancing act is to ensure we are not closing complaints that do have merit. Sometimes the only way to determine this is through further investigation,” Mr Untersteiner said.

AFCA manages 70,000-plus cases each year and publishes more than 5000 decisions.