Appearing before the Senate economics legislation committee this Thursday, Australian Financial Complaints Authority’s (AFCA) chief operating officer, Justin Untersteiner, faced questions regarding the complaints received to date relating to Dixon Advisory.
Mr Untersteiner said, so far, 1,948 complaints have been received, valued at a total $374 million.
“The consumer claims amount to $374 million. We’re yet to review those complaints,” Mr Untersteiner said.
Asked by Liberal senator Andrew Bragg what happens next, Mr Untersteiner said a “high-level review” will ensue.
“With the passing of the CSLR bills and the legislation coming into force, the role that AFCA now undertakes is to undertake a high-level review of those complaints to make a determination on whether we think they are complaints all within the scope of the CSLR.
“Our view at the moment is that the vast majority are likely be, so as a result, we’ve started undertaking our own investigations into those complaints.”
Mr Untersteiner disclosed that AFCA this morning published its first determination relating to Dixon and found in favour of the consumer.
“We will now continue to work through those complaints,” he said.
Asked by Mr Bragg whether the use of a compensation scheme is “peculiar”, particularly given the regulator “wasn’t prepared” to enforce the law and seek civil and criminal penalties, Mr Untersteiner refused to comment.
“AFCA doesn’t hold a view on that,” he said.
The advice community has been particularly concerned regarding the impact Dixon-related claims will have on the cost of the Compensation Scheme of Last Resort (CSLR), and therefore on the levies already charged to advisers.
The case is fuelling concerns because nearly 2,000 former clients are seeking recourse under the CSLR, which is set to offer capped payments of up to $150,000 from April this year.
In November, in response to the potential increase in levies as a result of the CSLR, the chief executive of the Financial Advice Association Australia (FAAA), Sarah Abood, said that while the body doesn’t oppose the scheme, it is concerned about past costs and the history of misdeeds in the sector, including those inflicted by Dixon Advisory.
“What is the CSLR going to do with a large number of complaints, for example, from Dixon? We are looking into who is going to pay for those,” Ms Abood said at the time.
Back in October, David Locke, the chief executive of AFCA, informed the Senate economics references committee that the total payout for all Dixon complaints would amount to $357 million.
However, the latest figure from AFCA surpasses that amount.
In January, the CSLR board estimated that the initial levy to fund claims from eligible consumers who have been the victims of financial misconduct will total $241 million.
This figure will meet the compensation claims and costs in relation to complaints lodged with AFCA between 1 November 2018 and 7 September 2022, and falls within the annual cap of $250 million as set out in the legislation for the CSLR.
The initial levy estimate includes provision for the majority of claims involving Dixon Advisory and Superannuation Services, the CSLR board said in January.
While the government will cover the establishment costs for the CSLR and the expenses of the initial levy period until the end of the 2023–24 financial year, subsequent funding will rely on levies imposed on specific segments of the financial services industry.
