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Australians have lodged a record 96,987 complaints with the financial ombudsman in the past 12 months, a 34 per cent increase on the previous year.
Key points:
- Over $253 million was paid back to customers in 2022-23
- Insurance claim handling, and scams, were the most complained about issues
- Financial stresses worsened as interest rates increased
The Australian Financial Complaints Authority (AFCA) says complaints about delays in insurer claims handling topped the list of complaints last financial year, jumping 76 per cent.
The majority of those complaints had nothing to do with claims linked to natural disasters.
The second most complained about issue regarded unauthorised transactions, up 69 per cent, which included complaints about financial scams.
David Locke, AFCA's chief ombudsman, said he was "deeply concerned" about the volume of complaints Australians had to make to AFCA in the 2022-23 financial year.
"It's not fair on consumers and not good for business. We need to see a significant improvement from firms," he said.
Overall, in 2022-23, consumers secured $253.8 million in compensation and refunds after seeking help from the ombudsman.
Insurance, scams, and poor service
Insurance claims handling was the most complained about issue in the 2022-23 financial year.
General insurance complaints rose 50 per cent compared to the previous year, and there was a 136 per cent surge in complaints about claim delays from superannuation funds, including the payment of death benefits.
"We have been raising concerns about claims delays with insurers for over 12 months now," Mr Locke said.
"It is disappointing that this continues to be a concern.
"While we acknowledge the challenges insurers have faced, the bulk of complaints in the past year were not about natural disaster but about regular claims."
Australians are also extremely concerned about unauthorised transactions.
That category of complaint includes, among other things, credit card transactions that aren't authorised by the cardholder, ATM withdrawals made with a stolen card, and the sale of an investment without authority.
Scam-related complaints rose 46 per cent last year financial year, to 6,048, data from AFCA shows.
"We witness first-hand the human cost of this serious and sophisticated financial crime," Mr Locke said.
"It's pleasing to see initiatives by individual banks to combat scams but we would welcome a more consistent approach across the sector."
Earlier this month, the Albanese government launched a new investment scam taskforce to try to prevent Australians falling victim to financial scams.
It's also proposed introducing new codes of practice for the financial services sector, telecommunications companies, and social media platforms, to address financial scams.
Mr Locke has welcomed the proposal for new codes of practice.
"AFCA believes there is a need for enforceable standards, to lift the bar on scam prevention and remediation. This will also aid the work we do as an ombudsman service," he said.
Rising interest rates and financial stress
Mr Locke said AFCA's complaints data also shows the impact of financial stress from rising interest rates and the cost of living.
He said complaints rose significantly towards the end of the 2022-23 financial year — across April, May and June — as the Reserve Bank lifted the cash rate target to 4.1 per cent.
For example, he said complaints involving financial difficulty rose 9 per cent over the year, but were 31 per cent higher in the June quarter this year compared with the same three-month period last year (quarter on quarter).
He said home loan complaints were up 10 per cent over the year, but were 19 per cent higher quarter on quarter.
Credit card complaints were up 15 per cent, but were 34 per cent higher quarter-on-quarter.
"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.
He said buy now pay later (BNPL) complaints were 57 per cent higher in 2022-23, as more people turned to alternative forms of credit to manage tight budgets.
"This underlines the importance of the federal government's plan to regulate BNPL under the National Consumer Credit Act, and recent reforms addressing what's known as 'payday lending'," he said.
AFCA has been a 'game changer'
Overall, the 34 per cent increase in complaints lodged with AFCA last financial year was a record for the ombudsman, which was established in 2018.
AFCA is a one-stop-shop for consumers and small businesses who have a dispute with their financial firm, over things such as banking, credit, insurance, advice, investments or superannuation.
It was established by the Turnbull Coalition government in response to recommendations from the "Ramsay Review," which had been set up ahead of the banking royal commission.
The Ramsay Review had been asked to investigate the framework that governed the way in which Australians could lodge complaints about financial services firms and superannuation funds, and have their complaints resolved.
One of the review's key recommendations was to create a single body to handle the external dispute resolution (EDR) process, which led to the creation of AFCA.
In March 2022, the chair of the Australian Securities and Investments Commission, Joe Longo, said the reforms that flowed from the Ramsay Review had been "transformational" for complaints handling and dispute resolution in Australia.
"A true 'game changer' in financial services consumer protection in this country," he said.
Since its inception in 2018, as of June 30, 2023, AFCA has received more than 367,000 complaints and helped to secure $1.07 billion in compensation and refunds for customers through its dispute resolution work.
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