AFCA highlights 'pattern of delays' in super

The Australian Financial Complaints Authority (AFCA) has released its bi-annual System Issues Insight Report, to address industry practices and reduce consumer complaints.

In the first half of 2024-25, 235 matters were reported affecting 187,855 consumers with more than $3.13 million remediated.

Within the superannuation sector, four common systemic issues were highlighted in the report, being a need to enhance engagement with AFCA, enhancing systems, improving disclosures and improving timeliness of superannuation rollovers.

AFCA's complaint data and review process raised concerns about whether super funds had adequate resourcing to meet requests for information from the regulator within the required timeframes.

"Financial firms must invest in sufficient resourcing and proper processes to ensure timely responses to AFCA requests, and compliance with its obligations cooperate which can be found under A.9.1 of the AFCA Rules and our Engagement Charter," AFCA said.

"Failing to cooperate during the AFCA complaint process can cause a negative impact on consumers and contribute to a relationship breakdown between the customer and financial firm."

In one case study with an unnamed fund, AFCA said it observed a "pattern of delays" in the fund's responses which affected its Internal Dispute Resolution (IDR) referral period and working through AFCA's case management stages.

"The issue was linked to the financial firm's business model, which relied on external third parties to manage its complaints function. This structure increased delays and contributed to poor customer experiences," AFCA said.

AFCA said the unnamed fund committed to undertaking a review of its complaints reporting processes.

The report also noted IT disruptions which affected member account access was an ongoing issue. In one instance, an unnamed super fund confirmed 112,603 members were unable to access their accounts. In that instance, members who suffered financial losses were compensated a total of $15,605.

"IT system upgrades must include robust contingency plans to prevent largescale account access issues affecting members," AFCA said.

AFCA also warned funds about system errors within insurance policies. In one case, a system error in a super fund's insurance cancellation process led to the erroneous cancellation of Income Protection insurance for members when they left their employment.

This issue affected over 1500 members and resulted in remediation costs of $1,430,426.

Additionally, AFCA reminded super funds that rollovers must be processed within regulatory timeframes, and funds should identify where the timeframes are missed, determine the root cause of these failures, and proactively invest in technology and staffing to meet compliance standards.

Meantime, within investments and advice, only one common systemic issue was observed by AFCA, being firms not complying with customer instructions and cooling-off periods.

AFCA said firms need to streamline refund processes to avoid unnecessary delays, multiple touchpoints and customer complaints.

"AFCA investigated delays impacting a number of consumers in processing refunds for cancelled share recommendation subscription services, particularly those cancelled within the cooling-off period," it said.

In one case study of an unnamed financial firm, AFCA noted that while the issue was self-reported to the relevant regulator, the delays were found to be systemic with the key contributing factor being multiple touchpoints required for processing refunds.