‘Fair, transparent and equitable’: AFCA funding model approved

AFCA’s board has approved a new funding model that will see most advice firms pay the same or a lower levy, while frequent users will be required to cover the costs of the scheme.

Commencing from 1 July the new model was approved by the complaints authority’s independent board after a consultation process was undertaken with the users of the external dispute resolution scheme and industry bodies providing feedback.

The new model includes a single registration fee, a simplified complaints fee structure and five free complaints a year.

It is expected that 95 per cent of AFCA external dispute resolution scheme members will pay only their annual registration fee which will be $375.55.

AFCA expects members that see an increase in fees will do so because they are “heavy scheme users”, but the five free complaints provided under the new model will not be included when the authority calculates the user charge.

The user-pay system benefits the advice sector which accounted for only 1,238 of the 70,510 total complaints (1.8 per cent) received by AFCA from 1 July, 2020 to 30 June, 2021, which continued to trend downwards.

Chief ombudsman David Locke said the feedback for the consultation was overwhelmingly positive.

“Members welcomed the fact the model rewards good complaints resolution performance, and that it apportions fees fairly based on use of AFCA’s services,” he said in a press release.

Firms have control over the fees they pay, Locke added, by taking a “resolution mindset” when managing complaints.

“This is a fair, transparent and equitable funding model.”

Fair being the key word with the complaints authority making fairness a priority in all of its processes.

The consultation included over 60 meetings with peak bodies and members, and the delivery of 11,000 individual, tailored impact assessments to financial firms.

AFCA lead ombudsman Shail Singh will be part of a panel at Licensee Summit next week to discuss how advisers can best protect themselves during the complaints process.