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Lull in SME financial disputes could be temporary, AFCA warns
15 August 2022
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9 minute read
The authority has warned despite a drop in remonstrations the challenging economic climate could mean an increase is near.
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The end of pandemic support and economic headwinds could cause a rise in financial disputes for small business, the AFCA cautioned, after fewer hardship issues meant total complaints fell slightly last year.
Small businesses won more than $18 million in compensation and refunds from 3,490 complaints in 2021–22, a 3 per cent decline thanks to the number involving financial difficulties falling by one-third.
Work by the banks to support customers through hardship was responsible for the drop, said the AFCA’s Lead Ombudsman for Small Business Suanne Russell, but economic challenges meant the decline might not last.
“A further fall in financial difficulty complaints involving small business would be welcomed by everyone,” she said, “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.
“AFCA will closely monitor the impact of higher rates in complaints from customers in the small business sector.”
Loans were the top cause of small-business disputes, accounting for 40 per cent of the total, followed by transaction accounts (800 complaints), commercial property insurance (276) business credit cards (201), and loss of profits or business interruption insurance (200).
The top five issues were service quality (389), failure to respond to a request for assistance (282), interpretation of product terms and conditions (271), denial of an insurance claim (204) and default listings (198).
More than a third of the complaints by small businesses were resolved at the earliest stage of its process, Ms Russell said, which involved the AFCA referring back to the financial firm.
“AFCA welcomes early resolution at this stage – as long as the outcome is fair for both parties – because it takes away uncertainty for small businesses,” she said.
If early resolution was impossible, the AFCA worked with both parties to help them reach an agreement.
If that failed, one of its ombudsmen, or a panel of decision-makers, made a determination that was binding on the financial service provider if it was accepted by the complainant.
Nearly half of small-business complaints were resolved within 60 days of being lodged with AFCA, though more complex cases took the average time to closure to 112 days.
Just over 10 per cent of small-business complaints progressed to a formal decision in 2021–22.
The AFCA said it had helped secure nearly $80 million in compensation and refunds from a total of 14,800 small-business complainants, since starting operation on 1 November 2018.
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