Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

This is another reform from the government that was aimed at avoiding a royal commission into the banking and financial services sector in Australia. Nonetheless, Labor is supporting the establishment of an Australian Financial Complaints Authority, despite the shortcomings of this proposal, which I will go through in some detail in my address.

The Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill makes changes to the external dispute resolution framework for the financial services sector. It implements the recommendations of the Ramsay review into external dispute resolution, which reported in April 2017. The central change in the bill is the new one-stop shop ombudsman, the Australian Financial Complaints Authority. The AFCA will replace three existing complaints bodies: the two ombudsman schemes—the Financial Ombudsman Service and the small Credit and Investments Ombudsman—and the statutory Superannuation Complaints Tribunal, which operates with respect to superannuation disputes in Australia. The new AFCA will follow the model of the existing ombudsman schemes and will be in the form of a not-for-profit company limited by guarantee. The minister will approve a scheme which will become the AFCA. All financial firms and superannuation trustees will be required to be members of the AFCA. As with the FOS and the CIO at the moment, the operational aspects of the AFCA scheme will be based on private-law contractual obligations between the AFCA and the financial firms who are members of the scheme. At the moment, there are three external dispute resolution schemes: the ombudsman schemes and the statutory SCT.

On closer inspection of the government's plans for the Financial Ombudsman Service and the Credit and Investments Ombudsman, this is simply a merging and a rebadging of the two existing ombudsman services into the one scheme, with a different threshold—and we do welcome the higher monetary thresholds for the disputes that can be heard—but with no new additional powers that the existing dispute resolution bodies don't already have.

The bill also purports to copy and paste the powers of the statutory Superannuation Complaints Tribunal into the new Australian Financial Complaints Authority, which will be a private company listed by guarantee, as I said. However, in doing this, the bill will result in reduced consumer protections for superannuation disputes, and that's the issue Labor has with the government's proposal. The SCT was a specialised tribunal with specialised members who were able to hear complaints regarding superannuation issues from members and others who work in this area, in a timely fashion with expert advice, ensuring that resolutions could be reached. We believe it's disingenuous for the government to try and shut down this SCT scheme because of delays in the resolution of its complaints when we know that the government has cut funding and has cut staff to the SCT, leaving it in a precarious position in terms of the effectiveness and efficiency of its work. These changes risk losing some of that expertise that currently exists in the SCT.

While many of the SCT's powers are replicated in the new one-stop shop, there are changes between the powers of the SCT and the powers of the AFCA that stakeholders say result in a reduction in consumer protections. These include the fact that the bill retains appeal rights for superannuation determinations but does not include the current appeal rights for administrative decisions of the SCT. The SCT has the power to require information required or shared at the initial review stage to be kept confidential at the moment. According to the SCT, information collected during superannuation dispute resolutions can be highly personal, sensitive, inflammatory and identifiable—for example, family members fighting over who is entitled to a death benefit under superannuation life insurance policies. Currently, the SCT has an explicit statutory power to cancel the membership of a life policy fund if it finds that the conduct relating to the selling of that fund was unfair or unreasonable. And there's no limit on the value of the claim that the SCT is allowed to hear. This is important in disputes about life insurance policies held through super funds. The bill seeks to retain this unlimited jurisdiction for superannuation disputes. However, the SCT states that it's unclear that all disputes involving life insurance in super would receive the benefit of the unlimited jurisdiction. The final issue includes the fact that, as a private body, the new AFCA is not subject to freedom of information as currently exists for the SCT.

These reforms were supported by the House of Representatives Economics Committee, and Labor more generally. It's because of the government's strong desire to hold the banks to account that they're doing this, but is it also because of the government's intention to stand up for financial victims of the bank rip-offs and scandals over recent years? I don't believe it is. This body exists because it's one element of the government's attempts to prevent a royal commission into the banks. That's the point that I made earlier: this is another limb of this government's argument to stop a royal commission into the banking sector in this country. It was only when the banks gave the green light to the Prime Minister by writing to him and saying, 'It's okay to hold a royal commission now,' that the government eventually rolled over and held the commission, which commenced its proceedings yesterday.

The key issue that I've raised time and time again is: how is this going to work? The bill and the information provided to the industry, and to everybody with an interest in this, is scant at best. We've held several meetings with stakeholders who work in this industry. They have expressed the reservations that I outlined earlier about the operation of this new one-stop stop—in particular the folding into this body of the Superannuation Complaints Tribunal.

Since 2016, and in response to anger from his backbench about the behaviour of the banks, the Prime Minister has been promising that we will get a low-cost, speedy tribunal to deal with these types of consumer complaints—customer complaints against banks—and that this will be real action. But then the Minister for Revenue and Financial Services had to walk back from this guarantee and argue that the Prime Minister really meant only a 'little T' tribunal, not a 'big T' tribunal. The budget announced a new body, to be called the Australian Financial Complaints Authority, but let's be clear: this reform was designed to take pressure off the banks for that royal commission, a royal commission that the Prime Minister only called when the banks wrote to him and told him that it was okay to do so.

We all know in this place there have been far too many examples of poor behaviour in the banking and financial services sector, going right back to the scandals involving Storm Financial and Trio Capital through to the CBA wealth management scandals, the CommInsure scandals, the bank bill swap-rate scandals and, more recently, the problems that the Commonwealth Bank is having with alleged contraventions of anti-money-laundering and anti-terrorism financing laws. The scandals keep on coming, and it's only through a royal commission that we will be able to get to the bottom of what's going on in this industry for a fair dinkum, independent assessment of the problems in the banking and financial services sector in Australia and with a set of recommendations that all sides of government, including the opposition and the Greens, can have confidence in. Hopefully, we can restore confidence, strength and stability to Australia's financial services industry.

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

It's a pleasure to stand in this place and speak on the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, which the Minister for Revenue and Financial Services has put before the House.

I am pleased to say that the particular framework that has been created through this bill is something that I've had a number of discussions with the minister about. I think it's an enormous step in the right direction in terms of providing a robust complaints resolution system for when there are problems. Sadly, the current system has shown its failings, or its shortcomings, in dealing with some of the more egregious examples of bank misbehaviour over the past few years. I think this bill is a practical and much-needed improvement for consumers. An important addition is small business, and providing access to free, fast and binding financial dispute resolution. I think that that is a key component of this bill—that the decisions coming out of this body will be binding resolutions to matters.

The bill enacts the government's commitment to deliver on the recommendations of the independent review of external dispute resolutions, commonly known as the Ramsay review. I want to give the minister due credit for pursuing this course of action to establish this tribunal to deal with these issues. As I said, I had a number of discussions with the minister on this particular type of model, and I fully support, therefore, what this bill is trying to achieve, because I think it creates a one-stop shop, to resolve these issues where there are these complaints. We've seen, for example, the situation where the Superannuation Complaints Tribunal had taken an average of almost 800 days to resolve consumer complaints. That is nowhere near good enough, in anybody's book—that somebody has to wait nearly 800 days, on average, to have a complaint resolved. The bill addresses these issues with the creation of this new one-stop external dispute resolution body called the Australian Financial Complaints Authority. It will replace FOS, the CIO and the SCT and bring them all into one organisation. It will commence from 1 July 2018, from which time all new complaints will be dealt with by the new body.

The new Australian Financial Complaints Authority, as I've touched on already, will reduce confusion as it will handle all financial complaints. One of the things we heard frequently was that when people had an issue with financial services it wasn't clear who they should go to, to make a complaint and try to have that complaint resolved. That's what this body will do. By having a one-stop-stop that includes superannuation complaints, managing the complaints will be a smoother and more professional process.

Importantly, this is about creating a body that will provide resolution for consumers of their concerns. It is true that the banks and the financial services organisations over the years have let themselves down, and they do need to be held accountable for their shortfalls, but this is where people will have the opportunity to raise those complaints and those concerns. Importantly, the new authority will also be able to hear higher value complaints and award higher amounts of compensation, increasing access to redress for consumers and small business.

The key element of the new one-stop shop is that it is a single new external dispute resolution body to handle all financial disputes, authorised by the Minister for Revenue and Financial Services. The scheme will be industry funded, which will allow flexibility to increase funding in response to unforeseen increases in complaint volumes. The authority will be governed by a board, comprising an independent chair and an equal number of directors with consumer and industry backgrounds. At the establishment of the authority, the minister will appoint the chair and a minority of board members. The authority will be able to hear disputes of up to $1 million and be able to award compensation of up to $500,000. Consumers and small business will be able to bring a complaint about a credit facility where the facility is for an amount of up to $5 million, and they may be awarded compensation of up to $1 million. There is an unlimited monetary jurisdiction being maintained for all superannuation disputes.

I think it is worth looking at the history of how we got to the point of needing to change current arrangements. I've probably touched on some of that already, but it's worth looking at a broader review. The Ramsay review found that the current dispute resolution framework was the product of history rather than design. It found that having multiple schemes with overlapping jurisdictions means it's difficult to achieve comparable outcomes for consumers with similar complaints, and more difficult for consumers to progress disputes involving firms that are members of different schemes. This, as I touched on earlier, increases the risk of confusion for consumers.

Also, we've seen that the current monetary limits for FOS and the CIO are no longer fit for purpose and are preventing access for many individuals and small business to the complaints resolution processes of FOS and the CIO. The current monetary limit of $500,000 and the compensation cap of $309,000 bear little relationship to the value of most financial products—for example, residential mortgages, a range of insurance policies and even some investments. There are fundamental problems with dispute resolution arrangements for superannuation, which I've touched upon before, with the enormous backlog at the Superannuation Complaints Tribunal.

There has been support from the industry for the creation of this authority. Gerard Brody, the CEO of the Consumer Law Action Centre, stated:

Australians need one, high quality service to resolve their disputes against financial institutions quickly and fairly. The one-stop shop … is a sensible move that can help Australians get justice.

Choice has also welcomed the announcement, which will provide consumers with this single, one-stop shop. The authority will also assist with small business. The Council of Small Business of Australia noted:

… this new Authority will provide business owners with a clear mechanism to seek redress where they have been unfairly done by.

Consumers will benefit from the new framework through the ability of the authority to have flexibility in dealing with complaints in a timely manner and to have direct control over its funding and processes. This is envisaged to deliver practical improvements to consumers and small business. At the end of the day, that's what we're interested in. We're interested in seeking a model that is going to assist consumers and small businesses to have their disputes resolved in a timely and efficient manner. Consumers will be able to approach the authority to resolve all financial complaints, eliminating, as I touched on before, the uncertainty and the confusion. Where complaints cover multiple providers within the financial system, these complaints will now be able to be handled by the one authority.

The bill also introduces a new internal dispute resolution reporting regime to provide firms with an incentive to have best practice for internal dispute resolution. It is disappointing that, at a time when our financial services organisations are well aware of their corporate responsibility, their internal dispute resolution systems are not able to resolve these complaints and we need to proceed to an external dispute resolution process. But this new internal dispute resolution reporting regime is designed to ensure that financial systems firms do have first-class internal dispute resolution processes. I would hope, through that process, and improving their internal dispute resolution process, that the need for complaints to be referred to the authority and to an external dispute resolution process is minimised.

The establishment of this authority—the powers it has, the opportunities it will provide, the flexibility it has, the increased financial limits that will apply, and consumers and small businesses knowing they can go to one place to have their concerns heard and dealt with—will be of tremendous benefit to consumers and small business. I would like to thank the minister for her willingness to discuss this over the past 12 months or so and to be open to discussing various ideas. I commend this bill to this House.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

It is disappointing that the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 is coming forward in this form, and without additional promises of resourcing. I think anyone who has looked at the complaints-handling systems in this area would probably agree that some things could be done better. But, when you ask the people who actually work in those bodies that exist at the moment, 'What could be done to better improve complaints, say, around superannuation?', one of the loud responses that comes back is, 'Properly resource us.' In the context where this government regularly takes the axe to the Public Service and where it sees public servants not as people who work for the benefit of the community but instead simply as a cost to be cut, it's not surprising that people find themselves facing, potentially, long waiting times to get their various disputes resolved.

One of the things we've seen with the royal commission that the government was dragged kicking and screaming to support was that of course it couldn't let pass by an opportunity to attack industry superannuation funds, even though those funds often return much better returns than other funds. I say this as someone with a foot in both camps. I have an industry fund but also a private fossil fuel-free fund in Future Fund. I say this not being on one side of the chamber that feels they have a vested interest to either defend or attack, but it is very, very clear the government will use every opportunity it can to attack what it perceived to be funds that have union links, and so it is with this bill.

The government comes along and says, 'Well, here's a couple of complaints-handling authorities where we could make a difference'. Then it looks at the Superannuation Complaints Tribunal and, for reasons that are not really made out, asserts that there is a problem that can't be fixed with better resourcing and so decides that the tribunal needs to be abolished and rolled into a new organisation. One of the things that concern me about that is that this is all being done without any promise of additional resourcing. It is not at all clear from all the things we've heard from members of the government—concerns about trying to get their disputes resolved—that this not necessarily going to fix that at all. At the end of the day this is as much about ideology and responding to political pressures as it is about making a sensible decision about dealing with the governance of superannuation funds. You look at every other area with superannuation funds—changes to directorships and the like—and it is making these changes on an evidence-free basis, purely on the basis of ideology. I worry that is the case with this bill as well.

There have been some suggestions made that the Superannuation Complaints Tribunal has been far too legalistic. One of the things the people who work there have impressed on me in my discussions with them is that many of the complaints are resolved informally, without the need to proceed through the formal complaints process. Whether or not they're counted in the statistics that government members rely on, I don't know, but it has certainly been the case that, although they're called a tribunal, in many respects they've actually operated almost like an ombudsman: they've helped take complaints and resolve them, often without having to initiate formal processes with funds, as one might expect and one might hope. It is not at all clear that that process is going to continue or, at least, that there'll be a separate, dedicated level of resources given to that industry.

It is also concerning in that respect that we see this slow privatisation of complaints handling mechanisms and of government authorities, because—putting aside the principal position, the ideology of that—one of the things that does, for example, is remove the Superannuation Complaints Tribunal, to the extent that it's covered by FOI and AAT, from that process, removes it from that oversight. I'm not saying that every decision of the complaints tribunal could be taken to one of those bodies but, certainly, the internal processes were governed by that. The more that governments take bodies that make decisions out of the public realm, slot them over and say, 'We're going to create a new private company now,' the less oversight there is over the way these organisations do business. We've got laws that demand that people get paid superannuation. It's not an option now: if you're an employer you have to pay it for your employee. So, we have a federal law that says we have to funnel huge amounts of money into these schemes. Given that they're federally regulated, you'd expect that when complaints arise there should also be some federal oversight of those complaints. But taking away AAT and taking away FOI in the way that I'm advised will happen as a result of this is not right.

The previous member said: 'Oh, well, this is all good. It's got the support of the industry.' Again, that's not right. Industry Super—again, an organisation that I don't have any particular ties to; I'm not here to bat for them politically, one way or the other—have come out and said: 'No, we don't support this change. We think there's a better way of dealing with complaints within superannuation.'

So I was hopeful that some of the good elements of this bill might have been able to prevail in the amendments that were moved in the Senate—I believe by the opposition—around the issue of the Superannuation Complaints Tribunal. Sadly, they didn't succeed. There were some other amendments that we proposed that I understand did succeed, and that's good. They made the bill slightly better. But without some further attention being paid to and the further case being made out as to why the SCT should be rolled in together with all of these other bodies then that aspect of the bill can't be supported, because it will make a change for which no case has been made and which could be fixed through other means—if the government wanted to stop attacking the Public Service and instead support it. And it has the potential for a number of deleterious consequences, including less oversight.

I imagine that this bill is going to sail through this place in the way that it sailed through the Senate, but I think opposition to that point, in particular, needs to be made, because it's an issue that was raised with the government when this bill was being progressed. They've steadfastly—I think perhaps for ideological reasons—refused to countenance any change to deal with that issue. As a result, opposition to that part of the bill has to be placed on record.

Ross Hart (Bass, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to be able to speak to the issues arising from the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017, currently before this chamber. I speak to the bill in the context of a 30-year career as a legal practitioner, primarily as a commercial practitioner, but also in the latter part of my career as a litigation practitioner, addressing a lot of work within the financial services industry but also dealing with people as customers who were attempting to deal with, I might say, the pointy end of the financial services industry.

It's important for this place to understand that there is significant anxiety generated, particularly when a financial organisation seeks to take possession of real estate that's been pledged to secure a customer's obligations under a loan. In other words, the foreclosure process brings the customer and the bank into conflict. And, up to now, that conflict has really only been softened or ameliorated by the intervention of the Financial Ombudsman Service and the alternative dispute resolution services that are made available by the financial institutions.

We also need to be mindful of the fact that there has been significant disquiet in the community about financial institutions and the banking industry, and that that disquiet has led to significant pressure being placed upon the government to inquire into the conduct of financial institutions. Hence, Labor announced at the last election that it would support the establishment of a royal commission to inquire into misconduct in the financial services sector.

What we have before us today is very much the government's initial response to that political pressure that it was necessary and appropriate to inquire into misconduct within the financial services industry. Unfortunately, as is the case with the government's response with respect to the rolling out of infrastructure, there is a very significant gap between announcement and deliverable, particularly when you look at what's being proposed in this legislation.

Let me be perfectly clear. Labor moved amendments to this legislation in the Senate so as to retain the existing tribunal which addressed statutory superannuation complaints. That was undertaken in order to protect the quality of superannuation dispute resolution and the integrity of the compulsory superannuation system. The central reason for that was that Labor felt that it was necessary to keep this new authority out of regulation of or inquiry into complaints dealing with superannuation. We moved those amendments in good faith because we believed that the changes that we proposed would have significantly improved this legislation. We are disappointed that the amendments were not accepted by the Senate. We are also concerned that the government has not been able to give satisfactory answers to questions about how the transition process that will apply to the new financial complaints body in this bill would work—because we're not talking about something which is trivial in execution. We're talking about the consolidation of a number of different organisations, including a statutory Superannuation Complaints Tribunal, into one body. We know, nevertheless, that this will pass the House, and Labor will support the passage of this bill through the House of Representatives.

It is appropriate that we consider some of the history leading to the introduction of this bill and why we're here today. As I said earlier, in April 2016 the opposition announced that a Labor government would establish a royal commission into misconduct within the financial services sector. It might be fairly put that the government's response was somewhat lacklustre. It concentrated on reforming the powers of the Australian Securities and Investments Commission and implementing the Ramsay review into the financial system external dispute resolution processes. An expert panel conducted a review to ensure that the Australian system of external dispute resolution was effectively meeting the needs of users of the financial system. As I indicated in my opening, I've seen this in operation. I've seen it in operation while acting for the banks, but I've also seen this at the pointy end when individual customers are endeavouring to deal with external dispute resolution. I've seen where litigation has been stayed as a consequence of a complaint made under the Financial Ombudsman Service and the other schemes.

Whilst there might be a case built for the establishment of a consolidated one-stop shop as described by the government, I do still have significant concerns as to the incorporation of the separate and distinct area of superannuation into that one-stop shop. The bill combines three existing external dispute resolution schemes—that is, the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. The new body, as everybody is aware, will be known as the Australian Financial Complaints Authority. What needs to be emphasised is that this bill actually abolishes an existing tribunal under what might be described as a 'rebranding' exercise.

Of course, the context for this is vitally important to understand because this was in the context of Labor's calls for a royal commission. In late 2016 the Prime Minister promised a low-cost speedy tribunal to deal with financial sector complaints. He said this would constitute real action against the banks. Rather than real action, what we have with this bill is a merging of the Financial Ombudsman Service and the Credit and Investments Ombudsman rebadged as the Australian Financial Complaints Authority. The body has no new or additional powers other than accruing some additional jurisdiction—that is, monetary jurisdiction—in that the new authority can hear disputes with higher monetary thresholds than its predecessors. That is a good thing in the sense that it opens up the jurisdiction to more disputes.

If you were cynical, you would think that the implementation of this complaints authority was simply another delaying tactic from this government intended to stave off increasing public pressure for a banking royal commission. Before now, most disputes with financial service providers in Australia were resolved through internal dispute resolution processes between the customer and the relevant bank or other providers. I know the protocols that apply with particular complaints. I know the banks are required to investigate certain complaints, escalate particular complaints, but it doesn't remove, in my view, the general concerns that we have regarding financial misconduct, particularly in the area of sales of financial instruments and financial advice.

There have been far too many examples of poor conduct on the part of the banks and the financial service providers, including illegal activity, misconduct, inappropriate financial advice, insurance claims unfairly declined, fraudulent activity, the targeting of whistleblowers and irresponsible lending. Many of those complaints of particularly egregious behaviour have been seen by me in the course of my legal practice. And, of course, it is true that if you needed to articulate that argument in a court, it would be very difficult to do that with the resources that are available to a financial institution like a major bank and the resources available to an individual customer. That is, after all, why Labor remain committed to the establishment of a royal commission into the financial sector that would extend to banks, insurance providers and superannuation funds.

It must be emphasised that the word 'authority' in this particular authority's name is a misnomer. This is just another ombudsman scheme, according to the minister, as confirmed in the Senate, in this case in the form of a private company limited by a guarantee. There are already two of these organisations in existence for financial services disputes, which, as I've said earlier, are the Financial Ombudsman Service and the Credit and Investments Ombudsman. The bill abolishes the three existing complaints-handling bodies and, in many respects, represents a merger and rebranding of the work of three separate authorities. There is some overlap between the work of the two previous bodies. Indeed, I've seen some financial firms choose one or other of the ombudsman services and, in practical operation, they seem to me to be indistinguishable. At the moment, a customer who has a dispute with a bank, an insurer, a payday lender or a mortgage broker can go to an ombudsman scheme to have their dispute resolved. Once this bill passes, the customers will be able to go to an ombudsman scheme to have the dispute resolved.

We have some concerns as to the transitional arrangements that are proposed. The government has said that AFCA will start from 1 July 2018 for new complaints and so we're hoping that the government has given proper consideration to make sure the transition process works.

There has been a Senate inquiry, and it has raised concerns about this. A commentator, Mike Taylor, summarised in Super Review some of the concerns about this process in light of evidence given to the Senate:

There is much to suggest that the creation of AFCA represents a bureaucratic slow-motion train crash with the Treasury officials confirming that the financial services industry will have to deal with four different external dispute resolution schemes for at least a year after the necessary legislation is passed and that the Superannuation Complaints Tribunal will still be clearing its workload as late as 2022.

Labor has questioned the government in the Senate about the transition plans and how they would make sure that the transition to the AFCA would work. The lack of detail in the answers has been very concerning. It seems that since the bill passed the Senate the government has announced additional funding in MYEFO, which of course is welcome, to help the Superannuation Complaints Tribunal work through its existing workload. It was very concerning that the government did not appear to properly plan for this when announcing AFCA in the budget.

As I said earlier, these sorts of external dispute resolution schemes are very important. They are important to give the voice to consumers, sometimes in situations which are really riven by conflict. The situations that I've seen are those where customers are the subject of foreclosure proceedings, and in those circumstances it's certainly appropriate for external dispute resolution to be promoted by any responsible regulator or government. However, as I've said in my remarks this afternoon, it's vitally important that the government understands that there is an existing effective complaint scheme with the Superannuation Complaints Tribunal. The effectiveness of the transitional arrangements needs to be monitored and they need to be properly resourced. We'll have a situation where, if the government takes its eye off the ball, there will be significant distress occasioned to people that are already exposed to the stress of foreclosure or dispute with a financial institution.

Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Link to this | Hansard source

Firstly, I'd like to thank those members who have contributed to this debate. Today the government is delivering on its commitment to overhaul the financial dispute resolution framework as announced in the 2017 budget in response to the Ramsay review. There is a clear need to improve the dispute resolution framework, which is a product of history rather than design. Currently, there are three external dispute resolution bodies: the Superannuation Complaints Tribunal, the Financial Ombudsman Service and the Credit and Investments Ombudsman.

The existence of multiple external dispute resolution schemes with overlapping jurisdictions means it is more difficult to achieve similar outcomes for consumers with similar complaints. It is also difficult for consumers to know which scheme to approach, leading to duplicative costs within the system. The monetary limits and compensation caps that apply under the existing schemes are manifestly too low and are not working to ensure access to justice for consumers and small businesses. FOS' and the CIO's current monetary limit of $500,000 and compensation caps of $309,000 bear little relationship to the value of most financial products and are no longer fit for purpose. Similarly, the monetary limit of $2 million for credit disputes and a compensation cap of $309,000 is precluding too many small businesses from accessing justice under the existing schemes.

Further, the dispute resolution arrangements for superannuation are in drastic need of improvement. The inflexible tribunal model has meant that the SCT has been unable to resolve disputes in a timely manner, and the body now has a significant backlog of legacy claims. At the time of the Ramsay review, the SCT was taking an average of 796 days to resolve a dispute that reached determination stage. This is clearly unacceptable.

In April 2016, the government commissioned an independent comprehensive review of the dispute resolution framework, led by an expert panel comprising Professor Ian Ramsay, Julie Abramson and Alan Kirkland. The review made 11 recommendations to strengthen and futureproof the dispute resolution framework, and the government accepted all of these recommendations.

The flagship recommendation was for the establishment of a new one-stop shop industry funded dispute resolution scheme to hear and determine all financial disputes, including superannuation disputes. The new scheme would replace the SCT, FOS and CIO. The reforms in this bill to establish the Australian Financial Complaints Authority will radically overhaul how financial disputes are dealt with in Australia and will ensure that significantly more consumers and small businesses have access to free, fast and binding dispute resolution.

All financial firms, including superannuation funds, that deal with consumers will be required by law to be members of AFCA, and decisions of AFCA will be binding on financial firms. AFCA will be based on an industry ombudsman model, which will provide it with the flexibility to adapt to changes in the financial system and user expectations. By not restricting how AFCA deals with complaints, the framework enables AFCA to be flexible and innovative and to take advantage of new technologies and techniques in the resolution disputes.

AFCA will be a not-for-profit company governed by a board comprising an independent chair and equal numbers of directors with industry and consumer backgrounds. The bill introduces a legislative framework which sets out the standards that AFCA must adhere to, ensuring that AFCA is accountable to its all users: consumers, small businesses and members of financial firms. Under the legislative framework, AFCA will be accessible to consumers and small businesses which would be able to have their disputes heard by AFCA for free, and will be funded by industry. AFCA will have a range of statutory powers to effectively manage superannuation complaints, such as the ability to join third parties to a dispute, to require parties to attend conciliation, and to require the production of information.

As the Minister for Revenue and Financial Services, I will authorise the new AFCA scheme and I will have the ability to set conditions on authorisation. Until I am satisfied the scheme will have robust systems and processes, I will not authorise AFCA. I will also appoint the independent chair and a minority of the initial AFCA board to ensure that it has an appropriate mix of skills and experience.

The Australian Securities and Investment Commission will be responsible for overseeing AFCA to ensure that it meets the standards set out in the legislation. So that ASIC can fulfil this role, the legislation will provide ASIC with the ability to set regulatory requirements that AFCA must adhere to and will also provide ASIC with a general directions power to compel AFCA to comply with the standards set out in the legislation. In addition, ASIC will have a specific directions power that can be used to require AFCA to increase funding in the event that it is insufficiently financed.

The bill was examined by the Senate Economics Legislation Committee. In response to the committee's report, the government moved a number of amendments to provide additional certainty and clarity around aspects of AFCA's operations, to ensure it will operate as effectively as possible. Additionally, the government will commission an independent review of the new external dispute resolution arrangements 18 months after AFCA commences operations. This review will take into account feedback from consumers and small businesses regarding whether AFCA resolved their complaint in a way that was fair, efficient, timely and independent. The review will also specifically examine the appropriateness of the monetary limits applying to complaints relating to credit facilities provided to primary production businesses. The Legislative and Governance Forum for Corporations was consulted in relation to the bill and to these amendments, and has approved them as required under the Corporations Agreement 2002.

While overhauling the dispute resolution framework, the government also looked to strengthen the internal dispute resolution processes within firms. The legislation also introduces a new IDR reporting regime. Under the regime, ASIC will be provided with the power to collect and publish IDR data at both the aggregate and firm level.

Being such a significant reform, the government understands the importance of having a smooth transition from the existing dispute resolution bodies to AFCA. That is why the government has created a transition team, led by Dr Malcolm Edey, a former assistant governor of the Reserve Bank, to drive the establishment of AFCA. The transition team has undertaken consultation with key stakeholders, and feedback from that consultation process will inform its advice to government on AFCA's terms of reference, governance and funding arrangements. It will also advise government on the transitional arrangements required to appropriately resolve legacy disputes of the three existing schemes.

Once the legislation is passed by the parliament, I will be seeking an application for authorisation. Following an assessment of that application, I will be authorising AFCA and making my formal appointments to the board. It is my intention to do this as swiftly as possible, to ensure that the AFCA board has the maximum time available to put in place the required operational arrangements, including securing membership and funding, and to undertake consultation on its terms of reference and funding arrangements ahead of AFCA's commencement. In line with advice received by Dr Edey and the transition team and in order to facilitate an orderly transition to AFCA, it is my intention that AFCA will commence accepting disputes no later than 1 November 2018.

The change to IDR and the establishment of AFCA will ensure that consumers have free, fast and binding resolutions of complaints regarding financial services, ensuring confidence in our financial system. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.