AFCA’s new fee approach could see super funds ‘double-billed’

Proposed transitional arrangements for new fees associated with complaints lodged with the Australian Financial Complaints Authority (AFCA) could result in the effective “double-billing” of some superannuation funds because AFCA’s processes have been so slow.

Superannuation funds have complained that even relatively simple matters have not been resolved by AFCA for over 12 months.

What is more, the user-pays model for superannuation funds dealing with complaints lodged with AFCA could place the funds in jeopardy of breaching their obligations to act in the best financial interests of members.

In a submission filed with AFCA relating to its proposed new funding model, the Association of Superannuation Funds of Australia (ASFA) has claimed that for some superannuation funds, AFCA’s proposed transitional arrangements to the new funding model “will involve an effective double-billing of AFCA’s external dispute resolution (EDR) services” because disputes remain unresolved.

It said the new complaint fee schedule would apply to all open complaints from 1 July 2022, regardless of when complaints had been received by AFCA.

“ASFA has obtained feedback from member funds of lengthy delays for some open matters. This includes examples of death benefit cases, that are not particularly complex, which have been awaiting review by the Ombudsman for over 12 months,” it said.

“As a whole, it can be reasonably argued that the superannuation sector has effectively paid for work associated with complaints received (but not closed) prior to 1 July 2022. As noted above, under the interim funding model the superannuation sector has been subsidising other sectors of the financial industry. This implies that the fees paid by the superannuation sector (as a whole) has exceeded the regulatory services provided to the superannuation sector via AFCA’s EDR services, and that this excess amount (as a whole) can be considered as payment in lieu of services in respect of complaints that have yet to be closed,” the submission said.

“With respect to the proposed new funding model, ASFA’s preference is for AFCA to charge superannuation entities for complaints received from 1 July and not for the current open matters. At a minimum, AFCA should apply a discounted fee to any complaints in train as of 1 July 2022.”

On the question of members’ best financial interests, the ASFA submission said that AFCA’s proposed new tiered fee structure raised concerns for some superannuation funds “because for a complaint that a superannuation trustee considers is vexatious or unmeritorious, the trustee’s decision whether to incur escalating dispute fees (in expectation that the trustee position ultimately will be upheld as fair and reasonable), or alternatively to settle the complaint is challenging given the trustee’s fiduciary duty to act in the best financial interests of all its members”.