Tips and tricks for navigating the AFCA complaints process

Speaking on a webinar, law firm Cowell Clarke’s financial services team noted some tips for advice firms when going through the Australian Financial Complaints Authority (AFCA) dispute resolution process, but also some key pitfalls to be aware of.

On the most basic level, Cowell Clarke lawyer Richard Hopkin explained that any “expression of dissatisfaction” from a client towards the licensee, whether that be through an email, something said to any member of the firm’s staff or even a comment on a social media page managed by the firm, should be treated as a complaint.

“If in doubt, probably err on the side of caution, don’t be scared of putting that feedback onto your register so that you can approach it appropriately and meet any timelines required,” Cowell Clarke lawyer Emma Johnson said.

However, before you even encounter a complaint, there is one crucial sticking point.

Hopkin explained that, in accordance with AFCAs rules, there is a limitation period to lodge a complaint that is either six years from when the complainant became aware of the loss or reasonably should have become aware, or within two years of receiving a final internal dispute resolution (IDR) response.

While on the surface this seems simple, he said that the wording of this can create a challenge for all parties involved.

“Now, the issue with the six-year limit is that it’s around awareness of loss, or when the client should reasonably have become aware. There are a few things to note here, one of which is, of course, that advice can be provided and then a loss doesn’t actually occur for several years after that advice was provided,” Hopkin said.

“Also, awareness is a bit of a flexible concept as well, so, particularly around investment performance over time, clients aren’t necessarily aware or reasonably aware that their investment is underperforming until well after the fact.

“An example would be, say, advice for a particular insurance product – life insurance, TPD, whatever it might be – and at the point that there’s a claim on it, then it becomes apparent that the coverage, for whatever reason, the adviser has failed to perform their duty properly, and the client isn’t properly covered.”

The primary issue with this, Hopkin explained, is that advice firms are only legally required to keep records for 10 years, meaning that advisers may have a harder time producing records and evidence for a complaint made beyond this time frame.

“That advice might have been given several years prior to the actual loss, and then you’ve got another six years from that loss to complain so that can cause problems,” he said.

“From a documentary perspective, if you’re trying to defend a complaint where you might have perfectly lawfully deleted or destroyed documents and records, but you’re sort of defending a complaint based on a fact pattern that happened 10 years prior to the complaint being lodged, that is within the realms of possibility, and I have seen it happen.”

How to make your life easier when dealing with AFCA

When it comes to actually going through AFCA’s complaints process, one key tip from Hopkin was to make sure you are engaging with the case manager, as they will likely give you some indication of what the outcome of the case might be and if there are any issues.

By doing this, the financial firm can make strategic decisions about how they should proceed in order to achieve the best outcome.

Furthermore, even though AFCA does have a policy requiring them to get in touch with the financial firm once a case against them has been assigned a case manager, due to the sheer volume of complaints AFCA receives, it could be months before the case is assigned.

While this could be seen as a negative, Hopkin said that this time could be a useful opportunity for the financial firm.

“Of course, you can use that time to try to resolve the complaint. There is nothing stopping you at that point contacting the client and seeking to settle the complaint if that’s the decision that you’ve made. You don’t have to wait for an AFCA case manager to pick it up in order to still seek to resolve it,” he said.

For firms with several AFCA complaints based on similar circumstances, the lawyer said that some may choose to test the waters with the first case, pushing it all the way to the final determination, and then using that to guide their decisions on the proceeding cases.

“You might want to run it as a test case so that you can understand what AFCA is going to do. That might be particularly useful if you have a lot of complaints that are based around a similar fact pattern,” he said.

However, it is important to note that, unlike in the courts, AFCA isn’t actually required to follow its previous determinations, Hopkins said, it can “depart and deviate from previous decisions”.

Pushing back against an AFCA complaint

There are limitations on what types of cases AFCA has jurisdiction over and a financial firm can, if they believe AFCA is overstepping these bounds, request a jurisdictional review.

“Say that the complaint is outside the scope of the scheme or the client is wholesale, or whatever reason it might be, you ask for a jurisdictional review, and you submit your reasons as to why you think it’s out of jurisdiction by reference to the AFCA rules, saying, ‘Under this rule, AFCA must or should exclude the complaint’, and then that goes to a different team,” he said.

Hopkin advised that firms looking to question AFCA’s right to handle a case should do so as early as possible while also noting that this process only assesses AFCA’s jurisdiction on the case, not the actual merit of the complaint.

However, he also stated that, in his experience, given the opportunity to exercise its discretion to exclude a complaint, AFCA “rarely” turns it away.

Looking further down the line on the complaints process, once a preliminary assessment has been made, the firm can either choose to accept or reject it.

However, Hopkin warned that there is often little change between the preliminary and final determinations.

“So, if you respond to the preliminary assessment accepting it, then at that point, you can proceed if the client agrees and also agrees with the preliminary assessment, you can go on to settle the complaint,” he said.

“We generally recommend that you do that by way of a deed of settlement, because you can still – and AFCA accepts this – you can set out the settlement terms in a deed which has the terms and conditions of the settlement, which can include confidentiality, non-disclosure so that the complainant – to a certain extent, as much as is possible and available by the law – has an obligation to not talk about the outcome of the settlement.

“You can also use it for a bit of risk management, which you should always do for settling complaints.”

For those who might want to appeal or refute an AFCA determination, Hopkin said there are few options available.

“Provided that AFCA has made such an error of law that it permits you to, it’s not a decisions-based review. So, you can’t say, ‘Well, they got the law right but the decision was wrong because of this and that and the other’ and get that reviewed and appeal the decision on that basis,” he said.

“It has to be that AFCA has either broken its own rules, or they’ve made such an egregious application of the law that you’ve got a right to appeal that. What will happen at that point, if the courts agree with you, is that they will send it back to AFCA for them to do their work over again.”

However, he added that, if they choose to go down this path, “the financial firm is legally required to pay an AFCA determination, unless, of course, you’re going through the process of appealing it to the courts”.