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AFCA Rules of Complaint Resolution

Tuesday, October 30, 2018 - Posted by Michael McCulloch

On Thursday, 1 November 2018 the new Australian Financial Complaints Authority (AFCA) will begin receiving complaints.

AFCA has released their Complaint Resolution Scheme Rules which you can download from our website which outline the types of complaints that AFCA can deal with and how it will handle complaints from consumers against financiers.

AFCA Jurisdiction

The graphic below depicts how AFCA will determine if a complaint falls within their jurisdiction -

AFCA Complaint Resolution Process

Section A
A.4 - Complaints that AFCA Considers

A.4.1 The Complainant must be an Eligible Person.

A.4.2 A complaint must be about a Financial Firm that is an AFCA Member at the time that the complaint is submitted to AFCA (even if not an AFCA Member at the time of the events giving rise to the complaint).

A.4.3 There are some additional requirements that must be met in order for AFCA to be able to consider a complaint. In summary:

a) The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA’s jurisdiction.
b) There must be a sufficient connection with Australia.
c) Generally, there is a time limit within which the complaint must be submitted to AFCA.
d) If the complaint is about a Traditional Trustee Company Service that involve Other Affected Parties, the Complainant must get the consent of all Other Affected Parties.

Section B sets out these requirements.

A.4.4 There are some types of complaints that AFCA must exclude and some situations in which AFCA can decide to exclude a complaint.

Section C sets this out.

A.4.5 If AFCA excludes a complaint, AFCA will give written reasons to the Complainant and specify the timeframe within which the Complainant may object to this decision.
A.4.6 If the Complainant objects within the specified timeframe, AFCA will review the decision if AFCA is satisfied that the objection may have substance. If this is the case, AFCA will inform the Financial Firms involved in the complaint and provide them with an opportunity to make submissions before AFCA makes a final decision as to whether to consider the complaint.
A.4.7 Despite other rules, AFCA may consider a complaint if all parties to the complaint consent in writing and AFCA agrees to this. This does not apply to complaints about payment of a death benefit excluded under the time limits in rule B.4.1.3.

Section B
B.2 Relationship Giving Rise to the Complaint - Other Complaints
Section B.2.1

A complaint (other than a Superannuation Complaint) must arise from or relate to:

a) the provision of a Financial Service by the Financial Firm to the Complainant;
b) the provision by the Complainant of a guarantee or security for, or repayment of, financial accommodation provided by the Financial Firm to an Eligible Person;
c) an entitlement or benefit under a Life Insurance Policy that specifies or refers to the Complainant, whether by name or otherwise, as a person to whom the insurance cover extends or to whom money becomes payable under the Life Insurance Policy;
d) an entitlement or benefit under a General Insurance Policy that specifies or refers to the Complainant, whether by name, or otherwise, as a person to whom the policy extends;
e) a legal or beneficial interest of the Complainant arising out of:
(i) a financial investment (such as life insurance, a security or an interest in a managed investment scheme or a superannuation fund); or
(ii) a facility under which the Complainant seeks to manage financial risk or to avoid or limit the financial consequences of fluctuations in, or in the value of, an asset, receipts or costs (such as a derivatives contract);
f) a claim by the Complainant under another person’s Motor Vehicle Insurance Product for:
(i) property damage to an Uninsured Motor Vehicle caused by a driver of the insured motor vehicle;
(ii) non-financial loss as a result of claims handling by the Financial Firm that insured the motor vehicle, but only where a valid claim has been submitted by the owner of the insured motor vehicle (unless the claim is being made pursuant to section 51 of the Insurance Contracts Act 1984);
g) an investment made by the Complainant that was offered by a Financial Firm under a foreign recognition scheme to Australian resident investors, unless expressly excluded from access to AFCA or a Predecessor Scheme by the investment offer document; or
h) a Traditional Trustee Company Service where:
(i) the Complainant is entitled to request an Annual Information Return from the trustee; and
(ii) at least one co-trustee was at that time a current AFCA Member and all co-trustees that are not AFCA Members have consented to AFCA considering the complaint.
i) a breach of obligations arising from the operation of the:
(i) Privacy Act; or
(ii) the Consumer Data Framework.

B.3 Sufficient Connection with Australia

A complaint must arise from:
a) a contract or obligation arising under Australian law, including but not limited to privacy obligations;
b) an offer to invest that was received in Australia by a Complainant in relation to a recognised Foreign Collective Investment Scheme; or
c) a direct or indirect investment in a product through a platform which was offered in Australia.

B.4 Time Limits for Complaints
B.4.2 Complaints to Which the National Credit Code Applies

Where a complaint relates to a variation of a credit contract as a result of financial hardship, an unjust transaction or unconscionable interest and other charges under the National Credit Code, AFCA will generally not handle the complaint unless it was submitted to AFCA before the later of the following time limits:
a) within two years of the date when the credit contract is rescinded, discharged or otherwise comes to an end; or
b) where, prior to lodging the complaint with AFCA, the Complainant was given an IDR Response in relation to the Complaint from the Financial Firm - within two years of the date of that IDR Response.

AFCA Type of Complaint

Section C
C.1 Mandatory Exclusions
C.1.2 Exclusions Applying Generally

AFCA must exclude:

a) A complaint about the level of a fee, premium, charge, rebate or interest rate – unless:
(i) the complaint concerns non-disclosure, misrepresentation or incorrect application of the fee, premium, charge, rebate or interest rate by the Financial Firm having regard to any scale or practices generally applied by that Financial Firm or agreed with that Complainant;
(ii) the complaint concerns a breach of any legal obligation or duty on the part of the Financial Firm; or
(iii) the Complainant’s complaint is with a medical indemnity insurer and pertains to the level of medical indemnity insurance premium or the application of a risk surcharge (as defined in the Services Contract between the Health Insurance Commission, and the Commonwealth of Australia represented by the Department of Health and Ageing, and medical indemnity insurers).
b) A complaint that relates to a decision by a Financial Firm as to how to allocate the benefit of a Financial Service between the competing claims of potential beneficiaries, unless the complaint relates to a Superannuation Complaint or a Traditional Trustee Company Service.
c) A complaint that raises the same events and facts and is brought by the same Complainant as a complaint previously dealt with by AFCA and there is insufficient additional events and facts raised in the new complaint to warrant AFCA considering the new complaint.
d) A complaint that has already been dealt with by a court, dispute resolution tribunal established by legislation or a Predecessor Scheme, unless the Complainant has requested a stay on the execution of a default judgment on the basis of financial difficulty, and the Financial Firm has declined the Complainant’s financial difficulty assistance request, and the request has not previously been dealt with. For the avoidance of doubt, AFCA may consider a complaint by a Primary Producer about issues unresolved after a farm debt mediation.
e) A complaint where the value of the Complainant’s claim when the complaint is submitted to AFCA exceeds $1 million or higher amount that applies as a result of an adjustment in accordance with rule D.4.3. This jurisdictional limit does not apply to:
(i) a Superannuation Complaint; or
(ii) a complaint by a borrower arising from a credit facility provided to a Small Business (including Primary Producer); or
(iii) a complaint to set aside a guarantee supported by security over the guarantor’s primary place of residence.
f) A complaint where the Complainant is a member of a group of Related Bodies Corporate and that group has 100 employees or more. 
g) A complaint that would require review of a trustee’s exercise of discretion but this does not exclude:
(i) a complaint to the extent that an allegation is made of bad faith, failure to give fair and proper consideration to the exercise of the discretion, or failure to exercise the discretion in accordance with the purpose for which it was conferred; or
(ii) a Superannuation Complaint,
h) A complaint about professional accountancy services provided by an Accountant unless they are provided in connection with one of the following:
(i) a financial service within the meaning of section 766A of the Corporations Act or section 12BAB of the ASIC Act;
(ii) credit activity within the meaning of the National Consumer Credit Protection Act 2009; or
(iii) tax (financial) advice services within the meaning of the Tax Agent Services Act 2009.
i) A complaint about a:
(i) Privacy Act Participant that does not relate to a right or obligation arising under the Privacy Act; or
(ii) CDR Participant that does not relate to a right or obligation arising under the Consumer Data Framework.

C.2 AFCA's Discretion Not to Consider Complaints

AFCA may in its discretion exclude a complaint, if AFCA considers this course of action is appropriate.

AFCA will not exercise its discretion to exclude a complaint lightly. The discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint. 

Section D
D.3 Compensation for Complaints Other Than Superannuation Complaints

An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for direct financial loss. When calculating the value of such a remedy, monetary compensation and any remedy where the value can readily be calculated, such as the waiving of a debt, are included.

D.4 sets out the maximum amount that an AFCA Decision Maker can award for direct financial loss.


In addition or instead, an AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for indirect financial loss. This is not the case if the complaint arises as a result of a claim:

a) on a General Insurance Policy that expressly excludes such liability; or
b) by the Complainant under another person’s Motor Vehicle Insurance Product.
D.4 sets out the maximum amount that an AFCA Decision Maker can award for indirect financial loss.


An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for non-financial loss:

a) for a complaint relating to an individual’s privacy rights - injury has occurred to the Complainant’s feelings or humiliation has been suffered by the Complainant; or
b) for other complaints – an unusual degree or extent of physical inconvenience, time taken to resolve the situation or interference with the Complainant’s expectation of enjoyment or peace of mind has occurred.
This type of compensation, however, is not permitted if the complaint arises as a result of a claim on a General Insurance Policy that expressly excludes such liability.

D.4 sets out the maximum amount that an AFCA Decision Maker can award for non-financial loss.

D.4 Monetary Limits for Complaints Other Than Superannuation Complaints -

AFCA Compensation Amount Limit

As indicated above, AFCA will apply a new definition for small business and will also introduce the following monetary limits and compensation caps:

  • small business is now defined as any business with fewer than 100 staff;
  • unlimited monetary jurisdiction for superannuation disputes;
  • a monetary limit of $1,000,000 and a compensation cap of $500,000 for most non-superannuation disputes;
  • a monetary limit of $5,000,000 and a compensation cap of $1,000,000 for small business credit facility disputes;
  • increased compensation caps for small business primary production producers; and
  • no monetary limits and compensation caps for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other securitised interest over a guarantor's primary residence.
Default Judgment

In accordance with the Complaint Resolution Scheme Rules A.7 Restrictions on Financial Firms During a Complaint AFCA have confirmed that while they are considering a complaint that legal proceedings cannot commence against a Complainant or any other party to the complaint while the complaint is being investigated. Furthermore AFCA have indicated that where proceedings have been commenced an application for Default Judgment must not be sought or to pursue debt recovery legal proceedings.

Where an application for Default Judgment has been filed AFCA are instructing financial firms to write to the Court requesting that the application not be processed. In the event of the application having already been lodged and processed by the Court the financial firm is to make an application to set aside Default Judgment, at your cost.

Despite Rule A.7.1 AFCA have confirmed that with their permission legal proceedings can be commenced where -

A.7 Restrictions on Financial Firms During a Complaint

a) begin legal proceedings if the legal limitation period for the proceedings is about to expire – but the Financial Firm may not pursue those legal proceedings other than to the minimum extent necessary to preserve the Financial Firm’s legal rights;
b) begin legal proceedings if AFCA agrees to allow the Financial Firm to treat the complaint as a test case and the Financial Firm meets the requirements set out in rule C.2.2(f);
c) exercise any rights it might have to freeze, preserve or sell assets the subject of the complaint;
d) continue with legal proceedings if the Complainant, anyone else joined as a party to the complaint or Other Affected Party took a step in defending those legal proceedings that went beyond lodging
a defence or a defence and counterclaim;
e) continue with legal proceedings about a Small Business (including Primary Producer) credit facility of more than $5 million; or
f) enforce a default judgment obtained in court.
In each case, the Financial Firm must comply with any conditions that AFCA imposes.

Mapping of FOS Terms of Reference, CIO Rules and AFCA Rules

To further assist financiers in making the transition, AFCA has released Mapping of FOS Terms of Reference, CIO Rules and AFCA Rules which provides a reference when attempting to locate a particular section of the new Rules. This has been released following feedback from submissions. You can read the 34 submissions online at the AFA Rules Consultation page.

As AFCA start receiving complaints and making decisions public we will endeavour to publish these via our blog and across social media to keep you informed as to the interpretation of the new Rules and how this may impact you.

Alternatively if you have any questions regarding the new Rules we urge you to speak with a qualified legal practitioner or speak with Collection Law Partners.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

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