AFCA’s new funding model hits heavy users

The Australian Financial Complaints Authority has sought to reassure financial advisers and others that the vast majority of firms will pay the same amount or less than they are now under new arrangements announced today.

Releasing its new funding model, AFCA claimed it rewarded firms with good complaints resolution performance and apportioned fees fairly based on use of AFCA’s services.

The new arrangements will come into force on 1 July.

Under the new model about 90% of members of the national ombudsman scheme will see a positive or neutral impact on total fees. The 10% of heavy scheme users that are expected to experience an increase in cost will do so because this more accurately and fairly reflects their usage.

The new model includes a single registration fee and a simplified complaints fee structure. All members qualify for five free complaints a year.

The superannuation levy has been abolished and super funds have been brought under the same fee structure as other scheme members – with a positive or neutral impact for most super fund trustee members.

According to AFCA, overall, 95% of licensed financial firm members of the AFCA external dispute resolution scheme will pay only their annual registration fee, which has been set at $375.55 for the coming financial year.

Among authorised credit representatives, 99.9% will pay only $65.98 annually – steady with their annual membership levy for the past year.

“The feedback we received was overwhelmingly positive,” AFCA’s Chief Ombudsman and Chief Executive Officer, David Locke, said. “Members welcomed the fact the model rewards good complaints resolution performance, and that it apportions fees fairly based on use of AFCA’s services.

“This is a fair, transparent and equitable funding model,” Mr Locke said. “Ultimately, firms have control over the fees they pay by taking a resolution mindset when managing complaints.”

AFCA’s consultation process included more than 60 meetings with peak bodies and members likely to experience a greater impact, five webinars open to all member firms, and the delivery of 11,000 individual, tailored impact assessments to financial firms.

Feedback led to instalments being introduced for member payments above a threshold amount, and no fee being payable for complaints found upon initial assessment to be outside AFCA’s jurisdiction. In addition, the five free complaints provided under the new model will not be included when AFCA calculates the user charge that applies to more frequent users of the service.

Under the new model about 90% of members of the national ombudsman scheme will see a positive or neutral impact on total fees. The 10% of heavy scheme users that are expected to experience an increase in cost will do so because this more accurately and fairly reflects their usage.

The model minimises the cross-subsidisation across sectors that was occurring under the interim model put in place at AFCA’s inception in 2018, by considering both the volume of complaints registered for a firm along with the time taken to resolve them.