Small businesses in dispute with financial service providers lodged 3490 complaints with the Australian Financial Complaints Authority (AFCA) in 2021-22. This figure, while significant, represents a three per cent drop from the previous year.
The AFCA also reported that the small businesses that ended up being the favoured parties in their complaints secured more than $18 million from financial firms in compensation and refunds.
Small-business complaints accounted for about five per cent of the more than 72,000 complaints the ombudsman service registered overall last financial year. The remainder came from individual consumers. About 13 per cent of these complaints involved financial difficulty, down from 19 per cent the previous financial year.
Business loans topped the list of most commonly complained about products in 2020-21, with over 40 per cent of small business complaints – about 1440 disputes – were to do with loans. Rounding up the top five are: business transaction accounts (800 complaints), commercial property insurance (276) business credit cards (201), and loss-of-profits or business interruption insurance (200).
“Lower levels of hardship complaints in 2021-22 in part reflect the work the banking sector has been doing in recent years to support customers in difficulty,” AFCA’s Lead Ombudsman for Small Business Suanne Russell said. “A further fall in financial difficulty complaints involving small business would be welcomed by everyone, but we are concerned we may see an increase given the end of COVID government support and the current economic environment.
Higher interest rates may also make that a challenge in the current year but we hope lenders will continue to step up,” Russell added. “AFCA will closely monitor the impact of higher rates in complaints from customers in the small-business sector.”
Russell said she was pleased to see that 36 per cent of the complaints that small businesses escalated to AFCA were resolved at the earliest stage of its process, when AFCA refers a complaint back to the financial firm for further consideration. If early resolution isn’t possible, AFCA continues to work with the parties to try to help them reach agreement through processes such as conciliation. Failing that, one of its ombudsmen, or a panel of decision makers, will make a determination. This is a decision that is binding on the financial service provider if it is accepted by the complainant.
AFCA repoirt that 47 per cent of small businesses’ complaints were resolved within 60 days of being lodged with them, though more complex cases took the average time to closure to 112 days. Just over 10 per cent of small businesses’ complaints progressed to a formal decision in 2021-22.
