Treasury consults to extend AFCA’s super powers

Superannuation AFCA law change

Federal Treasury has called for public feedback on a legal amendment that would enable the Australian Financial Complaints Authority (AFCA) to adjudicate on a broader range of superannuation complaints.

The proposed amendment would introduce a slight change in the wording – but a significant change in scope – to the current law, enabling complaints to be lodged against a superannuation provider “even if [it] does not meet the definition of a superannuation complaint”.

As the law stands, “a complaint relating to superannuation may only be made to AFCA if it meets the definition of a superannuation complaint” – meaning that, for instance, AFCA would not be able to pursue a complaint levelled against a third party attached to a super fund, such as a life insurer and its policies, if the complaint is lodged against the super fund.

AFCA’s oversight of complaints made against superannuation providers is governed by Section 1053 of the Corporations Act, which means that a complaint can only be reviewed by the complaints authority if it falls strictly within one of the categories identified within the subsection.

This, Treasury noted in its explanatory memorandum on the amendment, “is contrary to the original policy intent”.

“The policy intent of Division 3 of Part 7.10A [External Dispute Resolution] of the Corporations Act is to provide AFCA with additional statutory powers to manage superannuation-related complaints effectively. It is not intended to limit the complaints that may be brought under the AFCA scheme,” Treasury wrote in its exposure draft.

The jurisdictional black spot was exposed after a Federal Court finding in October last year (in the case MetLife v AFCA [2022] FCAFC 173) which found AFCA lacked the authority to determine an original complaint relating to a life insurance policy within a superannuation fund, as it “did not satisfy any” of subsections of 1053.

The Court found that “AFCA does not have the authority to determine a ‘complaint relating to superannuation’ that falls outside the ambit” of subsection 1053.

Treasury noted in its exposure draft that the MetLife decision “has led to AFCA being unable to consider certain complaints about insurance policies held inside superannuation which it would otherwise be able to determine”.

AFCA serves as an external dispute resolution scheme for consumers unable to resolve complaints with member financial services organisations.

All Australian financial services licensees, Australian credit licensees, authorised credit representatives and superannuation trustees are required to be members of AFCA.

Since launching in 2018, merging several separate financial complaints authorities (including the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman, and the Superannuation Complaints Tribunal), AFCA has received more than 300,000 complaints – an average of 200 complaints a day – and has secured more than $900 million in compensation and refunds.

Last calendar year, AFCA received upwards of 5,600 complaints directed specifically at the superannuation sector, up 11 per cent on the previous year. This represents around 7.7 per cent of all complaints received by AFCA , totalling 72,358 complaints lodged in the 2022 calendar year.

Submissions for the consultation close on 16 June 2023.