The top financial grievances Australians had as complaints hit 'unsustainable' record high

The nation's financial watchdog received a record number of complaints in 2023 and fears the trend is "unsustainable". Here's a breakdown of the issues Australians faced.

Australia's cost of living crisis has driven up the number of financial-related complaints, an industry watchdog says. Source: Getty / Zoranm

KEY POINTS

• The Australian Financial Complaints Authority handled a record number of complaints in 2023.
• It says the trend needs to be reversed and has called on banks to improve their dispute resolution systems.
• The Australian Banking Association says such systems are "robust" and resolve the majority of complaints.

Australia's financial watchdog says it received a record number of complaints last year — a trend its boss says could overwhelm the body if it continues.

The Australian Financial Complaints Authority (AFCA) received more than 100,000 complaints from consumers and small businesses between 2022 and 2023, a 23 per cent year-on-year increase.

AFCA chief ombudsman and executive David Locke has labelled the trend "unsustainable" and one that needs to be reversed to reduce delays in addressing complaints and has called on financial institutions to improve their remedial systems.

The financial dispute resolution body was established in 2018 ahead of the banking royal commission. It came in the wake of the previous year's Ramsay Review that recommended three separate schemes be abolished in favour of a one-stop shop.

Locke said it should only be handling "complex cases".

Reports about scams nearly doubled from 4,611 to about 9,000, while complaints about financial hardship were up 29 per cent on the previous year.

“The volume of complaints escalated to AFCA has been increasing at an unsustainable rate,” Locke said in a statement.

"They continue to be of great concern to us.

"We are also seeing the impact of increased interest rates and cost of living pressures, with complaints involving financial hardship also significantly higher."

The highest number of complaints (16,028) centred around personal transaction accounts, followed by credit cards (12,124), comprehensive vehicle insurance (9,565), home building insurance (8,073), and home loans (7,361).

When AFCA examined the top five issues, it found unauthorised transactions were the number one grievance with 12,289 complaints, delays in claim handling (10,692), service quality (7,190), claim amounts (6,447), and claim denials (4,791).

Source: SBS, Supplied / Australian Financial Complaints Authority

Source: SBS, Supplied / Australian Financial Complaints Authority

In some good news, Australians received more than $304 million in compensation and refunds after lodging complaints, a 38 per cent increase on the previous year.

But Locke said there needed to be a "downward trend in complaints overall" and financial institutions needed to better work "to support their customers and to address complaints quickly and efficiently in-house".

"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," he said.

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

He said "the need for a strong consumer protection framework" remained.

Discussing the rise in scam complaints on ABC radio on Tuesday, Consumer Action Law Centre CEO Stephanie Tonkin said the onus should be on banks to protect customers from scams.

As the federal government looks to develop a framework to combat scams across industries, Tonkin said banks should be liable if their customers fall victim to a scam.

"We hope that we can get the best possible framework that really focuses on putting the responsibility on banks to stop scams reaching customers, and put the liability, therefore, on the banks to reimburse customers where a scam breaches through their front lines," she told ABC radio.

"And we say that if you're incentivising the banks to reimburse, that's the hook that will provide the investment that's needed."

An Australian Banking Association (ABA) spokesperson pointed to the joint ABA-Community Owned Banking Association "Scam-Safe Accord" announced in November last year.

"At its centre is an industry-wide $100 million investment in Confirmation of Payee which will be rolled out across every bank, building society and credit union across the country," the ABA spokesperson told SBS News in a statement.

"The Accord also includes a major expansion of intelligence sharing across the sector with all banks acting on scams intelligence from the Australian Financial Crimes Exchange by mid-2024 and joining the Fraud Reporting Exchange.

"This means critical information is shared across the banking sector at speed about scam transactions improving the chances of recovering stolen funds."

The spokesperson said banks' internal dispute resolution systems are "robust" and they resolved the majority of complaints.

- With AAP.