Government introduces new EDR scheme

Yesterday, the government released its consultation papers for industry feedback on the new EDR scheme for financial services, which was announced in the 2017 federal budget recently.

As part of the new EDR scheme, a dispute resolution body will be formed called the Australian Financial Complaints Authority (AFCA), which will replace FOS, the CIO and the Superannuation Complaints Tribunal (SCT). The AFCA will be operational from 1 July 2018 and all financial firms must be members of the new body.

ASIC powers will also be strengthened for “enhanced oversight and monitoring” of the scheme while financial services firms will adhere to “enhanced transparency and accountability of internal dispute resolution activities”, the EDR consultation paper states.

According to the scheme’s explanatory memorandum, additional powers will also be granted to superannuation complaints.

The new EDR scheme introduces two new bills into Parliament - the Treasury Laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017.

The CIO has recently responded to the new EDR scheme claiming it is a “complete waste of money”, while the FPA has cautioned against the cost of establishing the AFCA, which will be funded by the industry via a new levy, adding additional cost pressures on consumers.

The closing date for submissions on the new EDR scheme is 14 June 2017, the government said.