But financial difficulty complaints did not rise as expected
The Australian Financial Complaints Authority (AFCA) has recorded a total of 3,807 complaints from small businesses engaged in disputes with financial service providers in 2022-23, marking a 9% uptick compared to the previous year.
Small businesses obtained $23.4 million in compensation and refunds from financial firms upon seeking resolution through AFCA, reflecting a 16% increase compared to the $20 million the previous financial year.
Financial difficulty complaints dropped
Suanne Russel (pictured above), AFCA’s lead ombudsman for business, noted in AFCA’s recent member forum, however, that the national financial dispute resolution service had not seen the expected rise in difficulty complaints amid challenging global and domestic economic conditions.
Financial difficulty complaints related to small business lending even decreased by 1% to 475 in 2022-23.
“This decrease was not what we were expecting, particularly when we hear of increases in personal and corporate insolvency,” Russell said. “Small businesses have proven to be incredibly resistant in the aftermath of COVID and in the current economic environment, with increased costs and interest rates.”
Most complained about issues and products
The data revealed that business loans remained the most common source of financial complaints, constituting approximately one-third of small business complaints lodged to AFCA. However, the number of loan-related complaints decreased 7%, totaling 1,347 complaints compared to the previous year. Rounding up the top five products attracting complaints were business transaction accounts, commercial property, credit cards, and commercial vehicles.
Service quality emerged as the primary issue in small business complaints, even though this category experienced a 21% decline. Other top concerns included unauthorised transactions – a category that covers scam activity – financial firms’ failure to respond to assistance requests, denial of insurance claims, and disputes over insurance claim amounts.
AFCA’s five-year milestone
Established on November 1, 2018, AFCA recently celebrated its fifth anniversary. Over this period, it has played a pivotal role in resolving more than 20,000 complaints from small businesses, securing a total of $106 million in compensation and refunds for complainants. While AFCA received a record-breaking 96,987 complaints in 2022-23, a 34% increase, 4% of those complaints came from small businesses and the rest from individual consumers.
Russell said not all small business lenders are required to be members of the AFCA Scheme. While membership is obligatory for Australian Financial Services and Australian Credit License holders, lenders exclusively dealing with small businesses, lacking an AFSL or ACL, are exempt.
Nearly half (48%) of small business complaints were resolved within 60 days of being lodged with AFCA.
Click here to access the AFCA media release.
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