AFCA: A fair worry
When I was in my second or third year of law school, I remember having to read some EDR scheme decisions to answer the following question: “What role do considerations of fairness play in the EDR decision making process?”. In short, my answer was that it was hard to tell. The legal factors were neatly set out, but the discussion on fairness was vague. So how, I wondered, could financial services providers know what to expect?
These decisions were made by the industry-based schemes that pre-dated FOS and CIO. They disappeared when they suffered the extinction event of consolidation. Fast-forwarding 15 or so years, FOS and CIO no longer inhabit the EDR scheme landscape. Instead, we have AFCA.
After all these changes, I couldn’t have predicted that so many people would still be trying to answer the same old fairness question.
Our clients are worried about AFCA. They’re worried that they will be ‘named and shamed’ in AFCA determinations following ASIC’s recent approval of changes to AFCA’s rules.
But most conversations about AFCA involve questions about how it will apply considerations of fairness in its decision making process. Clients reason that in order to deal appropriately with complaints at the IDR stage (and to escape either naming or potential shaming), they need to know what AFCA deems to be fair.
AFCA is required to decide a complaint based on what is fair in all the circumstances, having regard to factors such as legal principles, good industry practice, codes of practice and previous decisions.
FOS and CIO were also required to take considerations of fairness into account. However, it is AFCA’s calls for a “fairness revolution” that have got people talking. So what does it all mean? In searching for answers, one will find that AFCA’s Operational Guidelines do not set out any detailed guidance in this area. AFCA is yet to publish a position statement on fairness in its decision making.
As recently as a few years ago, the question of fairness may not have stirred up quite so much interest. But post Royal Commission, there is a bigger chance that a lack of fairness in our behaviour will have real-world consequences. Taking in the broader picture, there is now the potential of a civil penalty attached to the failure by an AFS licensee to ensure their financial services are provided ‘efficiently, honestly and fairly’ as required by section 912A of the Corporations Act. So it’s understandable that licensees are anxious to get it right, and well before their name pops up in any published AFCA determination. The only issue is pinning down exactly what all this fairness requires of us.