2020–21 Annual Review
Contents
- About this Annual Review
- Board Chair message
- Chief Executive Officer and Chief Ombudsman message
- About us
- Strategic plan
- Year in review – strategic initiatives
- Year at a glance
- Membership
- Complaints
- Who complained to AFCA?
- Overview of complaints
- Open cases
- Complaints closed by AFCA
- Banking and finance complaints
- Scams
- General insurance complaints
- Superannuation complaints
- Investments and advice complaints
- Life insurance complaints
- Financial difficulty complaints
- Small business complaints
- Complaints lodged by consumer advocates
- Legacy complaints
- Conciliation
- Complaints outside the Rules
- Systemic issues
- Naming financial firms
- Significant events
- Stakeholder engagement
- People and culture
- Feedback about our service
- Independent Assessor Report
- Corporate information
- AFCA General Purpose Financial Report 2021
- Code compliance and monitoring
- Previous schemes
- Appendix 1
Financial difficulty complaints
Demographics of people in financial difficulty
Between 1 July 2020 and 30 June 2021
32% of complainants were represented by a friend or family member
4% were represented by a financial counsellor
80% of complainants lodged online
1% of complainants requested interpreting language services
4% of complainants identified as Aboriginal Australian and/or Torres Strait Islander
Received complaints by state and territory 1
| State | Percentage |
|---|---|
| NSW | 31% |
| Victoria | 31% |
| Queensland | 21% |
| Western Australia | 10% |
| South Australia | 6% |
| ACT | 1% |
| Tasmania | 1% |
| NT | 1% |
| Not provided | 4% |
| Other country | 1% |
Received complaints by gender of complainant
| Gender | Percentage |
|---|---|
| Female | 44% |
| Male | 55% |
| Not provided | 1% |
Received complaints by age of complainant
| Age | Percentage |
|---|---|
| 18–24 | 2% |
| 25–29 | 6% |
| 30–39 | 24% |
| 40–59 | 45% |
| 60+ | 14% |
| Not provided | 9% |
Complaints received
5,184 complaints received
45% resolved at Registration and Referral stage
Top five financial difficulty complaints received by product3
| Product | Total |
|---|---|
| Personal loans | 1,436 |
| Credit cards | 1,285 |
| Home loans | 1,209 |
| Business loans | 411 |
| Hire purchase/lease | 154 |
Top five financial difficulty complaints received by issue 3
| Issue | Total |
|---|---|
| Financial firm failure to respond to request for assistance | 2,740 |
| Decline of financial difficulty request | 1,220 |
| Request to suspend enforcement proceedings | 341 |
| Default notice | 206 |
| Default judgment obtained | 122 |
Complaints closed
5,433 complaints closed 4
Average time to close a complaint 86 days
Stage at which financial difficulty complaints closed
| Stage | Total |
|---|---|
| At Registration | 2,463 |
| At Case Management | 1,997 |
| At Rules Review | 364 |
| Preliminary Assessment | 286 |
| Decision | 323 |
Average time taken to close financial difficulty complaints
| Time | Total |
|---|---|
| Closed 0–30 days | 26% |
| Closed 31–60 days | 32% |
| Closed 61–180 days | 32% |
| Closed 181–365 days | 7% |
| Closed greater than 365 days | 3% |
About financial difficulty
Financial difficulty is when an individual or small business is in a situation where they are unable to meet their repayment obligations.
Sickness, unemployment, over-commitment, business downturn and natural disasters are some of the disruptive events that can cause financial difficulty.
Given the immediacy of the situation, and the stress involved for the consumer or small business, financial difficulty complaints often have an urgency beyond other types of financial disputes. To ensure these complaints are dealt with in an efficient, timely and fair manner, AFCA uses a streamlined process for financial difficulty disputes.
The types of issues AFCA receives complaints about include a financial firm:
- failing to respond or responding inappropriately to a financial difficulty request
- issuing default notices when a complainant is experiencing financial difficulty
- continuing action against a complainant to recover a debt after they have made a financial difficulty request
- declining requests for assistance in repaying a default court judgment (which AFCA can consider in some situations only).
Government support, business relief measures and a steadying economy, following the early period of the COVID-19 pandemic, appears to have had a positive effect on financial difficulty complaint levels in 2020–21. This year, AFCA received 5,184 financial difficulty complaints, a decrease of almost 40% compared to the 2019–20 financial year.
Of the 2020–21 complaints, personal loans (1,436), credit cards (1,285) and home loans (1,209) were the most complained about product types. AFCA also received 411 financial difficulty complaints about business loans.
As in 2019–20, the predominant issue was financial firms failing to respond to requests for assistance, with 2,740 complaints. The second most common issue was financial firms declining financial difficulty requests with 1,220 complaints.
Due to the sensitivity and urgency of financial difficulty complaints, we encourage financial firms to negotiate a resolution early in our dispute resolution process. The financial difficulty team held 738 conciliations during the year, with 328 of these complaints reaching a resolution at this stage. Many other matters that didn’t resolve at the conciliation, did resolve shortly afterwards.
AFCA closed 5,433 financial difficulty complaints in 2020–21. Of these complaints, 74% (4,002) were resolved within 90 days. Nearly half (45%) of financial difficulty complaints were resolved at the Registration and Referral stage when AFCA refers the dispute back to the financial firm.
Case study
The complainant had a home loan facility and two transaction accounts with the financial firm. The complainant ceased work due to severe mental health issues and made an application under their Income Protection Insurance Policy. The complaint was primarily about whether the financial firm complied with its financial difficulty obligations in relation to her loan accounts.
Findings and outcome
A financial firm has obligations under the National Credit Code and industry codes of practice to assist its customers in financial hardship.
A customer does not need to explicitly request hardship assistance. The financial firm’s obligations arise when the customer gives the financial firm written or oral notice that they will be unable to meet their contractual obligations.
After extensive discussions with the parties, an AFCA case manager provided the parties with a recommendation on the issues in dispute. The complainant was unwell and was unable to accept the recommendation.
The recommendation found that the financial firm breached its obligations under the National Credit Code, as well as its commitments under the applicable industry code of practice because:
- the financial firm was made aware on two occasions that the complainant was experiencing financial difficulty and severe mental health issues
- the firm did not take reasonable steps to inform the complainant of her right to request hardship assistance or request information, so it could assess and consider the complainant’s financial position and/or alternate options
- it was inappropriate for the financial firm to not engage with the complainant until they had acknowledged receipt of legal proceedings.
The financial firm reconsidered its position given the complainant’s mental health issues and financial circumstances. The financial firm agreed to waive the significant loan arrears and reduce the interest rate on the loan.
AFCA issued a determination endorsing the offer made by the firm. After the determination was issued, the complainant requested details of the offer as well as an apology. AFCA facilitated finalisation of the matter based on the offer made and secured a written apology from the firm.
During the handling of the complaint, the complainant’s insurance claim was accepted. After resolution of the complainant’s loan arrears, she was able to meet her ongoing payments.
Case studies are used to demonstrate AFCA’s approach to an issue and have been simplified for length and clarity.
1 One complaint can have multiple complainants from different states/territories.
2 One complaint can have multiple products.
3 One complaint can have multiple issues.
4 This includes 1,039 complaints received before 1 July 2020, and 4,394 received from 1 July 2020 to 30 June 2021.
