“We need to even the scales”: broker dissects the AFCA model

Although an advocate of anything that safeguards consumers against unsavoury and dishonest behaviours, one broker has raised some concerns about the current structure of the Australian Financial Complaints Authority (AFCA) model.

AFCA replaced two external dispute resolution schemes last year: the Financial Ombudsman Scheme (FOS) and the Credit and Investments Ombudsman (CIO), as well as the statutory Superannuation Complaints Tribunal (SCT). It began receiving complaints from 1 November.

While there have only been a very small percentage of complaints about brokers, PFS Financial Services director Daniel O’Brien said the model is “weighted far too heavily towards clients”.

O’Brien, a 2018 MPA Top 100 Brokers finalist, suggested there were no consequences whatsoever for clients who lied or deceived, or for anything else fraudulent.

“As a broker, I pay for the AFCA process and the client’s right to make a complaint. Even if the client provides no evidence of the broker’s wrongdoing, they can file a complaint,” he said.

Brokers are losing out

Brokers have to pay a complaint process fee for each complaint filed against them. While they are given “two free complaints per year”, brokers can only get the complaint process fee rebated once AFCA hands down a final decision.

However, if AFCA informs the consumer that the situation is turning against their favour, the consumer might cancel at the last minute and stop a decision from happening. That means if the complaint costs $12,000, the broker must pay for it. 

“In AFCA’s current process, in whose best interest is it to cancel the complaint before it gets finalised? AFCA gets that fee income if the client cancels,” O’Brien said. "If a client knows this information, they can use it against a broker."

Brokers can also lose out if the client makes a complaint to AFCA about paying a fee to the broker: even if the client signs an agreement which adheres to the NCCP rules. This is something O’Brien has faced himself in the past.

“Brokers just have to roll over and let the client off the hook for a fee they agreed to pay,” O’Brien said.

An alternative solution

O’Brien believes AFCA should move to a model where the loser pays, and the only time consumers should be ordered to pay is when they have been proven to be lying or not fulfilling a fee agreement.

This model would put more onus on clients to justify their complaints, especially with the amount of paperwork and email exchanges loan application generate these days. O’Brien said clients can currently lodge a complaint and start the clock ticking on AFCA fees even without any evidence of any kind.

The current model is open for clients to exploit and make ATMs out of brokers, O’Brien said.

If the client files a complaint that’s totally unrelated to the broker, such as the bank undervaluing their property, it would be a costly problem. If the client demands a $5000 compensation after the broker has used up all two free complaints, the broker is left with no choice but to yield, as that would be cheaper than paying AFCA.

"It concerns me that clients have the opportunity to rack up a broker's AFCA bill then leave the broker without an outcome,” he said.

O’Brien’s concern is not so much in AFCA exploiting him, but in clients exploiting AFCA. For 15 years, he has settled over 4200 loans and received no ombudsman complaints on service or advice, only a few from clients trying to avoid fees they agreed to pay.

“We need to even the scales. Maybe the way to do that is by doubling the fees for brokers ruled to be ‘at fault’ and waiving the fees for brokers ruled to be ‘not at fault’,” O’Brien said.

“I am all for protecting the little guy – the consumer. But plenty of brokers out there are just as little. Where is their protection?”