Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

The purpose of the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 is to amend the Corporations Act 2001 and other related legislation to implement the central recommendation of the Ramsay review. What was that? You've probably heard this from the minister several times. It was for the establishment of a new one-stop-shop external dispute resolution, or EDR, framework—the Australian Financial Complaints Authority.

The Australian Financial Complaints Authority will replace the Superannuation Complaints Tribunal, SCT, the Financial Ombudsman Service, which we know as FOS, and the Credit and Investments Ombudsman, CIO, in the existing EDR schemes approved by the Australian Securities and Investments Commission. It will also provide an enhanced internal dispute resolution, or IDR, framework. Basically it's about dealing with all customer financial disputes about products and services provided by any financial services firms, including superannuation disputes.

What is EDR, or external dispute resolution? EDR schemes are designed to provide a cost-free, relatively quick and independent service to resolve disputes between consumers and providers of financial services or credit. EDR schemes represent an alternative to the often costly and time-consuming effort of going to court. They may assist in resolving complaints through the use of negotiation or conciliation and requests for further information in order to help a complainant deal with a dispute.

The outcome of an EDR process may be a decision that is binding on the financial services or credit provider, if it is accepted by the consumer. This may include ordering that compensation be paid to a consumer, if they have suffered a loss, or a dispute may be resolved in some other way. As mentioned before, there are two EDR schemes, FOS and the CIO.

The FOS is an independent dispute resolution service for individuals and small-business holders. Those of us who have been working with the victims of financial crime for some years now are very familiar with FOS. It is governed by an independent board of consumer representatives and financial service industry representatives. It is typically the larger banks and their insurance arms which are members of FOS. Basically, FOS can generally hear disputes if: the dispute is between an individual or small business and a bank or financial institution, including credit unions; the financial services provider is a member of FOS; or the dispute relates to an act or omission by a financial services provider in relation to a financial service in Australia; a claim whose monetary limit does not exceed $500,000; a dispute involving a claim for more than $500,000, if all parties in FOS agree; and the event to which the dispute relates occurred no more than six years earlier. I note that the bill before us under the new AFCA structure improves outcomes in relation to FOS's current powers and limits on disputes on claims, which is a good thing.

The Credit and Investments Ombudsman, CIO, operates in a similar manner to FOS. Its key goal is to provide consumers with a cost-free alternative to legal proceedings for resolving disputes they may have with their financial service provider. Participants in the scheme include credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, investment managers, debt services and a wide range of other financial services and product providers. CIO operates mainly in the credit sector. Its member profile consists of nearly 24,000 members, about 97 per cent of which are sole traders and small businesses. That membership is mainly comprised of the group that I've just mentioned.

Lastly, the Superannuation Complaints Tribunal is an independent statutory tribunal. It's not subject to ASIC's approval, and only deals with complaints against trustees and certain insurers in relation to superannuation funds, annuities, deferred annuities and retirement savings, by virtue under the relevant provisions of the Superannuation (Resolution of Complaints) Act 1993. As explained by the industry super funds in submissions to this legislation, complaints about superannuation that are dealt with by the SCT are different to complaints about the financial products and services dealt with by other financial service external dispute resolution schemes.

That is the basic background on what we're dealing with here tonight. We're dealing with legislation that merges all three entities. The intent of that legislation is to improve outcomes for consumers, to make things quicker, to have a new funding model, to provide a one-stop shop and to get through a backlog of complaints and disputes in this country. I want to acknowledge Minister O'Dwyer and the work she has done to bring this legislation forward. The Greens have had constructive discussions and conversations with the minister over recent weeks. While we haven't yet reached a satisfactory accommodation on the inclusion of the SCT in this new AFCA, we do support the intent of merging the CIO and the FOS and improving outcomes for consumers.

We support the merger of the Financial Ombudsman Service, FOS, with the Credit and Investments Ombudsman, CIO, but we're still not convinced of the need to bring in the Superannuation Complaints Tribunal under the umbrella of the merged authority. We acknowledge—indeed, others opposed to the inclusion of the SCT in this new body, such as the CPSU themselves, also acknowledge—the need for the SCT to be reformed and to have better resourcing and funding. But a number of important stakeholders throughout the consultation process—indeed, even in the hours and days leading up to this legislation—still disagree that the inclusion of the SCT in the AFCA model is the way to solve problems with the SCT, and I will come back to that later.

This legislation can be related directly to the Ramsay review, as I mentioned earlier, but the origin of this bill stems from the government's unwillingness over this term of government to call for a royal commission into the banks and financial services sector. It was brought together quickly to reduce the volume of calls for a royal commission. In fact, the new AFCA was first floated as an idea to head off demands from Liberal MP Warren Entsch, to satisfy his concerns and prevent him publicly supporting a royal commission. It has since been spun, including by a large number of Liberals in this chamber, in debates and in the media, as an important part of their frame and a reason for not having a royal commission—or at least as a reason for the government not acting on implementing their own royal commission.

I often say that good legislation is a bit like baking a cake. We have the politics and we have the policy. The policy includes the ingredients that you need to make the cake edible, but the politics is what sets the oven at the right temperature to actually bake the cake. I think the government was hoping that they would get widespread support for this scheme as a substitute for having a full, in-depth royal commission looking at misconduct, but, as we know now, that changed after the Prime Minister's magnificent double-twist with a full pike backflip, which we saw last week. We now actually have an in-depth inquiry into financial misconduct in this country.

I want to talk a little bit about the royal commission and the terms of reference. It is very clear in the terms of reference. Item 1e) states that the commissioner will examine

the effectiveness of mechanisms for redress for consumers of financial services who suffer detriment as a result of misconduct by a financial service entity.

We know that other aspects of the industry super bodies will be looked at by the royal commission. As I've said in here before, the Greens' bill that passed this place, which had the support of Senator Williams and the support of Labor in the House, also had broad enough terms of reference to have a similar inquiry by the commissioner. This issue will be looked at by the royal commission. We're now dealing with legislation before us which has been in train for some time, and since only a few days ago we have a commissioner looking at similar issues relating to disputes and the same body that was looking to merge into the AFCA.

The government has also been talking recently about a last-resort compensation scheme. It has been said—indeed, this was hinted at in the Ramsey review—that this would be ideally bolted onto the Australian Financial Complaints Authority. I haven't been involved in discussions with anyone about a last-resort scheme. I know that Senator Xenophon certainly talked a lot about that when he was in this place, and Senator Williams may have some light to shed on this. We know it was a live option for the government. There were active discussions on this until recent days. I don't know if it's still active and still under consideration. If a royal commission does recommend compensation or grounds for compensation for victims of financial crime, as I hope it will, then this scheme is going to be really important. If the royal commission is going to last only 12 months, why aren't we dealing with that in the legislation here tonight? That is clearly going to be an important part of any new financial complaints authority.

I'm not really sure that we've got the ingredients right here tonight. I don't believe that the SCT, the Superannuation Complaints Tribunal, should go into this body at the moment and I don't believe that the politics of this has set the temperature right for this to pass the Senate. I may be proved wrong in just a few minutes. What we have, when you think about it, is a confusing spaghetti bowl of ideas, policies, legislation and spin around financial complaints.