Home loan complaints rose 17 per cent in 2023

The ombudsman service for financial disputes has revealed that it received more than 102,000 complaints across all products and services in 2023, marking the first time it has recorded more than 100,000 complaints in a calendar year since it was established five years ago.

Personal transaction accounts led the way when it came to financial product complaints in 2023 (16,028 complaints) – a 64 per cent change on the previous year.

Credit cards were the second most commonly complained about product to AFCA (12,124 complaints), up by a third on last year’s figures, followed by comprehensive vehicle insurance (9,565) and home building insurance (8,073).

Mortgages were the fifth most commonly complained about product, at 7,461 complaints, a 17 per cent increase on the previous year.

The home loan figure is also higher than at the end of the financial year (when AFCA releases its full breakdown of complaints in more detail), when home loan complaints rose by 10 per cent over the financial year, from 6,439 to 7,096. The data released for FY23 revealed that the majority of banking and finance complaints were lodged against banks, with less than 0.1 per cent relating to mortgage brokers.

Volume of complaints ‘unsustainable’: AFCA

Across the calendar year 2023, AFCA received 102,790 complaints from consumers and small businesses that were unable to resolve disputes directly with their financial firms. This was a jump of 23 per cent on 2022, according to the preliminary data snapshot.

The main issue that consumers complained about was unauthorised transactions (with 12,289 complaints relating to this issue), which have been particularly prevalent as online scams and attacks rose to unprecedented levels. This type of complaint increased by 48 per cent over the year.

AFCA registered 8,987 complaints related to scams, up 95 per cent from 4,611 in 2022.

Indeed, the volume of digital attacks and scams has led government and the financial sector to issue several warnings and campaigns to borrowers urging them to be vigilant against suspicious activity. It is hoped that these will help “disrupt this serious and organised crime,” according to AFCA.

Other issues included delays in claim handling (10,692 complaints), poor service quality (7,190 complaints), claim amounts (6,447 complaints), and denial of a claim.

The volume of complaints increased “at an unsustainable rate”, according to AFCA’s chief ombudsman and chief executive David Locke.

“Scam-related complaints to AFCA have nearly doubled between 2022 and 2023. They continue to be of great concern to us,” he said.

“We are also seeing the impact of increased interest rates and cost-of-living pressures, with complaints involving financial hardship also significantly higher,” revealing that they totalled 5,396, up 29 per cent on 2022.

“We also 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.

“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.

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

The AFCA CEO also said that he was “concerned about signs of a softening attitude to industry codes of practice”.

“We have raised concerns with some industry bodies about proposed changes because we believe we have an important perspective to share on how codes apply in practice,” he said in a recent opinion piece.

“Well-functioning dispute resolution – internally and through the external dispute resolution system – allows consumers to have confidence and trust in the financial system, because they know they can seek redress if things go wrong.

“I congratulate the 70 per cent of financial firm members who did not have a complaint reach AFCA in the past five years, and I thank those firms that are taking steps to improve their internal and external complaints performance.”

Since opening its doors in 2018, AFCA has received more than 420,000 complaints and secured a total of $1.3 billion in compensation or refunds for consumers.

Consumers secured $304 million in compensation and refunds after coming to AFCA in 2023, which was up 38 per cent on the previous year.

In related news, it was recently revealed that the 10 largest banking and insurance groups will need to contribute an estimated $241 million to the new Compensation Scheme of Last Resort (CSLR).

The new scheme has been designed to provide compensation for eligible complainants who have a determination in their favour from the Australian Financial Complaints Authority (AFCA), but where the financial firm has become insolvent or cannot pay.

The scheme facilitates the payment of up to $150,000 in compensation and covers five financial products and services, including personal advice on relevant financial products to retail clients, credit intermediation, securities dealing, credit provision, and insurance product distribution.

The 10 largest banking and insurance groups (as determined by income reported to the Australian Taxation Office for 2021–22) will be required to pay this levy, which is estimated to be $241 million for complaints that were lodged with AFCA between 1 November 2018 and 7 September 2022.

The scheme is scheduled to start receiving claims in April 2024.

The CSLR board stated last week: “We are pleased to announce this important milestone as an important step towards the CSLR being able to pay the compensation claims it will start receiving from April 2024.

“This has been a significant undertaking, as this levy is the first of its kind. We needed to have a robust and rigorous process to be able to make a best estimate based on the best information available.”

[Related: Home loans are the most reported licensee breach: ASIC]