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‘Unprecedented’ spike in consumer complaints as rate hikes bite: AFCA
The Australian Financial Complaints Authority (AFCA) received nearly 100,000 consumer complaints against financial firms in the last 12 months, up an “unprecedented” 34 per cent from the year before as rising interest rates add to financial stress and the volume of scams skyrockets.
Complainants have won nearly $254 million in compensation in connection with the record complaint levels over the past year, AFCA said in a July 26 update on complaints to its financial ombudsman. To put the new figures in context, the July 2022 update revealed a rise of just 3 per cent in complaints from the 2021 financial year.
“We are deeply concerned by the volume of complaints consumers are having to escalate to AFCA,” said chief ombudsman and CEO David Locke.
“It’s not fair on consumers and not good for business,” he added. “We need to see a significant improvement from firms.”
Breaking down the complaint categories shows the surge in dispute activity was especially strong in certain sectors. Scam-related complaints rose 46 per cent, while insurance complaints increased by 50 per cent amid ongoing problems with claims processing delays. The top complained-about issue was insurance claim handling delays, with complaints to AFCA up 76 per cent.
The Reserve Bank of Australia’s rate-hiking campaign to fight soaring inflation, which has seen official rates increase by 400 basis points in the space of a year, is now clearly affecting consumers and the economy, Locke said, attributing the spike in complaints to increased financial stress and cost-of-living pressures.
Complaints against banking and finance entities increased 27 per cent over the past 12 months, reaching 53,638 for the 2022-3 financial year, AFCA said. “Within that, complaints involving financial difficulty rose 9 per cent over the year but were up 31 per cent when the June quarter was compared with the same period a year earlier,” it said, with home loan complaints and credit card complaints also spiking later in the year.
However, the report noted that, “pleasingly,” banking and finance entities were increasingly resolving complaints at the “earliest stage of the AFCA process”.
Another rising source of consumer disputes was the buy-now-pay-later (BNPL) sector, with 57 per cent more complaints filed than in the 2021-2 financial year. Locke attributed this to people turning to other credit options as their budgets tighten.
“This underlines the importance of the federal government’s plan to regulate BNPL under the National Consumer Credit Act, and recent reforms addressing what’s known as ‘payday’ lending,” he said.
And for the first time, credit cards were not the most complained-about product, with personal transaction accounts taking the top spot after disputes increased by 86 per cent, driven by the increase in scam-related complaints.
“We witness firsthand the human cost of this serious and sophisticated financial crime,” Locke said. “It’s pleasing to see initiatives by individual banks to combat scams, but we would welcome a more consistent approach across the sector.”
Complaints about superannuation rose 32 per cent, with insurance claim handling delays also representing a key issue. There was a 136 per cent rise in complaints about claim delays, including death benefit payments.
“We urge fund trustees to closely track the progress of claims and to review outcomes for members,” Locke said.
“Access to this money is vital for people who have lost a loved one or are unable to work. Unnecessary delays and poor communication are distressing.”
