AFCA warns of ‘brutal’ human cost as dispute backlog grows

Speaking on a recent ifa podcast, Singh said the Australian Financial Complaints Authority (AFCA) is under pressure to balance speed, accuracy and cost when handling complex matters such as the Dixon Advisory and United Global Capital (UGC) cases.

“We have had cases where people are in their 90s … It’s the tragedy of these people’s circumstances,” he said. “Some of them will get to preservation age over the course of the dispute and have nothing … We’re trying to balance a number of factors, including getting through things quickly because these people are literally on the brink.”

Singh outlined the operational challenges of managing a growing caseload, noting that AFCA cannot simply accelerate processing without expanding its workforce.

“We have to bring a workforce in to deal with these matters. We can’t just suddenly deal with 2,700 Dixon disputes without bringing in more people to do it,” he said.

He emphasised that the authority must maintain rigorous processes to ensure consumers have valid claims.

“The reason the system is as it is, is because we need to ensure the consumer does have a claim … We need to validate that particular consumer’s claim,” Singh said.

Touching on the “but for” debate, Singh said the calculation is not a major factor in most cases, but it can work both ways – increasing compensation in some instances and reducing it in others.

The assessment becomes more complex when consumers are moved out of APRA-regulated funds, sometimes without their full knowledge, as it requires evaluating what would have happened in a different fund rather than just hypothetical losses.

Singh added that he doesn’t particularly like the term “but for”, as it can oversimplify the reality of the cases. Similarly, he earlier defended the counterfactual approach, saying it isn’t about hypothetical windfalls, but about fairly calculating a client’s actual financial loss by comparing what happened to what reasonably would have occurred with proper advice.

“It’s not hypothetical losses. So UGC illustrates this quite well. What we do is look at where would they have been had the advice not been provided? And that’s back in the fund that they were in previously,” he said on the podcast.

“And remember, these people have been talked into by a cold call or by a super switching thing to get their super compared and then either sometimes without authority, but sometimes with authority, but certainly without knowledge of really what’s going on, they get talked into a different product. So that is the key difference.”

AFCA, he added, is also attempting to contain costs while improving efficiency, with staff trained on certain disputes able to accelerate processing for others.

“Essentially we’re trying to get efficiencies,” Singh said, adding that balancing workforce, cost, and legislative changes is a constant challenge.

To hear more from Shail Singh, click here.