- Published on September 14, 2017
- Kate Carnell - Small Business and Family Enterprise Ombudsman
I welcome today's announcement by the Minister for Revenue and Financial Services, Kelly O'Dwyer, regarding plans for a new one-stop shop dispute resolution scheme, the Australian Financial Complaints Authority (AFCA). The initiative addresses a key recommendation from ASBFEO’s Small Business Loans Inquiry and will significantly improve access to justice, especially for capital-intensive enterprises.
AFCA will consolidate the existing Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
A small business will be able to seek resolution of a dispute where the credit facility is up to $5 million and potentially receive compensation up to $1 million. The FOS is currently limited to considering disputes of not more than $500,000 arising from a credit facility no higher than $2 million, which excludes many small businesses.
Small businesses do not have the money or time to challenge banks through the court system and there is a significant power imbalance between banks and small businesses. Small businesses do not have the financial capacity to hire expert legal advice to help them overcome this disadvantage.
The new one-stop-shop will be able to make binding determinations.
The higher compensation cap should also incentivise banks to resolve disputes through internal processes before progressing to the AFCA. The Government’s proposed model will provide a genuine alternate dispute resolution option in a forum where the needs of small business are understood. It will save time and money by significantly reducing the need for litigation.
I also welcomed the proposed transitional arrangements and the Government’s commitment to consult on AFCA’s terms of reference.