Revised Explanatory Memorandum(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and the Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)
General outline and financial impact
External dispute resolution
This Bill will amend the Corporations Act 2001 (Corporations Act) and other Commonwealth Acts to introduce a new external dispute resolution (EDR) framework and an enhanced internal dispute resolution (IDR) framework for the financial system.
The new EDR framework will ensure that consumers have easy access to a single EDR scheme, known as the Australian Financial Complaints Authority (AFCA), which will resolve disputes about products and services provided by financial firms. The AFCA scheme will replace the Superannuation Complaints Tribunal (SCT) and the existing EDR schemes approved by the Australian Securities and Investments Commission (ASIC).
The enhanced IDR framework will require financial firms to report their IDR activities in accordance with ASIC requirements and allow ASIC to publish information it receives under new reporting requirements. This will allow ASIC to improve transparency about the performance of financial firms in relation to their IDR activities.
Date of effect: The amendments repealing the Superannuation (Resolution of Complaints) Act 1993 (Superannuation Complaints Act) commence on a day to be fixed by proclamation.
The timing of key application dates in this Bill will be set by the Minister (currently, expected to be the Minister for Revenue and Financial Services) by notifiable instrument. This will enable AFCA to commence operations in a way that minimises disruption to industry and consumers.
The dates that may be set by notifiable instrument include the date the authorisation of AFCA comes into force, the date that financial firms need to become members of AFCA, the date financial firms no longer need to be members of existing EDR schemes approved by ASIC and the date that the SCT can no longer receive new disputes.
Proposal announced: This measure was announced in the 2017-18 Budget as 'A More Accountable and Competitive Banking System - improving external dispute resolution'.
Financial impact: The measure is estimated to have the following financial impact over the forward estimates period:
- Nil .. not zero but rounded to zero
Human rights implications : This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3.
Compliance cost impact : This measure is estimated to have a compliance cost impact of $43.85 million each year.
Summary of regulation impact statement
Regulation impact on business
Impact : This measure is estimated to have a compliance cost impact of $43.85 million each year.
Main points :
- The Government has been informed of the regulatory impacts of various reform options by the Review of the Financial System External Dispute Resolution and Complaints Framework (the Ramsay Review). The Ramsay Review was commissioned by the Government in May 2016 and led by an expert panel, chaired by Professor Ian Ramsay.
- Extensive consultation with both industry and consumer stakeholders was undertaken as part of the Ramsay Review.
- The review panel found that the current framework is a product of history rather than design and that reform is needed. The panel identified that the existence of multiple EDR schemes with overlapping jurisdictions means that:
- it is difficult to achieve comparable outcomes for consumers with similar complaints;
- it is more difficult for consumers to progress disputes involving firms that are members of different schemes; and
- there is an increased risk of consumer confusion.
- The panel also noted that the dispute resolution arrangements for superannuation were not effective and that superannuation disputes should be resolved by an ombudsman scheme, rather than a statutory tribunal.
- Alternative reform options were considered and included having targeted reforms to the SCT and establishing a statutory tribunal.
- The measure is estimated to result in compliance costs for financial firms as a result of the introduction of the new IDR reporting requirements and costs associated with the higher monetary limits on claims that may be brought under the new EDR framework.
- The measure is also estimated to result in compliance costs associated with transitioning to the new framework, such as the costs of updating disclosure information and the costs for superannuation funds to move to an industry based scheme.