FAAA questions possible AFCA over-reach

The Financial Advice Association of Australia has questioned why the Australian Financial Complaints Authority (AFCA) believes it has the power to set standards around elder abuse in financial services.

The FAAA has responded to an AFCA consultation on approaches to family violence and elder abuse stating – “it is unclear as to the enabling law that allows AFCA to set standards that firms must comply with or define the consequences of a breach”.

It said this compared to AFCA’s other approach with respect to complaints handling.

However, it said AFCA’s draft approach to family violence and elder abuse “goes further by proposing actions firms should undertake to address financial abuse of older people and the steps firms should take to help potential victims”.

“The expectations proposed in the draft Approach include, for example, that the firm has internal policy and procedures and staff training in relation to the financial abuse of older people, and actions that should be taken by the firm in the event that the potential abuse of a client can be identified. This indicates that AFCA expects the information and actions detailed in the draft Approach to act as standards and be “’complied with’ by firms, including financial advice providers,” the FAAA submission said.

The FAAA specifically noted that the AFCA draft approach had stated: AFCA also considers this to be a matter of good industry practice which should apply to all financial firms, regardless of whether a financial firm subscribes to a code of practice or not.

“This is standard setting. The legal framework for imposing these and other obligations on firms, the consequences for not meeting AFCA’s expectations, and how this AFCA Approach will be considered by PI insurers, is unclear,” the FAAA said.

“While we note the sensitivity of the subject matter, and the critical need to put in place a solid framework and effective consistent system to be used by all stakeholders to address financial abuse, we are concerned about AFCA seeking to set compliance standards that unfairly hold financial advisers to account (through EDR compensation and PI premiums) for the wrongdoing of the perpetrators,” it said.

“We suggest the AFCA draft Approach should avoid setting compliance standards and blurring the lines between helping financial firms to recognise signs of financial abuse and taking steps to prevent victim losses, and the misconduct of the perpetrator of the financial abuse.”