Reform gaps for financial regulation must be ‘urgently’ addressed
The federal government needs to fix the gaps in its reforms to the Australian Financial Complaints Authority (AFCA) given the continuing revelations of serious misconduct by Australian banks, argues one firm.
As part of the post-Hayne royal commission reforms, changes were made to the jurisdiction of AFCA to extend the normal six-year limitation period to commence litigation by permitting AFCA to deal with matters arising after 1 January 2008.
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Creevey Russell principal Dan Creevey noted this extension in the jurisdiction of AFCA is limited to credit facilities not exceeding $5 million, meaning businesses and farmers with facilities greater than $5 million are now worse off.
Mr Creevey confirmed the firm has complained to the Department of Treasury, and was advised a review of the AFCA scheme was scheduled to take place after May 2020.
“But we consider that the gap in the jurisdictions of AFCA is a matter which should properly be addressed immediately,” he said.
“Given the continuing revelations of serious misconduct by Australian banks, our firm and a prominent client from the rural sector are concerned Australian banks may have misled the government into agreeing to a monetary cap of $5 million and to the waiver of time limits being limited to matters arising after 1 June 2008 in relation to AFCA’s jurisdiction.”
These limitations are “very attractive and convenient” for the banks, Mr Creevey continued.
“They mean banks are effectively immune from liability in relation to past misconduct occurring before the normal limitation period of six years in relation to facilities exceeding $5 million,” he said.
“Our client believes there are many other parties, particularly in the rural sector, who have suffered considerable losses as a result of bank misconduct and are unable to pursue their rights as a result of this unfair gap.
“Common sense suggests there are likely to be many potential claims in this category and there is no good reason why banks should avoid liability for their misconduct in relation to these claims. Given the serious nature of bank misconduct there does not appear to be any logical or moral reason for not waving the usual limitation periods where serious misconduct by the bank can be demonstrated.
“Aggrieved businesses and farmers with facilities over $5 million are likely to have suffered greater losses. They may well now be in a worse financial position than parties with credit facilities under $5 million who are able to seek compensation through AFCA.”
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