Financial complaints hit ‘unsustainable’ highs in 2023

Financial services providers asked to do a better job of handling complaints.

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Last updated: 10 Jan 2024

The Australian Financial Complaints Authority (AFCA) appears to have become a dumping ground for many complaints that should have been resolved internally by the financial institution on the receiving end of the complaint.

For the first time since its founding in November 2018, the independent external dispute resolution service received over 100,000 complaints in a calendar year.

The tally for 2023 is 102,790 from both consumers and small businesses, a jump of 23% on 2022.

The record figure suggests that banks, insurance companies, superannuation funds and other financial services providers are increasingly failing to resolve issues with their customers.

The volume of complaints escalated to AFCA has been increasing at an unsustainable rate
AFCA Chief Ombudsman David Locke

It also means that people who lodge a complaint with the independent external dispute resolution service are having to wait longer for a resolution.

“The volume of complaints escalated to AFCA has been increasing at an unsustainable rate,” says Chief Ombudsman and CEO David Locke.

Despite the added workload, the scheme is still doing what it’s supposed to do.

Consumers secured $304 million in compensation and refunds after lodging a complaint with AFCA in 2023, up 38% on the previous year.

Internal dispute resolution not working

AFCA instructs financial services customers to initially file a complaint with the company in question and give it an opportunity to resolve the issue internally. But that process appears to have broken down in many cases.

“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,” Locke says.

“Instead, the volume of complaints reaching us is putting unnecessary pressure on the external dispute resolution system and inevitably causing further delays for consumers.”

Top 5 financial products complained about in 2023

Personal transaction accounts
Credit cards
Comprehensive vehicle insurance
Home building insurance
Home loans

Top 5 financial issues complained about in 2023

Unauthorised transactions
Delays in claims handling
Quality of service
Insurance claims amounts
Denial of insurance claims

$1.3 billion in compensation

AFCA was set up as a single scheme in 2018 to replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Since then it has received more than 420,000 complaints and helped secure $1.3 billion in compensation or refunds for consumers.

The scheme also focuses on systemic issues – recurring complaints that point to an entrenched and widespread problem within a financial services sector. To date, AFCA’s efforts on systemic issues have resulted in 4.9 million people receiving more than $380 million in compensation.

We need to see a downward trend in complaints overall
AFCA Chief Ombudsman David Locke

But the performance of financial firms on dispute resolution is making AFCA’s job harder.

“We need to see a downward trend in complaints overall, with financial firms working better to support their customers and to address complaints quickly and efficiently in-house,” Locke says.

In their final year, the three schemes that preceded AFCA received 52,000 complaints between them, about half the volume AFCA is now receiving.

Scam-related complaints nearly double

The exponential increase in scams over the past year coupled with the cost of living crisis has also had an impact.

AFCA took on 8987 complaints related to scams in 2023, up 95% from 2022 when it registered 4611.

Complaints involving financial hardship totalled 5396, up 29% on 2022.

“As we head into the new year our hope for 2024 is that this will be the year that anti-scam initiatives by industry and government finally disrupt this serious and organised crime,” Locke says.

Andy

I'm a long-time investigative journalist who started off in New York City, ended up in Sydney, and likes nothing better than to shine a spotlight on underhanded behaviour in the consumer marketplace. The Investigations Team's work often focuses on financial harm to vulnerable people at the hands of corporations and businesses. I came to CHOICE in late 2010 by way of the Australian Securities and Investments Commission, a role that was preceded by a stint at the Australian Financial Review. I've also been a comms manager for a sales-driven boutique financial services firm in Sydney – an experience that inspired me to apply for the ASIC job. I research and report on a wide range of issues in the consumer marketplace – there never seems to be a shortage of them. I'm a former member of the NSW Fair Trading Advisory Council. You can find me on Twitter and LinkedIn. Recent articles by Andy TPG email cancellations causing chaos, but there may be an upside Cigno payday loan charging 800% declared illegal These are the most complained about businesses in 2023 3 out of 4 Australians harmed by a data breach CHOICE report: Extreme weather putting home insurance out of reach Why are we still paying billions in bank fees?