'Not fair on consumers, not good for business': Financial complaints hit new record

Consumers in dispute with financial firms lodged a record 96,987 complaints with the Australian Financial Complaints Authority (AFCA) in the 2022-23 financial year, representing an unprecedented rise of 34 per cent while the surge was higher still for buy-now pay-later (BNPL) customers and scam victims.

AFCA’s chief ombudsman and chief executive officer, David Locke, says the rise reflects growing financial stress in the community, the continued scourge of scams, and issues with insurer claims handling that has continued for more than a year now.

"We are deeply concerned by the volume of complaints consumers are having to escalate to AFCA," says Locke.

"It’s not fair on consumers and not good for business. We need to see a significant improvement from firms."

Overall, banking and finance complaints rose 27 per cent to 53,638 in 2022-23, out of which complaints involving financial difficulty rose 9 per cent. However, in the June quarter complaints relating to financial difficulty were up 31 per cent year-on-year.

Home loan complaints and credit card complaints also spiked higher in the final months of the year, up 19 per cent and 34 per cent year-on-year in the June quarter.

"We want to see banks and other finance providers continue to take active steps to identify and support customers who are experiencing financial difficulty," Locke says.

On a more positive note, the banking and finance sector continued to lift the proportion of complaints resolved at the earliest stage of the AFCA process. During the period, consumers secured $253.8 million in compensation and refunds after coming to the AFCA, while the authority's systemic issues work resulted in firms remediating more than 368,000 people to a total of $75.5 million.

Buy now pay later (BNPL) complaints rose 57 per cent in 2022-23, and Locke notes people have been turning to other forms of credit to manage tight budgets.

"This underlines the importance of the federal government’s plan to regulate BNPL under the National Consumer Credit Act, and recent reforms addressing what’s known as ‘payday’ lending," he says.

Meanwhile, personal transaction accounts overtook credit cards as the most complained about product, with disputes up 86 per cent. It is the first time credit cards have failed to top the list since AFCA’s inception nearly five years ago.  

This was partly due to scam-related complaints, which rose 46 per cent in FY23 to 6,048.

"We witness first-hand the human cost of this serious and sophisticated financial crime," Locke says.

"It’s pleasing to see initiatives by individual banks to combat scams but we would welcome a more consistent approach across the sector."

The AFCA chief ombudsman welcomes the government proposal for codes of practice addressing scams.

"AFCA believes there is a need for enforceable standards, to lift the bar on scam prevention and remediation. This will also aid the work we do as an ombudsman service," he says.

"We have been raising our concerns about claim delays with insurers for over 12 months now.

"It is disappointing that this continues to be a concern. While we acknowledge the challenges insurers have faced, the bulk of complaints in the past year were not about natural disasters but about regular claims. We would like to see insurers take the necessary steps to ensure fewer policyholders have to take a complaint to AFCA."

Delay in insurance claim handling was also a significant issue in superannuation. Super complaints rose 32 per cent overall, but within this was a 136 per cent rise in complaints about claim delays, including the payment of death benefits.

"We urge fund trustees to closely track the progress of claims and to review outcomes for members," Locke says.

"Access to this money is vital for people who have lost a loved one or are unable to work. Unnecessary delays and poor communication are distressing."

AFCA has helped secure $1.07 billion in compensation and refunds since starting operation on 1 November 2018. It has received more than 367,000 complaints in that time. Its systemic issues work has resulted in 4.8 million people receiving $340.2 million.