Coonan’s mission to raise standards and restore trust

The new Australian Financial Complaints Authority formally opens its doors today (November 1), replacing the three existing external dispute resolution schemes of the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT).

AFCA aims to provide fair, independent and effective solutions to resolve and reduce financial disputes, working with consumers, small business and the financial services sector.

The chairman is Helen Coonan, a former Liberal senator who previously held senior roles in the Howard Government including Minister for Revenue and Assistant Treasurer, and Minister for Communications, Information Technology and the Arts.

In our exclusive interview below, Coonan explains the mission of AFCA is to restore trust in the financial system for consumers and small business, and why she believes the authority will be a “game changer”.

She also predicts a sharp spike in financial complaints over the next year, some of which will emanate from the Royal Commission, and that AFCA could potentially curb the number of class actions being launched in courts against financial institutions.

Listen to our podcast, or read the full interview transcript below.

Helen Coonan: I’m grateful for the opportunity to talk about after the new organisation because we do think that it’s got a very important role in restoring trust and providing a much more edgy and on-the-mark service. So happy to talk about all of these things.

Tony Kaye: Excellent. My first question was really about AFCA in the sense of, why is AFCA an important development for investors?

Helen Coonan: It’s got, basically, two major functions, Tony. Firstly, we offer an impartial, fair, and effective service to assist consumers and small business to resolve their complaints and really help them to get on with their lives. That’s our first thrust.

The second is, it assists AFCA members by providing clarity and certainty around complaint resolution processes, and provides support to financial firms in developing and strengthening their own internal processes. It is a very big focus of the new organisation. We want to be proactive, reach out to members, help them resolve disputes right at the outset, help them with their own internal processes so that it minimises the need to come to AFCA and certainly minimises the frustration and disappointment for their customers. Raising standards and minimising disputes are the twin objectives of what we’re trying to do.

Tony Kaye: Do you see that it will provide better complaints outcomes than the previous bodies that were in existence, particularly the Ombudsman Service?

Helen Coonan: Yes, I think it will because of ... as you know, we’ve come out of the [Professor Ian] Ramsey review of 2016 and the government has very closely implemented those recommendations, with the exception of the scheme of last resort, which is the compensation scheme of last resort, which was parked until the Royal Commission has reported. Subject to that, of course, we’ve got significantly expanded jurisdictional limits. Not only in terms of higher monetary limits, but also with the addition of superannuation complaints. So we’re pretty much cover the gamut of the kinds of financial services that have given rise to the disappointments that have been exposed in the Royal Commission.

And due to these increased limits, now more Australians than ever before are able to obtain access to resolutions by bringing their complaint to a single, independent, alternative dispute resolution body rather than previously where they had to navigate multiple things, or go to court with the attendant expense and appeals. Our decisions are final for members, but consumers are still free, if not happy with our decisions, to go to court. So, the fact that it’s binding and final on members, I think, is certainly the way in which the scheme needs to operate to deliver justice for consumers.

And the third thing, I think, with the arrival of AFCA, many small business complaints will now be covered by an external dispute resolution scheme for the first time. Small business, for us, is defined up to 100 employees. And we know that small businesses are a really very key part of the Australian economy. They’ve been featured in the Royal Commission and we do know that they have limited resources and time to navigate issues through courts or even with ombudsmen. So we have to provide a very quick turnaround for them, a fair, free, and independent way of resolving disputes so that they can get on with their lives and businesses.

Tony Kaye: One of the questions I wanted to ask you is about funding from the government to AFCA. What sort of funding commitment has the government given in terms of funding and how will that be allocated?

Helen Coonan: We had some initial, very small funding just to cover the costs and difficulties of migrating two existing schemes into AFCA, but that won’t be in any way recurring funding. We are completely funded by memberships of financial service institutions who are required as a condition of their financial service or their Australian credit licence to be a member of the organisation. So, Tony, we will have up to 37,000 members and membership fees will obviously be levied to be a member. And then, of course, there’s a user pay system for dispute resolution, so our funding model really is independent of government.

Tony Kaye: I also wanted to ask a couple of questions next, perhaps they’re tied together, but I want to ask about your own personal objectives for AFCA and how that sort of comes into the background to your appointment to the role as chairman.

Helen Coonan: Well, I’ll just talk broadly about our vision first, and then I’ll certainly come to me. But our vision for AFCA is really no small thing. We want to strive for AFCA to be a world-class ombudsman that both raises standards and minimises disputes, and meets the diverse needs of the community it services. And which, crucially, restores trust. Is a trusted institution by all who use it, be it our member organisations or consumers or small business. And we want to achieve this by providing, as I’ve mentioned, fair and independent and effective solutions, which are free to consumers, I think that’s very important, and small business and binding on financial firms. So these are all the core underpinnings of AFCA.

We had a big strategy day, that is the board and senior management, and we’re all very much on board with this vision. And it will be very different from its predecessor schemes in that there will be a much greater focus on external engagement, as I mentioned, with consumers and small business organisations and with industry. We’ll be proactive in working with industry and other stakeholders to try to mitigate them occurring in the first place.

We want to build very strong relationships with the community, and a particular focus of mine in taking on this role has been that we will provide an outreach service to vulnerable people. We will certainly be focusing on indigenous communities, on rural and regional Australia, on people of non-English-speaking backgrounds. People who otherwise probably wouldn’t feel comfortable approaching an ombudsman service, which, really, has been, I think, in the past there to pick up the pieces. We want to go out there and educate people about how to manage their financial arrangements with service providers.

So, it’s a very different proactive focus to our predecessors. That interested me greatly because of my background. Firstly, I’m a trained mediator. I was a barrister for many years before I went into Parliament. And then in Parliament, of course, I had a Treasury portfolio, I was Assistant Treasurer. And in that capacity I initiated, and ultimately it became an organisation, the financial literacy arrangement the Treasury entered into with Paul Clitheroe as the chair. I’ve always had a very, very keen focus in keeping people informed about their financial services and superannuation, in particular. I was the Minister responsible for superannuation.

I was the Minister who brought in co-contributions for low income earners. It’s always been a particular focus of mine. Always very interested in how superannuation operates and to try to make the system as fair as possible, to give people dignity in retirement. So with the expanded remit of AFCA, when I was approached by the government to gauge interest in taking on the inaugural chair’s role, of course, I was very pleased to give something back to, and really do it from a different angle, all the sorts of issues that have engaged me for a long time.

Tony Kaye: Next thing I wanted to move on to, Helen, was the Royal Commission. Now that shone a spotlight, really, on all of the poor practices that were taking place across the sector. Do you expect that AFCA will see a large escalation in disputes arising from the Royal Commission?

Helen Coonan: Yes, I agree with you. I think that the Royal Commission has exposed some very egregious behaviour across the financial services sector more broadly. And I do think that we do expect to see a spike. We expect to see in the order of 50,000 to 55,000 disputes next year. That’s about 10,000 more than the old FOS received. And some of this spike may be due to the Royal Commission, but I hope that if we see this spike, which we anticipate we will see, a lot of it will be because people have confidence in engaging with us. Confidence that they’ll be heard and that we’ll be striving to provide a very timely, fair, and effective outcome for them. So it could also be a measure of awareness raising of this new body and what we are wanting to achieve.

Tony Kaye: Helen, in relation to AFCA also, you’ve introduced higher monetary limits and compensation payments. Were the previous levels too restrictive?

Helen Coonan: Ramsey thought they were and I certainly agree. It seems that the new limits are going to be much more reflective of the kind of financial arrangements that people have entered into that have gone pear-shaped. And, of course, with the increased monetary limit for small business and primary producers, that, of course, will take into account the great bulk, the vast majority of a loan book of the major financial institutions. So what we really want to do is to try to provide a service at the coal face, to liaise with ASIC, to get these disputes resolved much more quickly and in the kind of bulk that they need to be. We need to be very adept and agile in dealing with these kinds of disputes.

Tony Kaye: Now, I’m going to ask you about your interaction with our regulators so, will ASIC be the primary regulator that you’ll be liaising with?

Helen Coonan: Yes, definitely. AFCA will be working very closely with the regulators, ASIC, APRA, and the ATO too. Of course, ASIC is the major one. And it will be done, not only through the reporting of systemic issues, and serious contraventions to the regulators, and we have to do this under the new reporting obligations. So it will be a lot earlier than previous requirements on any external dispute resolution body. And it will also actively liaise and share information. So we’ve been working with the regulators to set up reporting mechanisms and contact points to ensure that we get this right. That it’s efficient and timely exchange of information.

And that the regulators are able to use the AFCA insights in their work. As you can appreciate, we will have the most enormous database. And interrogating that data will provide statistical information and trends to assist the regulators to use it in whatever they’re investigating. And we are likely to be liaising monthly, if not fortnightly, with ASIC about various matters including systemic issues on an ongoing basis. So we want to be resolving disputes at the coal face and we want to assist ASIC to look more broadly at what makes that happen, the serious cases of misconduct. So AFCA really, Tony, I’m confident in saying this will be a game changer. Because we ought to be able to resolve the majority of these disputes without necessarily having to wait for AFCA to do an investigation and to get involved in the way in which they should, which is to look at what kind of regulatory and other arrangements should be made as a result of systemic issues.

Tony Kaye: One of the other things I wanted to ask you about was, we’re seeing a ...  I’ll call it a proliferation of class actions against institutions and there’s more and more cases coming out, especially with the Royal Commission. Do you see that AFCA will curb the amount of actions that we see going into the court system?

Helen Coonan: Look, that’s a very good question and the answer to that is very speculative, of course, because I think often people take class actions because they may not necessarily see themselves being able to get redress through the courts, either because of the expense or because their claim isn’t large enough to warrant all of the usual panoply around a court case with expensive legal fees, uncertain outcomes, and also possible appeals. So, my guess is that, if people can actually have their disputes dealt with quickly and fairly, and they get an outcome that they’re comfortable with, they will get on with their lives and it may have an impact on people wanting to join class actions. Now it will be interesting to see if that’s correct but, I do think that there is a prospect that the class actions will not be as attractive to small investors.

Tony Kaye: I just wanted to ask in terms of making people aware, making the public aware of AFCA, is there a marketing program that is in place to promote AFCA as an organisation?

Helen Coonan: Yes, of course. We’re very conscious of the fact that so much of getting a new organisation off the ground is making people aware of it. So obviously, our marketing campaign is very well developed, including our main launch will be in Melbourne on Friday, this coming Friday the second. We will have gone live on the first, which is Thursday. And we’ll be having another launch in Sydney. We’ll then be doing a road show where we’ll take AFCA and what it can do for local communities, right out into rural and regional Australia, and certainly to some indigenous communities. In my past life, of course, I’ve visited many of these communities, so I know how important it is to be seen and actually take the trouble to go and explain how you can really help and engage with the local community.

And also, Tony, particularly, how you can do follow-up from those visits. Not that you just fly through and they never hear from you again. But we have an active campaign to keep people aware of what we do. And, of course, as we get underway, we hope that we’ll have some foundation decisions that will give consumers hope that we can deal with their disputes fairly and effectively. And from our members’ perspective that we are a crucial part of helping them meet their consumers’ demands and requirements if they’ve got a dispute, and that we’re playing our part to help them with their internal processes. So with all of that we hope to engender real confidence that AFCA will be a critical part of the regulatory framework going forward for resolving disputes, and that we will play a critical part in restoring trust in financial services.

Tony Kaye: Well, thanks very much for your time, Helen. I wish AFCA and yourself all the best in the role.

Helen Coonan: Thank you very much. I really appreciate your interest and happy to call in from time to time and give you updates.

Tony Kaye: Thank you very much, Helen.

Helen Coonan: Thanks. Have a great day.

Tony Kaye: You too. Bye bye.

Helen Coonan: Bye.