Record number of complaints reveal flaws in finance sector
Banks and buy now, pay later companies are under fire after a huge rise in financial complaints.
July 29 2023
New Daily
Australians fed up with financial services firms such as buy now, pay later (BNPL) giants and banks have complained in record numbers to regulators, sparking renewed calls for a crackdown.
The Australian Financial Complaints Authority (AFCA) published figures on Friday revealing there had been a record 96,987 complaints against financial services companies over the past year – an increase of 34 per cent.
Even more staggering was the increase in complaints related to BNPL, which skyrocketed 57 per cent as separate research shows more Australians are turning to these services to purchase essentials amid the cost-of-living crisis.
Complaints against general insurance companies soared 76 per cent, and bank complaints by 27 per cent.
AFCA chief executive David Locke said he was “deeply concerned” by the rises, with increasing financial stress across the nation becoming increasingly evident in consumers’ complaints.
“It’s not fair on consumers and not good for business,” he said on Friday. “We need to see a significant improvement from firms.”
Choice chief executive Alan Kirkland said the record-breaking increase shows financial services companies aren’t doing enough to help Australians with cost-of-living pressures and a surge in scams.
“We urgently need strong rules that protect people from scams and poorly regulated loans,” he said.
Workload balloons
AFCA was set up following the Banking Royal Commission as a one-stop shop for Australians concerned about their treatment by financial services companies.
Since its inception, the body has helped resolve issues for hundreds of thousands of customers. But as Friday’s figures show, the workload has ballooned in the past year.
Transaction accounts were the biggest issue amid a sharp rise in scam activity, with an 86 per cent increase in complaints over the past financial year, followed by credit cards (up 15 per cent).
Mr Locke singled out banks, saying they need to do a better job supporting those people who are doing it tough.
“We want to see banks and other finance providers continue to take active steps to identify and support customers who are experiencing financial difficulty,” Mr Locke said.
There was a meteoric rise in complaints about BNPL companies ahead of an impending crackdown on the industry that will see new rules introduced for responsible lending.
Mr Kirkland said worsening cost-of-living pressures mean more people risk falling into financial hardship because of “poor lending practices” peddled by BNPL companies.
“Buy now, pay later loans don’t come with the same protections as other forms of credit, leading a growing number of people to end up with multiple buy now, pay later debts that they struggle to repay,” he said.
“The huge increase in complaints about buy now, pay later loans demonstrates the need for strong regulation, to ensure that these businesses lend safely.”
Consumer advocates remain concerned the federal government will not go far enough in regulating BNPL companies, with one option involving a pared-back version of responsible lending.
Surging scam activity
An undercurrent in the huge rise in complaints this year is surging scam activity, with many of the reported consumer complaints stemming from failures to protect against a wave of financial crime.
Scam-related complaints rose 46 per cent in the 2022-23 financial year, Mr Locke said.
“We witness first-hand the human cost of this serious and sophisticated financial crime,” he said.
“It’s pleasing to see initiatives by individual banks to combat scams, but we would welcome a more consistent approach across the sector.”
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