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Whither the Australian Financial Complaints Authority?

Whither the Australian Financial Complaints Authority?

Having been an ear to bank victims when all the official institutions have failed them, I have been lately hearing much about AFCA.  Evan Jones

In November 2018, the newly created Australian Financial Complaints Authority (AFCA) replaced three complaints services, notably the Financial Ombudsman Service (FOS). By that time, FOS had been totally discredited, demonstrating long term incompetence and complicity with the banks.

AFCA was introduced with much fanfare as representing a new era, especially after the exposures of the Hayne banking Royal Commission.

From the stories related to me on an ongoing basis, AFCA’s performance in handling the complaints of serious bank victims (i.e. their lives have been shattered) does not look good.

I attach below an email that I sent to AFCA’s CEO David Locke in April 2019 (there was no response).

This is the point in one paragraph: there is a fundamental power imbalance between a bank and its customer. This imbalance, regardless of the letter of the law, inevitably generates abuse by the powerful (the bank) against the powerless (the customer). The courts are too expensive and cumbersome for a representative bank victim, (The are also complicit with the banks, but that’s another story.) A financial ombudsman exists formally to offset the power imbalance and to remedy the malpractice and crimes committed by means of that imbalance. AFCA personnel, like FOS personnel before it (many carried over to AFCA), still don’t get it.


David Locke

AFCA Chief Ombudsman & CEO

8 April 2019

Dear David Locke

Background: I have been in receipt of information from victims of bank malpractice on a continuous basis since 2000. As a consequence I have a rare familiarity with the nature and extent of bank malpractice and it is an ugly history of over 30 years duration.

Victims contact me, an outsider with no formal standing, after they have been extruded by the regulatory/mediation apparatus and treated cavalierly by the political class. (I should add that I have no pecuniary interest in such victims, my involvement being advisory and driven by ethical concerns.)

The complicity of FOS has been an integral dimension of this regime of predation – a dimension completely ignored in media reporting on the financial sector, in previous Parliamentary inquiries and in the hearings of the Royal Commission itself. Victims have been perennially nonplussed at the cynical treatment handed out to them by FOS.

As a result of this absence of accountability of FOS, the organisation has been incorporated into AFCA with no public acknowledgement of its failures and no public notification that any process has been put in place to ensure that such complicity is now a thing of the past.

The total failure, indeed general complicity, of the regulatory apparatus provides the background to the longtime pressure for the establishment of a Royal Commission.

The Royal Commission has subsequently proved a fizzer, ignoring in large part the banks' banking domain and de facto legitimising bank malpractice against small business and farmer borrowers and mortgagors. The Royal Commission, rather than unearthing the nature of the beast, has chosen superficiality and theatre, and the problem remains as entrenched as ever. Behind the scenes, the banks are still universally playing very hard ball with their accumulated legacy of victims.

Hence the establishment of the current Senate Legal & Constitutional Committee inquiry (‘Resolution of disputes with financial service providers within the justice system’), and the myriad submissions from bank victims whose accounts highlight that nothing has changed. This inquiry is the first to include the failings of EDR in its Terms of Reference, and some victim submissions document not merely the failings of FOS but also those of AFCA.

If AFCA is to do its job effectively, its personnel must confront that bank corruption is not a matter of rotten apples, misadventure, accounting mishaps in complex organisations, etc. (as misleadingly argued by bank CEOs in parliamentary hearings or before the FSRC).

Corruption is entrenched in the system, it survives endless turnover of CEOs and Board Chairmen. It is an integral component of the banking sector's modus operandi. It may be difficult for outsiders, properly brought up decent individuals (like myself and presumably yourself), to be able to comprehend such criminality and its extent, and to confront that such a thing is possible in our society formally administered under ‘the rule of law’. But the sound administration of justice is an illusion, and the media is happy to cooperate in the reproduction of that illusion.

The bank contract between itself as lender and borrower, profoundly asymmetric, provides the ideal vehicle for corrupt practices. A bank lender can default a small business/farmer borrower at will, appropriating customer assets including the family residence – with devastating long term effects on those defaulted. In addition, the 'professional' bodies on the bank teat (law firms, valuers, receivers, etc.) are happy to prostitute themselves in acting for banks in facilitating customer default and foreclosure.

FOS and subsequently AFCA have instituted a bureaucratic process that appears to treat the contending parties (bank and customer) as equals, as in a sporting contest. However, the very essence of EDR in its conception and institutionalisation constitutes an acknowledgement that the contending parties are not equal – far from it.

EDR, by its nature, is formally supposed to offset the asymmetry of power of bank against its customer. A priori, then, the bank has a case to answer. The vast number of complaints that come into EDR bodies are a tangible reflection of the abuse of that asymmetry of power.

Worse, as noted above, the banks, taking advantage of the comprehensive deregulation of the financial sector in the 1980s, have instituted a matrix of corrupt practices that regularly moves into criminality, using to full effect the intrinsic capacity for abuse that is embedded in the asymmetric banking contracts with their customers.

It should be imperative that AFCA personnel are educated into the nature of the beast behind the complaints that is their bread and butter and in the mentality that they bring to the handling of those complaints.

The police should be actively involved in investigating banking sector corrupt practices, given that fraud (i.e. a criminal rather than a civil offense) is the name of the game. However, in the absence of an equipped and coherent police response to such white-collar crime, the burden for victim redress is placed even more dramatically on the EDR domain.

… [There then follows details regarding a particular Westpac victim]

(Dr) Evan Jones
Last modified onFriday, 16 October 2020 03:14
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