Rise in Small Businesses Complaints to AFCA Indicates Growing Concerns
Rise in Small Businesses Complaints to AFCA Indicates Growing Concerns
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In the 2022-23 financial year, small businesses lodged a total of 3,807 complaints with the Australian Financial Complaints Authority (AFCA), indicating a significant increase of 9% compared to the previous year.
As a result of these complaints, small businesses received $23.4 million in compensation and refunds, marking a 16% increase from the previous financial year.
Surprisingly, despite the challenging global and domestic economic conditions, AFCA's Lead Ombudsman for Small Business, Suanne Russell, revealed that financial difficulty complaints had actually fallen by 1% to 475 complaints in 2022-23. Considering the rise in personal and corporate insolvencies, this unexpected decrease is an area that AFCA is diligently monitoring.
It is noteworthy to highlight the resilience demonstrated by small businesses post-COVID and in the current economic environment. Despite facing increased costs and higher interest rates, small businesses have remained steadfast and adaptable.
Main Concerns for Small Businesses
Business loans continued to be the most commonly complained about financial product, accounting for approximately one-third of small business complaints received by AFCA. However, there was a notable decrease of 7% in loan-related complaints compared to the previous year. Other top products that drew complaints included business transaction accounts, commercial property, credit cards, and commercial vehicles.
Shift in Small Business Complaint Issues
Service quality emerged as the predominant issue in small business complaints, although there was a 21% decrease in such complaints. The list of top complaints was further complemented by concerns regarding unauthorized transactions (including scam activity), financial firms failing to respond to assistance requests, denial of insurance claims based on exclusions or conditions, and insurance claim amounts.
AFCA's Role in Resolving Small Business Complaints
AFCA is an independent organization that provides free and impartial financial complaints resolution services for both small businesses and consumers. In the 2022-23 period, AFCA received a record-breaking 96,987 complaints, representing an unprecedented rise of 34%. While small business complaints accounted for 4% of the total complaints, the remainder predominantly originated from individual consumers.
It is worth mentioning that not all small business lenders are required to be members of AFCA. Membership is mandatory for Australian Financial Services and Australian Credit License holders, as well as a condition of codes of practice such as the Online Small Business Lenders Code. However, lenders focusing solely on small businesses are not obligated to possess an AFSL or ACL, and hence, do not need to be part of the AFCA Scheme.
Within 60 days of being lodged with AFCA, around 48% of small businesses' complaints were resolved successfully.
Having recently celebrated its fifth anniversary, AFCA has played a pivotal role in securing $106 million in compensation and refunds for small business complainants, following the registration of over 20,000 complaints.
Top 5 Products Resulting in Complaints
Business loans - 1,347 complaints (-7% change)
Business transaction accounts - 1,002 complaints (25% change)
Commercial property - 374 complaints (36% change)
Business credit cards - 304 complaints (51% change)
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Loan Amortisation Schedule: This is the formal name for the repayment schedule that shows each of your mortgage payments with a breakdown of how much is applied to principal and how much is applied to interest.
