Financial service complaints surge, pushing industry ombudsman to the brink
Nobody likes a whinger but those with a genuine complaint against a financial services company have arguably never had as good an opportunity of getting some meaningful action.
The volume of complaints received by the industry ombudsman, the Australian Financial Complaints Authority (AFCA), has been skyrocketing as consumers and small businesses learn that this is an excellent way to get some long-awaited action on their legitimate complaints.
Complaints bring action
Instead of being ignored or facing lengthy delays, those who complain to AFCA are finding that suddenly their insurer or bank wants to talk to them and fix up their issue.
Complaints against financial services firms jumped dramatically in 2023, reaching more than 100,000 for the first time since AFCA was formed.
That marks a dramatic rise with scam-related complaints to AFCA almost doubling between 2022 and 2023 and complaints also rising due to cost-of-living pressures and higher interest rates.
To apply for help from AFCA, customers must have already used the company’s internal dispute resolution but AFCA chief executive and chief ombudsman David Locke said the volume of complaints have been rising at an “unsustainable rate”.
Companies need to lift their game
“We believe many financial firms could be doing a better job of handling complaints within their own internal complaints processes, so only the most complex cases reach AFCA – which is the role we are meant to play,” Mr Locke said.
AFCA received almost 9000 complaints related to scams, up 95% from 2022, and 5396 complaints involving financial hardship, up 29% on 2022.
Complaints about other financial products also increased, such as personal transaction accounts (up 64%), credit cards (up 33%) and comprehensive vehicle insurance (up 39%).
Also rising were complaints about unauthorised transactions (48%), delays in claim handling (up 20%) – although complaints about service quality fell 25%.
All told AFCA received 102,790 complaints – up 23% on 2022 – and consumers secured $304 million in compensation and refunds, up 38% on the previous year.
This greater success in getting compensation and refunds may have played a part in AFCA’s growing popularity and Mr Locke said the volume of complaints was putting unnecessary pressure on the external dispute resolution system and causing further delays for consumers.
He is hopeful that an industry crackdown on scams will disrupt the organised crime scams and that financial services companies will also work harder to support their customers and address complaints quickly and efficiently in-house.
Since AFCA was formed in 2018, combining the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal, the volume of complaints has roughly doubled.
Since it began, AFCA has received more than 420,000 complaints and secured $1.3 billion in compensation or refunds for consumers.
On the negative side, five years since the Ramsay and Hayne reports showed widespread problems in the financial services sector, disputes have only increased.
Hopefully the growing cost of complaint resolution will cause a rethink within banks and insurers and a renewed determination to solve complaints internally.