Katy Holliday - 18 Aug, 2021

AFCA Data Says ‘Responsible Lending’ is Top Consumer Complaint

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According to a statement from the Australian Financial Complaints Authority (AFCA), the products most complained about by consumers and small businesses in the past 12 months were credit cards and home loans, with many citing responsible lending issues as the cause.

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The AFCA received more than 70,000 complaints in the last financial year, with 40% of these relating to credit products. The external dispute resolution service for financial complaints reported that credit card products were the highest source of complaints and made up 14% of the total.

Of those credit card complaints, the most common issue was default listings, while unauthorised transactions accounted for 11% of credit card concerns. 

Home loan credit matters were the second-highest on the complaint list. Issues with mortgages totalled 9% (6,300 disputes) of all credit product complaints lodged with AFCA for the financial year, down from 13% in FY20.

Other common reasons for credit complaints were financial firms not responding to requests for assistance (2,678 complaints filed), inadequate service (2,554), incorrect charges being applied (1,894) and responsible lending (1,698).

The AFCA data showed that almost 70% of disputes Australian’s had with lenders, insurers, investment firms, super funds and financial advisers were resolved by agreement through AFCA mediation. Nearly 60% of disputes were finalised within 60 days.

They worked to secure more than $240 million in compensation and refunds for consumers seeking their help in FY21, also achieving results with fee waivers, debt forgiveness and apologies. 

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AFCA chief ombudsman David Locke said in positive news complaints involving financial difficulty were down nearly 40 per cent from last year. 

“That’s a great outcome and reflects the positive response from government and industry to the impact of COVID,” Locke said.  

However, issues with personal transaction accounts increased 48% over the same period, while unauthorised transactions accounted for 29% of those issues. A rise in online scams could be responsible for this trend. 

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“There’s no single reason for these increases but people transacting online more during COVID-19 will have contributed,” Locke said.

“Scams, which have accelerated during the pandemic, are also leading to growing complaints about transactions.”

Likewise, electronic banking complaints rose 76%, with unauthorised transactions accounting for 28% of that increase, and mistaken internet payments taking a 19% cut of the pie. 

“It’s important that consumers and financial service providers continue to work together to resolve issues quickly as they emerge,” Locke said. 

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A massive $32 million in remediation payments needed to be paid out in the 2020-21 Financial Year due to “a range of systemic issues” the AFCA found.

It was also revealed that 26,281 of all complaints lodged were against banks, which accounted for more than a third of the issues raised, while other “credit providers” totalled 8,216 of all complaints (11%).

The amount of complaints against mortgage or finance brokers over the period has not yet been released but is expected to be announced later this year. However, in good news for the industry, AFCA data for the first six months of the financial year found that complaints against mortgage brokers totalled less than 1% of the disputes.

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Approximately 4% of AFCA members had received a complaint against them in the period.

While the overall number of financial complaints fell 12% from FY20 figures, when the start of the pandemic saw a dramatic rise in complaints relating to issues such as travel insurance, Locke said “It’s too early to say we’re out of the woods yet.”

“It may be some months before we know the full impact of the end of government emergency support and assistance from financial firms such as deferred loan repayments. And, of course, we are still living with COVID-19.”

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