AFCA chief David Locke's clean slate

AFCA chief David Locke. Photo: Anthony Geernaert.

AFCA chief David Locke knows data may not solve people's personal financial crises, but it will help explain their causes and how the financial industry might start to wipe its slate clean.

At a glance

  • David Locke was appointed CEO of AFCA in November 2018, and believes adjudicating financial complaints is about fairness.
  • Following the Hayne Royal Commission, AFCA is increasing its staff to meet the number of complaints – still running at about 600 a day.
  • Locke believes data is vital in addressing systemic issues in the financial services industry, and that it should be used so that firms and complainants alike take notice.

Back in June 2019, in an interview with the Australian Financial Review, David Locke sounded frustrated. The chief ombudsman and CEO of the Australian Financial Complaints Authority (AFCA) believed then that the big banks seemed to have learned few lessons from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Either they were not responding quickly enough to complaints, or were providing inadequate resources to deal with them, he said. It looked like the banks still didn’t get it.

Locke declared that even in the post-Hayne era, some of the disputes were becoming highly legal and adversarial in nature. Lawyers were resorting to the letter of the law “rather than addressing the substantive issue of unfairness”.

If the frustration was showing then, it seems to have passed six months down the track. Locke, speaking to INTHEBLACK in early 2020, believes the banks et al are beginning “to get it”. Many now seem to have worked out that contrition, perhaps with a dash of penance, is the best way forward. More than 12 months after AFCA’s inception, a sense of conciliation and restitution is in the air.

A fair fight

As Locke says, adjudicating financial complaints is not about being adversarial; it is about fairness. It is about hearing both sides of the argument fairly, and then delivering a reasonable and just judgment. Locke can claim more experience in David v Goliath battles than most.

He has spent much of the past 30 years as a lawyer fighting for and supporting the individual who has fallen victim to the machine. He’s from a mining town in the north-west of England. “My dad went down [the] pit and then became a corner shop owner for 35 years.” Locke was the first member of his family to go to university and, as a young man growing up in the Thatcher era, watched on as mining communities such as his own were decimated.

Humble beginnings can often lead to empathy and a passion for social justice, and Locke has more of these qualities than most. After legal studies at Hull University, he eschewed the big firms and opted for legal aid work.

“I was one of the very few who weren’t going direct from university into the City of London,” he remarks. “You can train at a big city practice and actually spend a lot of time producing court bundles, but often you’re having no direct responsibility for cases. They’re too complicated and there’s too much money involved.”

Locke’s daily fare was landlord and tenant disputes, discrimination cases and unfair dismissals. He was working in the heart of social welfare law, while also lending his time to the boards of charities.

It would eventually lead to a full-time switch into the charity law sector, which he admits was a relief after many years of hands-on community legal work. After a decade in social welfare law, he admits he was “a bit burnt out”.

In the intervening years, Locke, 53, built up an impressive CV in the charities sector.

He became executive director of charity services at the Charity Commission of England and Wales, and chief adviser to the ACNC Taskforce that established the Australian Charities and Not-for-profits Commission, and arrived in Australia in 2011. He then became assistant commissioner of charity services there, a role he held for over six years. He was appointed as CEO of AFCA in June 2018, taking up the position on 1 November that year.

The work he has always known is face to face. “You’re sitting across the table and hearing people’s life stories and the issues they have to deal with,” Locke says. “There’s something very compelling about that. You see them at the worst times, and if you can assist them to get to a different place, that’s very satisfying.”

The law, as he sees it, really can be used for good, even if it often gets bad press. “It can transform people’s lives and give them the rights and access they would have never normally had.”

Spike in complaints

After the Royal Commission, Locke and his staff knew the complaints deluge would come.

The media widely reported that in its first eight months (to 30 June 2019), AFCA fielded just over 47,000 complaints, a number that was steadily rising. By the 12th month of AFCA’s operation (31 October), there were 73,272 complaints made against AFCA members, of which nearly 80 per cent have been resolved. Of those resolved, 66 per cent were closed within 60 days. Th e average time to close a complaint was 62 days.

While the numbers sound forbidding, AFCA is increasing its staff to meet the number of complaints – still running at about 600 a day. The media had largely reported the numbers as proof of the egregious nature of the finance industry, but this is not entirely true.

AFCA is the amalgam of three previous consumer complaints platforms – the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal. “We have had 40 per cent more complaints than the three predecessor organisations combined,” Locke says.

"You're sitting across the table and hearing people's life stories and the issues they have to deal with. There's something very compelling about that."

“We took 10,000 cases from the FOS and the CIO – all transferred to us on 1 November 2018.” 

It doesn’t stop there. There are legacy cases from 10 years ago. These, he says, are fewer than 1000 in number. Still, it all adds up. There are, of course, systemic issues in banks that need to be cleared up, and banks make up a third of all complaints (26,000). There were 14,000 complaints against general insurers and 10,000 with other credit providers.

Perhaps not surprisingly, credit disputes have figured highest at 44 per cent of AFCA’s work, general insurance at about 22 per cent, and complaints in the superannuation arena at 9 per cent. Up to this point, AFCA has awarded A$185 million in compensation.

Proof is in the data

Locke’s strategy – so far as an ombudsman can have one – is clearly data-driven. Without it, it would be impossible to solve the systemic issues, which have been for so long hard-wired into the sales/adviser process. Without the ability to show the public (and perpetrators) which firms are attracting complaints and why – the entire exercise would be virtually worthless, he believes.

The AFCA site allows anyone to put in the details of any financial firm and product and see all the complaints data and how they’ve been resolved. It is possible to compare one financial firm to another.

AFCA’s latest release includes data up to and including 31 December, giving the public an insider’s look at the first 14 months of information compiled by AFCA.

Locke is clear. Understanding data leads to prevention. Prevention beats cure. Mediation trumps prosecution, and a company with an intelligent and fair-minded internal resolution program is preferable to everything.

Knowing why complaints occurred is paramount. “We want everyone to use data,” he says. “What are the patterns? Where are the hotspots? Who are the outliers in this? Also, when people do complain, how are they being treated?”

If the numbers and detail appear to point the finger at major offenders, it is not AFCA’s intent. The technology is there to offer empirical proof, and should be used so that firms and complainants alike take notice.

A last resort

Locke wants AFCA to be the last resort, not the first. However, if and, when, it is needed to adjudicate a case, he doesn’t want it to be like a court of law. He wants AFCA to act less like a judge and more like a mediator between the two parties.

There are still the old-style firms that rely on the “black letter of the law” to block complaints and obfuscate outcomes, and Locke says they were clearly present when evidence was being heard at the royal commission.

He gives the example of an insurance company that might enforce a definition of a heart attack that is outdated, bears no relation to current medical guidelines, and often has no relation to a patient’s experience.

There were cases where a woman with breast cancer was not covered because she was given a lumpectomy rather than a full mastectomy. “What we’re telling companies is, you can’t get out of this just because it doesn’t conform to what you have stated in ‘Section 74, subsection 18’. If it’s not fair dealing, we will make a determination.”

Not surprisingly, debt attracts the lion’s share of problems, and probably always will. “We’ve seen a lot of people who were over-committed, who took out properties with franking credits and negatively geared all of this,” Locke says. “And then something happens – a loss of a job or a major health issue arrives, and everything comes tumbling down.”

People, he says, come to AFCA often in a state of total despair. The frontline people receiving the calls have all received training from crisis support and suicide prevention organisation, Lifeline Australia. It’s part of the job. There have been occasions where AFCA has sent ambulances and police to people at the end of their tether.

Data may not solve people’s personal financial crises, but it will go a long way to explaining why these things keep happening, and how the financial industry can start to see how to wipe its slate clean.

“I don’t want us just to be a body that resolves disputes when they’ve arisen. I want us to be working with financial firms and advisers and others to drive improved practise, to identify issues to be aware of and give training and support to minimise disputes in the first place,” Locke says.

“It’s one thing to stop a boulder from rolling down the hill and killing the village, [it’s] better to smash the boulder before it rolls.”

Watchdog with a bigger bite

AFCA is an amalgamation of the Financial Ombudsman Service, the Superannuation Complaints Tribunal, and the Credit and Investments Ombudsman. Its creation was a key recommendation of the Ramsay Review into Australia’s external dispute resolution framework.

Starting in 2016, the review recommended simplifying the various industry ombudsman schemes that consumers and small businesses had to navigate to resolve a problem with a financial product or service. 

AFCA has greater powers, a wider reach and more resources than its predecessors. Under its broader powers, customers with disputes over large sums can have their cases ruled on by an independent third party without the cost of going to court. It also has the power to award greater compensation than the previous regime.

For non-superannuation matters, AFCA’s threshold for the value of disputes has increased from A$500,000 to A$1 million, and the compensation it can order has risen from A$350,000 to A$500,000.

For small businesses, the threshold has risen from A$2 million to A$5 million, and AFCA can order compensation of up to A$1 million.

CPA Library resource: Complaint is a Gift: Recovering Customer Loyalty When Things Go Wrong. Read now.

Inside AFCA's Datacube

In November 2019, AFCA released its comparative reporting tool, the Datacube, to increase transparency and consumer education.

Here’s a snapshot of the numbers:

44,988 complaints received
19,219 complaints resolved at registration and referral
24,665 complaints progressed
18,768 complaints closed at case management
A $112.1 million amount to be paid to complainants

Like what you're reading? Enter your email to receive the INTHEBLACK e-newsletter.


We have enjoyed an enviable period of economic growth and low unemployment over the past three decades, but within a few short months in 2020, that period of prosperity has become a thing of the past.

How to get the unemployed back to work

The vaccine market makes up a small percentage of the trillion-dollar worldwide pharmaceutical industry.

Immunity challenge: The economics of vaccines

Non-compliance, financial abuse of the elderly, a lack of education and training, financial viability for the sector and funding issues are all on the table as the Royal Commission continues hearings in preparation for the release of the final report in February 2021.

Calls for financial reform in aged care sector

April 2020
April 2020

Read the April 2020 issue of INTHEBLACK magazine.

Each month we select the must-reads from the current issue of INTHEBLACK. Read more now.