AFCA – four years in
The Australian Financial Complaints Authority (AFCA) has reported that since its launch in 2018 more than 300,000 complaints have been brought by consumers, or roughly 200 complaints per day, with more than $900 million secured in compensation and refunds.
In a snapshot of its first four years in operation, AFCA has provided an indication of the top-ranking issues, with financial advice notably absent from these.
The top five product line issues brought by customers to AFCA in the last four years were delay in insurance claim handling (5.4%), disputes regarding an insurance claim amount (4.7%), denial of an insurance claim, (exclusion and/or condition) (4.3%), failure to respond to a request for assistance (credit) (3.8%), and unauthorised transactions related to deposit taking (3.6%).
The top issues overall referred by consumers to AFCA have arisen out of service quality (9.1%), unauthorised transactions across all product lines (7.5%), delays in insurance claim handling (7.4%), insurance claim amount (5.5%), and denial of insurance claim (5.0%).
The bulk of consumer product complaints lodged with AFCA arise out of disputes over credit cards (13.6%), home loans (8.9%), personal transaction accounts (7.5%), and personal loans (7.4%). More than half of all complaints were generated by disputes with banks (36.5%), general insurers (20.6%), and credit providers (11.9%).
Interestingly for the financial advice industry, it was largely absent from the main issues detailed above.
CEO and Chief Ombudsman, David Locke, has said that “the past four years have demonstrated the critical role AFCA plays.” He added, “as we move into a period of heightened economic uncertainty, and amid increasing natural disasters, the need for AFCA’s services has never been greater.”
The establishment of AFCA was a significant overhaul of the Australian financial services dispute resolution framework, consolidating three separate predecessor schemes to provide an accessible and efficient ombudsman service to consumers and small businesses with access to binding, out-of-court dispute resolution.
In a media release provided by the ombudsman service, AFCA noted that 60 per cent of cases were resolved within 60 days, with most of these outcomes resolved by agreement between the parties. Mr Locke considers that this benefits both industry and consumers: “As long as the outcomes are fair and just, we think early resolution is good for everyone,” he said. “For industry, it means retaining customers’ business and goodwill. For consumers, the sooner a matter is resolved the better, because financial disputes can be very stressful.”
It further noted that its remit extended to complaints arising out of weather-related natural disasters, with about 5,000 victims of over 50 events filing for assistance, as well as 17,000 COVID-related complaints, and assisting to facilitate the early release of superannuation during the extended covid restrictions.
Although an independent review produced by the Treasury in November of 2021 found that AFCA was “performing well in a difficult operating environment and a changing regulatory landscape”, it also identified several areas that showed room for improvement, with most recommendations focused on enhancements to AFCA’s transparency, and improvements to the decision making process with particular emphasis on its fairness jurisdiction and timeliness to resolve disputes.
What the above figures tell us is that AFCA is handling a large number of complaints, trying to resolve complaints at an early stage and that it labours under a significant case load. For industry participants AFCA is here to stay but has room for improvement.
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
