Complaints authority aims to adopt a data-driven approach

  • By Christine St Anne

The Australian Financial Complaints Authority CEO David Locke would like to mine the wealth of insights already garnered from receiving hundreds and thousands of complaints, positioning the newish authority as a data-led organisation.

Speaking to AB+F ahead of his keynote presentation at our Randstad Leaders Lecture, Locke said that the authority has already received 35,000 complaints since it began six months ago and counting.

For Locke the immediate priority here is to improve the processes and outcomes for all participants in the financial services sector, ensuring complaints are not only swiftly dealt with but also even prevented.

This could be achieved by harnessing the wealth of data in these complaints already.

“We have seen complaints rise across the financial services sector. There is a huge amount of data here. I want AFCA to become a data-led organisation to better inform firms to improve their processes and practices.

“We are aiming to work with industry to address and minimise complaints using our data in intelligent ways to both inform the public and also help the industry [better manage complaints]”.

To do this, AFCA is already working with a number of companies who are experts in data analytics although the authority will also draw on its internal skills and experience.

AFCA will also seek to tap into ASIC’s internal data that will in part be garnered from the corporate regulator’s move to require financial service firms to report data to the corporate regulator from their own internal complaints network.

“Working with ASIC will give us a greater picture of complaints in the sector.”

Locke likens complaints to the “canary in the mine” analogy. “Many firms are focused on improving customer satisfaction but not on the leanings from more difficult and noisy complaints.

“If we can use complaints as a tool to gauge whether they are systemic and part of a wider issue then this will help the industry get a better understand of how to prevent or address complaints.”

For Locke, it’s a bit of “mixed bag” with the way the banks and the broader financial services industry have addressed consumer and business complaints.

In its first six months - of the amount of complaints received so far, 21,000 have related to banks, 7,000 to insurers and nearly 6,000 to credit providers.

Issues around credit cards drew the most complains followed by home loans, personal loans and insurance.

“It is a bit of mixed picture with some of them. Some banks have been increasing their teams to resolve complaints. Some are behind the curve.

“Not everyone is where I would like them to be. Matters do need to be resolved immediately. It’s better to do this than wait for years to resolve an issue.”

“We are trying to work with financial institutions and give them the opportunity to resolve issues”.

AFCA was formed in November last year replacing the three external dispute resolution schemes (EDR) of the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT).

This followed the recommendations made by the 2016 Ramsay Review into EDR schemes in financial services.

At the time of writing, ASIC announced that it would ensure licensees will meet their AFCA membership obligations.

In fact, AFCA had informed the regulator that 58 financial services firms and 217 credit licenses who had previously held external dispute (EDR) with one of the previous schemes, had not obtained AFCA membership and may be in breach of their licence conduct obligations.

For Locke the merged group delivers a more agile authority that can be more responsive as issues come to them.

“We are trying to work with financial institutions and give them the opportunity to resolve issues”.

In the 15 per cent of cases that are not resolved, the ombudsman makes the decision. If the consumer accepts that decision than it is binding on the firm. Currently AFCA can award consumers half a million in compensation, SMEs up to a million and famers up to $2 million.

“It means the authority can give significant awards on matters.  However, we aim to help financial services firms resolve issues with their customers rather than having to go to court which can be costly particularly for the consumer.”

 AFCA has also forged a “close working relationship with both ASIC and APRA.

“AFCA has to report all matters to the regulators where we see an issue that is systemic – that is the issue has the potential to impact a whole class of consumers.”

Any contraventions of the Corporations Act also need to be reported within 15 days to the regulators.

For Locke, under the revamped and merged authority, the flow of exchange of information is now a two-way process which its “an important way to work”.

The authority of course is now of course powered to deal with legacy complaints effectively going back to pre-GFC.

A month ago, ASIC has backed changes to allow the Australian Financial Complaints Authority to now investigate complaints dating back to January 2008.

“We have set up teams and recruited people to manage this process. Guidance is also on our website to help consumers.”

While complains are low, Locke expects this to trend upwards once the government and authority kick of a public campaign to boost awareness.

He acknowledges that it will be challenging for firms particularly around systems and lack of records “but we are working with firms to advise them how that would work”.

Locke’s previous experience has been in executive roles in charities as well as working as a regulatory adviser.

Taking on the helm of AFCA provided him with the opportunity to establish a new organisation focused on fairness and fair outcomes.

He is pleased with the level of work achieved so far. Of those 35, 000 complaints received so far, 60 per cent have been addressed with over $83 million awarded to concurs and SMEs in compensation.

“Having worked previously in a community legal centre, I saw the impact financial disputes had on people, We know from Relationships Australia that financial issues are the number one cause of relationships breakdowns. It can cause a huge amount of anxiety and mental issues.

“Done well, [EDR] schemes like AFCA can address this imbalance. The fact is, it is a noble cause and an important cause.

“The Royal Commission demonstrated that there are real issues that need to be addressed in financial services. It was an opportunity to make a difference.”