In 2021-22, small businesses in disagreement with financial service providers filed 3,490 complaints with the Australian Financial Complaints Authority (AFCA), down 3% from the previous year.
The AFCA is a non-profit mediation service that provides free, fair and independent assistance with financial issues.
Small business complaints represented approximately 5% of the more than 72,000 complaints received by the Mediation Service during the previous fiscal year. The rest came from individual customers. Those who won the case received more than $18 million in compensation and reimbursements from banking institutions.
According to the AFCA’s Chief Ombudsman for Small Business, Suanne Russell, about 13% of small business complaints cite financial problems, up from 19% the previous year.
“The decline in hardship complaint levels in 2021-22 partly reflects the work the banking industry has done in recent years to support customers in difficulty. A further decline in financial hardship complaints involving small businesses would be welcomed by all, but we are concerned that we will see an increase given the end of COVID-19 government support and the current economic environment.
“Higher interest rates may also make this a challenge for the current year, but we hope lenders will continue to step up. The AFCA will closely monitor the impact of the higher rates on complaints from customers in the small business sector.
In 2020-21, business loans were the most frequent complaints about the product. Loans accounted for just over 40% of small business complaints, or about 1,440 disputes. Business transaction accounts (800 complaints), commercial property insurance (276), business credit cards (201) and loss of profit or business interruption insurance round out the five most frequently criticized items (200 ).
Quality of service (389), failure to respond to a support request (282), interpretation of product terms and conditions (271), denial of an insurance claim (204), and default lists were the top five concerns (198).
“The AFCA welcomes an early resolution at this stage – as long as the outcome is fair to both parties – as it removes uncertainty for small businesses,” she said.
The AFCA provides a free, fair and impartial financial complaint resolution service to small businesses and consumers. Ms Russell was pleased to learn that more than a third (36%) of complaints referred to the AFCA by small businesses were dealt with at the initial level of the process, when the AFCA refers a complaint to the financial firm for a additional examination.
If a quick resolution is not possible, the AFCA continues to work with the parties to try to help them reach an agreement through processes such as conciliation. Otherwise, one of its mediators, or a panel of decision-makers, will decide. This is a decision that binds the financial service provider if it is accepted by the complainant.
Almost half (47%) of small business complaints were resolved within 60 days of filing with the AFCA, however, more complex cases took an average of 112 days to resolve (about three and a half months ). In 2021-22, just over 10% of small business concerns were formally resolved.
Since its inception on November 1, 2018, the AFCA has helped recover nearly $80 million in compensation and reimbursements for small business complainants. During this period, it received nearly 14,800 complaints from small businesses.
The Australian Financial Complaints Authority (AFCA) is a non-governmental mediation service that provides free, fair and independent assistance in financial disputes.
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