Address by the Hon Helen Coonan, Independent Chair, and Chief Ombudsman and CEO David Locke – AFCA Annual General Meeting, 13 November 2020
AFCA is of course as we all know a not-for-profit organisation, established as a member-based company limited by guarantee. In my role as Chair, together with the Board and Management, we are proud of helping to establish a world-class ombudsman service that is free to consumers and small business, and one that provides fair, independent and efficient dispute resolution services for financial firms and their customers.
During my time as Chair, AFCA has already assisted over 135,000 Australians to resolve disputes that they have had with financial firms, providing over $470 million in compensation to individual consumers and small business owners.
AFCA has now been in operation for 2 years and has moved from the establishment phase to now delivering against its ambitious strategy to be a world-class ombudsman service: raising standards and minimising disputes, meeting diverse community needs and trusted by all stakeholders.
The 2019-2020 financial year will, of course, be defined by the COVID-19 global pandemic and its social and economic impacts. The challenges this has presented consumers, small businesses and the financial services industry have really been unprecedented and will continue to be felt for months and years ahead.
I am proud of how adeptly AFCA and its staff have responded to the myriad of challenges this has presented, and how proactively its leadership have worked with consumers, consumer groups, and small businesses, financial firms and the financial regulators to ensure AFCA’s services are tailored to appropriately meet needs, and minimise disputes during this period.
2019-20, in many ways, is I think a story of two halves, which started on 1 July 2019 with AFCA implementing the expanded ‘look back’ jurisdiction that the Morrison Government conferred on it. For a 12-month period this broadened AFCA’s jurisdiction to consider complaints involving conduct dating back to 1 January 2008.
This aligned with the period that had been considered by the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This change to our jurisdiction gave consumers, who otherwise may have had no opportunity for redress, the ability to have their complaint heard. During the financial year 1,749 complaints were lodged with AFCA. This jurisdictional change came to an end on 30 June this year, 2020.
AFCA is committed to providing accessible services to all Australians and is highly aware that the challenges facing regional and rural communities are often very different to those in our cities. For this reason, in September 2019, AFCA embarked on a National Roadshow, visiting 30 locations across, Tasmania, Victoria, ACT and New South Wales.
Along the route, the team hosted special regional forums for members, small business and consumer advocates, to give all members of the community an opportunity to meet AFCA ombudsmen and learn about our service.
The terrible bushfire season, and COVID-19 pandemic, meant that it was not possible to continue the roadshow into other states and territories this year, but AFCA remains committed to seeking future opportunities to reach out and reach all communities.
Online, AFCA has launched new resources for diverse communities in 20 languages, including a series of videos featuring AFCA’s own people speaking their first language. This is part of AFCA’s mandate and commitment to be accessible and meet diverse community needs.
In each video, a member of AFCA’s team explains how AFCA can help with financial complaints and how to get in touch. This simple initiative is so positive I think because it uses the skills and diversity of AFCA’s own workforce to help us to reach out into communities that might not know about AFCA’s existence and services.
In November 2019, AFCA launched its ground-breaking AFCA Datacube – a free easily accessible online tool with a rich set of complaints data about individual firms, different financial products and the outcomes of complaints.
The Datacube enables any consumer or financial firm to see a presentation of comprehensive complaints data and to compare against others in the market. This new level of visibility is allowing AFCA members, industry and other stakeholders to better understand the products that cause complaints, and the outcomes of complaints made to AFCA.
Two further updates have since been released on AFCA’s Datacube, and it has attracted interest from other industry ombudsman schemes both within Australia and internationally.
AFCA has embarked on a number of other analytics initiatives this year, some of which will lead to further enhancements to how we use and share our data and insights in 2020-21 and following years.
Also, in November 2019, following a public consultation and the approval of the Australian Securities and Investments Commission (ASIC), AFCA began to name financial firms in its published decisions as part of our commitment to being open, transparent and accountable to the public.
The second half of the financial year was dominated by the bushfire season and then the pandemic.
AFCA responded quickly to the bushfire season by establishing a dedicated portal for consumers and members with tailored up-to-date information.
It established a direct hotline and worked proactively with insurers, banks, chambers of commerce, and consumer organisations to fast-track cases and address issues.
AFCA’s collaborative and highly engaged approach helped achieve timely and positive results for many consumers and businesses that had just lost everything.
In March 2020, AFCA pivoted to respond to the acute challenges posed by the COVID-19 pandemic. It established a dedicated portal and helpline providing information and support to members and consumers.
It sought and obtained approval from ASIC for a six-month change to AFCA’s Operational Guidelines to provide additional time to financial firms to respond to complaints at AFCA’s initial ‘refer-back’ stage, as well as providing more time to all parties at later stages in AFCA’s complaint process. AFCA also met with key stakeholders on a weekly basis, sharing knowledge and data about complaints and it worked in partnership with the financial regulators, financial firms and consumer groups to provide advice and pre-empt issues that could cause disputes.
For many businesses and individuals, the economic impact of COVID-19 is yet to crystallise, and the next 12 months will be a period of financial difficulty for many. AFCA’s services have never been more important than now.
As I reflect on the achievements of the past year, and indeed the two years since the inception of AFCA, I am proud of the achievements that have been made.
I took on the role of Chair in 2018 to lead a new organisation – AFCA, successfully overcoming the challenges of bringing together the Financial Ombudsman Service the Credit and Investments Ombudsman and the work of the Superannuation Complaints Tribunal to form a new external disputes resolution service with an increased jurisdiction, increased membership and the capacity to award significantly increased levels of financial compensation to consumers and small business.
AFCA is not simply a re-grouping of these predecessor schemes, but a new vision. Our strategy – to establish a world class ombudsman service, raising standards and minimising disputes, meeting community needs, and trusted by all. That strategy has reflected a new direction and vision for external dispute resolution for financial complaints in Australia.
We have built upon the good work of the three predecessor schemes to provide great service to consumers, small business and financial firms.
I am proud that AFCA has played an important role in restoring trust in Australia’s financial institutions in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. AFCA has influenced reform in the financial services sector by raising standards and improving internal practices to reduce and resolve disputes.
Those objectives set for AFCA when I first accepted the role have been, I believe, successfully achieved.
My term as Chair will come to an end in May 2021. I now confirm that I will not be seeking re-appointment.
However, I will continue to be actively engaged with the Board and Management until that time, including the process, search and selection of a new independent Chair to take over the leadership of AFCA next year.
At inception, our Board was large, comprising five industry directors, five consumer directors and myself as independent Chair.
With the pandemic underway, we paused on replacing the vacancies arising with the departures of Catriona Lowe (consumer director) who resigned in January 2020 and Robert Belleville (industry director) whose term came to an end in May 2020, to reflect on the size and composition of the Board and skills and experience of directors.
During that time, the terms of Jennifer Darbyshire (industry director) and Elissa Freeman (consumer director) came up and as a Board we considered it appropriate to re-appoint each of them for a further term, and each for a period of 3 years (to May 2023).
A number of directors will have their terms come to an end in May 2021.
As part of our Board Governance processes, we have had an external Board Evaluation conducted, to ensure the Board is right sized and that it is fit for purpose. To that end, the Board will, over the next few months, be focused on our directors, including the appropriate number of directors for the Board, the balance of skills and experience required, as well as tenure and succession planning, to ensure that for AFCA moving forward in 2021 and beyond, we continue the journey as a world leading ombudsman service.
I would like to thank my Board of Directors for their unwavering commitment, and excellent insights and advice, as we have navigated this past year.
I would like to thank AFCA’s CEO and Chief Ombudsman David Locke and his team of senior leaders.
I also extend my deep gratitude to all our AFCA people for their continued hard work in this past year, particularly in the trying circumstances of COVID-19. Their ability to seamlessly shift to working from home with no impact on service to complainants or members is simply exemplary, and the ongoing high performance across the business is testament to their skill, care and commitment to AFCA’s purpose and vision.
I thank all directors, management and staff most sincerely.
I now invite Chief Ombudsman and CEO David Locke to make some remarks.
Chief Ombudsman and CEO’s Address
Thank you Chair.
This has been AFCA’s first full year of operations as we were established part way through the 2018/19 Financial Year.
The demand for our services has been high with AFCA receiving 80,546 complaints from consumers and small business owners. This represented a 14% increase in the monthly average in 2018/19.
A majority of complaints received, 58%in this period related to banking and finance, and then followed by general insurance with 24%, superannuation 9%, investments and advice 6%and then life insurance matters accounted for approximately 2% of complaints coming to us. Of all complaints to AFCA, about 10% were about financial difficulty.
Credit cards were the most complained about product followed by home loans, personal loans () and motor vehicle comprehensive insurance
We resolved 76,681 complaints during the12 month period with complaints taking an average of 73 days to reach an outcome.
AFCA continued to resolve the 10,228 complex complaints that it inherited from the predecessor schemes Financial Ombudsman Service and the Credit and Investments Ombudsman. .
This was a big task and as at 30 June 2020, we only had 24 predecessor scheme cases outstanding. As at today I can confirm that there is just one Financial Ombudsman Service case and 13 from the Credit and Investments Ombudsman and all of these are at very advanced stages in our process.
The task of resolving these has been a massive task with many intractable cases with multiple complex issues being a challenge. AFCA has incurred costs of $1.42 million on the CIO work that was unfunded. This has impacted our end of year financial position. And of course, time that staff spent on these inherited cases was also time that couldn’t be spent on AFCA cases that had been brought to us. We also saw bad debts increase to $2.9 million last year as more firms went insolvent and failed to pay fees to AFCA, as well as failing of course to pay compensation awards to consumers. We have taken measures to mitigate against this, including pausing cases where firms are insolvent. And we are closely monitoring and managing this throughout this year.
With the wind up of the Superannuation Complaints Tribunal at the end of 2020, the remaining cases with that body will be transferred to AFCA and we look forward to providing resolutions to those final matters as well.
In addition to our dispute resolution work, which of course comprises the majority of the work we undertake, we also have a clear jurisdiction with regards to systemic issues. Our systemic issues team undertook this year 218 systemic issue investigations into financial firms. We reported 92 definite systemic issues to the financial regulators as well as 37 serious contraventions of the law also being reported.
AFCA’s membership has increased this year to 40,493 members and we welcome all new members to the scheme. I am delighted to report that 81% of our members had no complaints raised against them in this financial year with AFCA, and we would of course like to see this percentage increase even higher. Our ultimate aim is to help our members to improve their internal practices to avoid disputes before they come to AFCA or where they do arise, be able to resolve them internally rather than have matters escalated to ourselves.
We have continued to share insights through a range of means including dedicated member forums which in the COVID environment we are running as new online events. On Monday next week we are running a Plenary Session for all members, as well as running a dedicated session on the AFCA Datacube to show members how this can be used for their benefit and our plans for the future of this. And we are also running a dedicated Banking a Finance Forum on Monday. On Tuesday we are running forums for Superannuation, General Insurance and Investments and Advice. We already have over 5,000 members subscribed but there are still places available. These forums are free for all members, and if you would like to attend you can login to the Member Portal and find all the details in there.
I’m very pleased that this year AFCA has appointed a new Head of Membership Services, which shows our commitment to improving the membership experience. We have established a dedicated membership team and will be increasing our offering of education, training and support to members in 2020/21. This is one of our key organisational priorities for the year ahead. We will be conducting a Membership Survey in the week of 23 November and again we would welcome feedback on how you see us tracking and to seek views on what will be of most value to you and your businesses.
We are working to improve the data and analytics that AFCA can provide to members as Helen has already outlined. I want to be in the position to be able to give real-time granulated information including on industry and product trends to all members so you can see what issues we are picking up across the financial service sector and how you compare to your peers. We will do this through a significantly enhanced member portal.
As Helen has said the global pandemic has put great pressure on financial firms, consumers and the whole community and this continues. It is only very recently in Victoria we have come out of lockdown and we are still seeing deferrals of many loans in Victoria. AFCA was able to act quickly as the pandemic developed and committed to working closely with the financial sector and consumer advocacy groups to ensure open lines of communication, sharing early data and insights to help address issues as soon as they arise rather than dealing with cases on a case-by-case basis. I am proud of all the approach documents that have been issued to assist everyone to understand how AFCA deals with particular issues from travel insurance to break clauses, to financial hardship. Only yesterday we issued an approach about credit and relationships and also throughout COVID period we published approaches relating to travel insurance, credit card chargebacks, break fees and hardship. We will continue to respond in an agile way as we see issues coming through. The greater certainty we can provide to the community and how AFCA approaches individual matters, the better it is for everybody.
By 30 June 2020, AFCA had received 4,769 complaints related to the COVID-19. As of today, this is over 8,500.
This is a significant number that could have potentially been much higher if it were not for the early action taken by banks and others to defer payments on consumer and small business loans and this really is to be commended, but of course we need to ensure that people are treated fairly, and hardship is offered where necessary, as people come off these arrangements.
The social and economic impact of the pandemic will continue to be felt throughout 2020–21 and beyond, and we are expecting to see increasing levels of financial hardship and small business failures ahead. This will be an incredibly challenging time for many consumers and small business owners, and we know it is already a challenging time for many of our members.
AFCA stands ready to work in partnership with all our members and with consumers over the year ahead. And we are particularly alert to the period from March next year when we see the end of Job Keeper payments and Job Seeker support initiatives.
It was always provided in AFCA’s legislation that AFCA would be subject to an external review at 18 months or as soon as possible thereafter. This has not yet happened because of COVID-19 although we look forward to this when it is announced by Government. Next year we will also undertake a funding review to see if the current funding model needs adjustment, we are very conscious that some members have raised issues about fees on more straightforward matters. We really want to look at how the funding model is playing out and if it is delivering frustration to the market or needs adjustment. We will be undertaking this work in the new year.
I would like to thank members for the constructive way they have engaged with AFCA this year. Helen has already mentioned the AFCA staff, and I too would like to thank the Board for their tireless work to help us to deliver a high-quality service to all throughout the last 12 months.
Helen Coonan has announced this morning that she will not be seeking a re-appointment when her term comes to an end in May next year. This will therefore be Helen’s last AFCA AGM. Helen has been, and continues to be, a fantastic independent Chair of this organisation. She has brought huge expertise, and skill, as well as real passion and commitment to this cause and to this role. I would like to conclude my remarks today by formally thanking her for her work in establishing this organisation.