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Precedent (Australian Lawyers Alliance) |
THE AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY
IMPACT ON FIRST NATIONS PEOPLE
By Mark Holden
This article offers guidance on supporting First Nations clients to apply for financial dispute resolution through the Australian Financial Complaints Authority (AFCA). It introduces the purpose and operations of AFCA, and highlights the challenges First Nations clients may face when dealing with the complaints process and with financial service providers (FSPs).
I write in my capacity as a solicitor at the Financial Rights Legal Centre (FRLC), and this article has as its background the organisation’s experience with supporting clients in financial disputes.
ABOUT THE FINANCIAL RIGHTS LEGAL CENTRE
The FRLC has operated for more than 30 years as a Community Legal Centre specialising in consumer financial matters. It runs four consumer facing phone and email programs:
• the National Debt Helpline (NSW only) on 1800 007 007;
• the Credit and Debt Legal advice line (NSW only) on 1800 844 949;
• the Insurance Law Service (national) on 1300 663 464; and
• the Mob Strong Debt Help (national for Aboriginal and Torres Strait Islander people) on 1800 808 488.
The FRLC offers a range of programs and resources, and our work covers a variety of topics.[1] The Centre provides clients and callers with financial counselling, legal advice, legal assistance and representation in consumer financial matters, in particular representation at AFCA.
THE NEED FOR A FINANCIAL DISPUTE RESOLUTION SERVICE
There is a very large power imbalance between financial service providers (FSPs) and vulnerable First Nations consumers. Traditional methods of dispute resolution, such as litigation, generally favour FSPs, which have more expertise and resources. Such traditional methods pose insurmountable barriers for First Nations consumers, and have left them with no faith in Australia’s judicial system.[2]
The federal Government has embraced the concept of a free financial dispute resolution service by amending the Corporations Act 2001 (Cth) to establish AFCA, an amalgamation of past financial ombudsman dispute resolution services. AFCA has stated its aim to work to reduce systemic barriers in order to allow First Nations consumers to access its service.[3]
However, AFCA has the further potential not only of reducing more of the systemic barriers, but also of creating greater public confidence – particularly for First Nations consumers considering lodging a dispute against an FSP.
Financial disadvantages of First Nations consumers
The First Nations Foundation conducted a research study on First Nations consumers’ financial resilience in 2019, and made the following findings:
• Only 1 in 10 First Nations consumers are financially secure.
• Fewer than 2 in 5 First Nations consumers have access to an amount of $2,000, compared to 4 in 5 Australia wide.
• Nearly 50 per cent of the First Nations participants in the study were experiencing severe financial stress, compared to 11 per cent of participants in the broader population.
• First Nations participants were 10 times more likely than non-First Nations participants to have very little access to financial services.
• First Nations participants were more likely than non-First Nations participants to use fringe credit services.[4]
In this regard, some of the primary instigators of the disadvantage of First Nations people are intergenerational trauma and disenfranchisement resulting from past policies, poor education programs, lack of access to capital and equity resulting from colonial land dispossession, cultural erosion caused by assimilation and protection policies, and distrust of institutions. The disproportionate levels of financial stress and lack of access to financial services can leave First Nations consumers reliant on high-risk credit products, such as payday loans and unregulated credit. First Nations consumers also have a higher risk of experiencing financial hardship through undertaking loans or being targeted by predatory lending or unconscionable practices.[5]
Traditional dispute resolution a barrier to First Nations people
The traditional Western method for handling disputes has been through the litigation process. From the perspective of a lay person, Australia’s litigation system is complex, exceedingly expensive and daunting. Both parties are assumed to be on equal footing and are required to provide evidence and submissions to the judge in a court of law. As the judge then hands down the finding of law and fact, and determines which party is correct and will win, any party wishing to appeal will need to file their appeal and prove the judge made an error (often limited to an error of law). The entire process requires substantial legal resources, in the form of legal experts’ time and fees for advice, representation, drafting legal documents (including motions, submissions, appeals and correspondence) and for arranging payment of court fees. The party with the most legal resources and sound legal preparation holds a stronger position of power, which can be intimidating for more vulnerable parties.
Naturally the power disparity between First Nations consumers and FSPs is stark. First Nations consumers are more likely to live with a low socioeconomic background, limited education[6] and a lack of knowledge about financial products.[7] Our experience shows that they know when they have been wronged by FSPs, but lack the power and knowledge to fight against this, and end up more marginalised and disenfranchised. The FSPs, in contrast, have an intimate knowledge of financial laws and products and are likely to be supported by expert staff. The First Nations consumers the FRLC has supported often end up believing there is no point in complaining as they are going to lose anyway, and will develop a deep distrust of the legal system. This distrust is passed around the community, and can last for generations.
Legal Aid, community legal resources and pro bono programs have stepped in to help improve access to justice through legal education, advice and representation services. However, as litigation is extremely resource intensive, it is often reserved for special matters, such as ‘advanc[ing] the public interest’.[8]
Even alternative dispute resolution programs which are less resource intensive, such as mediation and conciliation, can be prejudicial to First Nations consumers who have no representation or, at the least, legal advice. The FSPs are better equipped, given their greater knowledge and resources in relation to consumer finance law, to potentially ‘stonewall’ First Nations consumers.[9] The mediator in the dispute resolution program may not be aware of any cultural issues affecting, or understand the perspective of, the First Nations consumer, and may not involve the extended family or greater community if they are also affected. If an agreement is made with an FSP, our clients report that the FSP may press the consumer into a confidentiality agreement.
When cultural and power disparity issues are not addressed during mediation, First Nations consumers may feel they have been forced into the predetermined arrangements, because they perceive the mediator to be on the FSP’s side.
These experiences of some First Nations consumers have left others in the community with no idea of whether they might be able to raise a similar dispute, no guidelines for doing so, and no way of knowing what the outcome might be if they did commence such a dispute.[10]
About the Australian Financial Complaints Authority
AFCA was established under the Treasury Laws Amendment (Putting Consumers First –Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth) (Act) as a means to create a one-stop shop for disputes with FSPs. Its stated purpose is: ‘to assist consumers and small businesses to reach agreements with financial firms about how to resolve their complaints’.[11]
This means complainants can take their complaint to an alternative forum that can be cost friendly, can have their concerns heard and dealt with in a more relaxed method than litigation, and can have certainty about what the FSP will do if an agreement is reached or the ombudsman makes a determination – including for declaratory, injunctive and compensatory relief.
AFCA describes itself as ‘a free and independent ombudsman service that resolves complaints by consumers and small businesses about financial firms.’[12] These financial firms include:
• banks;
• insurers;
• life insurers;
• small business lenders;
• superannuation funds;
• consumer lease providers; and
• small-amount credit providers.
FSPs must be members of AFCA in order to keep their Australian Financial Services Licence.
If a complaint is escalated to AFCA, the FSP must stay any enforcement proceedings until the matter is closed. A case manager will be appointed and will try to gather more information about the dispute from both sides. If necessary, a conciliation conference will be set up for the parties to try to resolve their dispute.
If no settlement is reached, the matter will be referred to the ombudsman, who will make a determination that is binding on the FSP but not on the consumer; if not satisfied, the latter can escalate the matter to litigation. As stated in AFCA’s Complaint Resolution Scheme Rules (Rules):
‘If a Complainant does not accept a Determination, the Complainant is not bound by the Determination and may bring an action in the courts or take any other available action against the Financial Firm’.[13]
Support for vulnerable consumers
The Act requires AFCA to be ‘appropriately accessible’ and ‘fair, efficient, timely and independent’,[14] as well as accountable and effective.[15] This is reflected in its Rules.[16] This ongoing requirement is especially important for vulnerable consumers, including First Nations consumers, as AFCA may be the only practical legal option they can exercise.
AFCA’s rules and processes appear to have the purpose of supporting vulnerable and disadvantaged consumers. The Rules contain the principle that AFCA should ‘have appropriate expertise and resources to consider complaints submitted to it’.[17] This could be interpreted as a requirement for AFCA to have culturally appropriate practices for considering complaints.
Benefits of AFCA
Here are some of the benefits to First Nations consumers of using AFCA as their complaints mechanism:
• There is no cost to the complainant.
• The ombudsman has specialised knowledge of financial issues.
• There are incentives for FSPs to negotiate to prevent further AFCA dispute costs.
• AFCA publishes its approaches to legal and financial issues to give the public a better idea of their prospects.
• This is a simpler and shorter decision-making process than litigation.
• Determinations are shorter and easier to understand than judgments.
• Determinations are public, and name the relevant FSP.[18]
• AFCA has a ‘fairness and reasonableness’ jurisdiction, which gives it greater flexibility.
• There are no formal rules of evidence.
• AFCA has published its approaches to a number of different FSP issues to help guide complainants in simple terms on how it will make its decision.[19]
Limitations of ACFA’s services
However, there are constraints on the services AFCA can provide. Clients need to be guided on the following limitations of AFCA as a complaint mechanism:
• AFCA is not a court or a tribunal, and its jurisdiction is restricted by the rules governing what it can and cannot hear.[20]
• There are limits on how much can be recovered from a claim.[21]
• AFCA cannot take evidence on oath – there is reliance on documents and call recordings of the FSP.
• AFCA decides matters on an individual basis, and does not make class settlements (although it does identify and report systemic issues).
• Proposed settlements are not reviewed by AFCA.
• There are no appeals – the only avenue if the consumer is unhappy with AFCA’s decision is litigation.
• The online complaint intake process is inflexible and requires emails to be inputted, though the complainant may not have access to email.
• AFCA can choose not to hear a complaint owing to its complexity, so you may need to be prepared to escalate the matter to court (see below).
• Enforcement powers are limited if the FSP does not comply with the determination.
• The dispute process is conducted via telecommunications, which is disadvantageous for First Nations consumers who have limited telecommunications technology and/or may be living remotely (no email, lost phone, etc.).
• Time limits can be strictly applied (though AFCA can choose to be flexible), which does not work well for First Nations consumers with other priorities, such as other legal issues, traditional activities and the need to support family.
• AFCA is a more efficient way of resolving disputes than litigation, but self-represented First Nations complainants can still find AFCA challenging, particularly in the area of having their cultural needs responded to appropriately. The examples below are some of the cases the FRLC has seen that highlight the need for support by a legal practitioner.
• Cultural issues such as sorry business may not be taken into consideration. Clients may not be contactable for some time owing to this, and the complaint may therefore be closed. AFCA can re-open a complaint, but usually only within six months of closure.
• AFCA’s statement-of-financial-position calculator[22] requires the complainant to input their income against living expenses for themselves and their family; however, the expenses categories are designed for the essential living expenses of immediate dependants and do not include expenses for the extended kinship structure. First Nations consumers are more inclined than non-First Nations consumers to financially support people in their kinship structure if they have the means to do so. This support is not based on purchasing items (which can be recorded on the statement), but just on simple cash transfers.
Some examples
The following example highlights the importance of exercising caution in recommending that vulnerable First Nations clients use AFCA if they cannot access ongoing legal advice.
One of the FRLC’s clients was a First Nations Elder who took out an egregious car loan through a used car dealer. The FRLC lodged a complaint on the Elder’s behalf, but the lender kept contacting the Elder to force him into a settlement without our knowledge. Our client did not understand the agreement offered, but ultimately relented and told AFCA to close the complaint. This example highlights the danger of gratuitous concurrence, where a First Nations consumer will agree to something they may not understand, just to wrap up the matter or out of fear or shame.[23]
As this example shows, First Nations clients could be pressured into a prejudicial agreement with FSPs without AFCA knowing. Matters with complex legal issues and potential precedential impact may be best suited to litigation and not for individual AFCA determination.
In another case, the client was an Aboriginal Elder who lived remotely and had very little knowledge of English. He was sold an unsuitable consumer lease and the FRLC represented him against the lessor and escalated the complaint to AFCA. The complaint was in danger of being closed because the lessor approached our client directly and convinced him to sign a very disadvantageous settlement, which included removing the FRLC as his legal representative. When the FRLC explained in detail the client’s disadvantage and the inappropriateness of the settlement, AFCA reviewed it and continued the complaint.
WORKING WITH AFCA
Supporting clients’ cultural needs
First Nations people may need cultural support beyond that which AFCA can provide. Its website and publications do not specifically mention support for Aboriginal and Torres Strait Islander people, or explain how AFCA has processes in place to manage First Nations complainants in a culturally safe manner. However, AFCA does check whether a complainant is a First Nations person through the initial intake process; the practitioner providing support could follow up to ascertain whether the client has been matched with a First Nations-identified claims manager.
In the experience of the FRLC, First Nations complainants may lack confidence in AFCA’s processes and therefore feel they would have a better chance of success if they dealt with the FSP on their own.
Working with First Nations clients and lodging complaints in AFCA
Here are some practical tips:
• Make sure you and your staff have had cultural awareness training when taking on First Nations clients.
• Take your time with the client to explain the complaint procedure through AFCA in plain language. Your client will have no knowledge about AFCA and what it can do.
• Read the AFCA approaches[24] and industry codes.[25] The AFCA approaches outline what the AFCA ombudsman can determine, and the industry codes are enforceable in AFCA.
• The FSP will be made aware of the complaint and may attempt to contact your client. Prepare your client for this possibility and get them to refer the FSP to you.
• Though AFCA does not hear evidence on oath, and relies on documents for reaching its decision, it can consider the circumstances of the client and their recollection of events in order to assess their capacity to understand financial documents and other contexts. This can be handy when arguing unconscionability or unjust contract cases.
• Case managers assigned to the matter may have not have adequate legal expertise to understand your matter. Try to avoid jargon, and use plain language when putting your case. Also feel free to call the case manager to explain your matter and answer any of their questions.
• If the case manager is making any errors and this is impacting on your client’s outcome, escalate your complaint.
• Note that the FSP, not your client, has to pay for the complaint. The FSP may prefer to negotiate a settlement with you and your client if the amount you are seeking is lower than the AFCA complaint costs.
• Note that the ombudsman will not change their determination once it is made. If the determination is not in your favour, your client has 30 days to decide whether or not to accept it. Use this time to assess whether the client has prospects in litigation or further negotiation. You will need this time to fully explain the client’s prospects in litigation.
• Even if your client does not accept the determination and the complaint is closed, you can still raise the matter again with the FSP and have the last option of litigation. You can raise another, different dispute about the same issue, and AFCA can still consider whether to hear it.
• If your client has accepted the determination, this is binding on the FSP, so you can raise the matter with AFCA again if the FSP is not complying. The FSP is allowed to require your client to sign an agreement to confirm only that the dispute is resolved and the FSP is released from liability.[26] The FSP is not allowed to require your client to sign a confidentiality agreement unless this has been negotiated.
CONCLUSION
The ability of a financial dispute resolution service to match its clients’ cultural needs is important. Such a service does not just provide support for the community with resolving disputes that have already arisen, but can also have a preventative function, empowering community members to identify and respond to issues such as exploitation by FSPs. As experience has taught us at the FRLC, a service will have no relevance in First Nations communities if it is tone-deaf to them.
We conclude by offering some strategies centred on cultural understanding for practitioners representing vulnerable First Nations clients; these have proved effective in the past for our organisation and in general:
• creating awareness of the importance of the kinship structure and what this means for clients’ perceived financial obligations;
• requesting interpreters where needed;
• addressing issues such as clients being required to complete online forms where the client has no online access;
• where an organisation requires an email address, advocating for clients who have phone numbers only, not email addresses, and requesting that a postal address be acceptable;
• requesting that wherever possible clients be matched with First Nations staff;
• requesting access, where possible, to videos explaining processes where the client may have trouble with understanding print or online publications;
• requesting access to audio and visual information about services and operations in different First Nations languages;
• requesting links to First Nations-focused resources on the organisation’s website or available in print; and
• requesting information on partnerships the organisation may have with Aboriginal services that could support your client.
Mark Holden is a Dunghutti man and solicitor with the Financial Rights Legal Centre. Mark is one of the leaders of Financial Rights Legal Centre’s Mob Strong Debt Help service, a national legal phone service which specialises in consumer financial issues: WEBSITE https://financialrights.org.au/mob-strong-debt-help/ PHONE 1800 808 488.
[1] See Financial Rights Legal Centre <https://financialrights.org.au/>.
[2] This view has been gained through my experience as a solicitor working with Aboriginal and Torres Strait Islander people for 10 years.
[3] AFCA, ‘Fact Sheet: Systemic Issues, serious contraventions and other breaches’ <https://www.afca.org.au/media/616/download>.
[4] M Weier, K Dolan, A Powell, K Muir and A Young, Money Stories: Financial Resilience Among Aboriginal and Torres Strait Islander Australians, Centre for Social Impact, First Nations Foundation and NAB, 2019 <https://firstnationsfoundation.org.au/wp-content/uploads/2020/01/full_report_2019.pdf>.
[5] Ibid, 2.
[6] Ibid.
[7] Ibid, 26.
[8] See for example Legal Aid NSW Policy Online, Civil Law Matters – when legal aid is available, 2019, [6.5.4] <https://www.legalaid.nsw.gov.au/for-lawyers/policyonline/policies/6.-civil-law-matters-when-legal-aid-is-available?SQ_DESIGN_NAME=print-chapter>.
[9] L Behrendt and L Kelly, Resolving Indigenous Disputes: Land Conflict and Beyond, The Federation Press, 2008, 59–67.
[10] Ibid.
[11] AFCA, About AFCA <https://www.afca.org.au/about-afca>.
[12] AFCA, What is an ombudsman? <https://www.afca.org.au/about-afca/corporate-information/what-is-an-ombudsman>.
[13] AFCA, Complaint Resolution Scheme Rules, 13 January 2021 (Rules), r A.15.4 <https://www.afca.org.au/about-afca/rules-and-guidelines/rules>.
[14] Treasury Laws Amendment (Putting Consumers First – Establishment Of The Australian Financial Complaints Authority) Act 2018 (Cth), ss1051(4)(a), (b).
[15] Ibid, s1051A. For an assessment of AFCA’s accountability, see AFCA, Public Report: Independent Assessor July-December 2021 <https://www.afca.org.au/about-afca/accountability/independent-assessor/public-report-independent-assessor-july-december-2021>.
[16] Rules, above note 13.
[17] Ibid, r A.2.1(e).
[18] For AFCA determinations see <https://www.afca.org.au/what-to-expect/search-published-decisions>.
[19] AFCA, AFCA Approaches <https://www.afca.org.au/what-to-expect/how-we-make-decisions/afca-approaches>.
[20] Rules, above note 13, r C.1, ‘Mandatory exclusions’, 31–4.
[21] Ibid, r D.4, ‘Monetary limits for complaints other than Superannuation Complaints’, 39–41.
[22] AFCA, Statement of financial position, 2022 <https://sofp.afca.org.au/>.
[23] D Eades, ‘Taking evidence from Aboriginal witnesses speaking English: some sociolinguistic considerations’, Precedent, No. 126, 2015, 44–8 <http://classic.austlii.edu.au/au/journals/PrecedentAULA/2015/12.html> .
[24] AFCA, above note 19.[25] AFCA, Codes of practice <https://www.afca.org.au/about-afca/codes-of-practice>.
[26] Rules, above note 13, r A.15.3.
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URL: http://www.austlii.edu.au/au/journals/PrecedentAULA/2022/20.html