Financial difficulty complaints

Demographics of people in financial difficulty

Between 1 July 2021 and 30 June 2022

7% of complainants were represented by a friend or family member

4% were represented by a financial counsellor

84% of complainants lodged online

1% of complainants requested interpreting language services

4% of complainants identified as Aboriginal or Torres Strait Islander peoples

Complaints received by state and territory

Complaints received by gender of complaint ¹

Complaints received by age

¹One complaint may have multiple complainants, so percentages won’t necessarily equal 100%.

Financial difficulty complaints

Between 1 July 2021 and 30 June 2022

4,442 complaints received

41% resolved at Registration and Referral stage

Financial difficulty complaints received

Percentage of financial difficulty complaints resolved at Registration and Referral stage

Top five financial difficulty complaints received by product

Product	Total
Personal loans	1,322
Home loans	1,154
Credit cards	1,009
Business loans	412
Line of credit/ overdraft	129

Top five financial difficulty complaints received by issue

Issue	Total
Financial firm failure to respond to request for assistance	2,759
Decline of financial difficulty request	1,080
Request to suspend enforcement proceedings	409
Default notice	164
Default judgment obtained	126

¹AFCA commenced on 1 November 2018. The 2018–19 financial year covers an 8-month period (from 1 Nov 2018 to 30 Jun 2019). Year-on-year changes between 18–19 and 19–20 have been calculated pro rata using monthly averages.

4,983 complaints closed

Average time to close a complaint 85 days

Financial difficulty complaints closed

Average time to close a financial difficulty complaint in days

Stage at which financial difficulty complaints closed

Stage	2018–19¹	2019–20	2020–21	2021–22
At Registration	1,643	3,499	2,463	2,052
At Case Management	1,418	3,677	1,997	1,891
At Rules Review	569	682	364	431
Preliminary Assessment	51	408	286	294
Decision	3	284	323	315

Average time taken to close financial difficulty complaints

Time	2018–19¹	2019–20	2020–21	2021–22
Closed in 0–30 days	1,511	2,309	1,388	1,174
Closed in 31–60 days	1,649	3,005	1,751	1,454
Closed in 61–180 days	522	2,647	1,739	1,799
Closed in 181–365 days	2	483	390	379
Closed in in more than 365 days	0	106	165	177

¹AFCA commenced on 1 November 2018. The 2018–19 financial year covers an 8-month period (from 1 Nov 2018 to 30 Jun 2019). Year-on-year changes between 18–19 and 19–20 have been calculated pro rata using monthly averages.

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 we can consider in some situations only).

Key insights:

This year, AFCA received 4,442 financial difficulty complaints, a decrease of 14% compared to the 2020–21 financial year, where AFCA received 5,184 financial difficulty complaints.
The decline in financial difficulty complaints is consistent with the decline we saw in the previous year. This shows the significant efforts of financial firms working with their customers to be responsive to COVID-19 impacts and those affected by natural disasters. Many have redesigned their systems to be more accessible.

In 2021–22, the most common types of financial difficulty complaints related to personal loans (1,322), home loans (1,154) and credit cards ( 1, 009).

As in 2020–21, the predominant issue was financial firm failure to respond to requests for assistance, with 2,759 complaints. The second most common issue was decline of financial difficulty requests with 1,080 complaints.

AFCA closed 4,983 financial difficulty complaints in 2021–22. Of these complaints, 53% (2,628) were resolved within 60 days. Another 41% of financial difficulty complaints were resolved at the Registration and Referral stage when AFCA refers the dispute back to the financial firm.

While complaints have declined further this year, we will be monitoring new complaints closely to assess any impact from recent interest rate rises and increases in the cost of living. We are hopeful that changes made to hardship processes during the COVID-19 pandemic will assist financial firms to respond quickly to requests for assistance from customers experiencing vulnerable circumstances in the coming year.

Case study

Background

The complainant had two home loans and a credit card account with the financial firm. The home loans were secured by a mortgage over an investment property. The complainant began experiencing financial difficulty in meeting their repayment obligations in 2013 for several reasons including health issues, changing employment and the COVID-19 pandemic. Since December 2020, the complainant was also receiving treatment for an illness that, at times, has affected their ability to work.

The complainant has raised concerns that the financial firm has:

not clearly communicated with them regarding their hardship requests and has failed to correct errors
caused them considerable confusion and stress, has had an adverse effect on their health and caused delays in their treatment
issued a default notice without prior notice.

Findings and outcome

AFCA found the financial firm had mostly met its financial hardship obligations to the complainant because it:

gave genuine consideration to the complainant’s requests for financial hardship assistance since May 2013, on both the loan accounts and credit card
requested additional information about the complainant’s circumstances, including a statement of financial position
provided several periods of appropriate hardship assistance to help the complainant overcome their financial difficulty.

However, AFCA found that, on some occasions, the financial firm did not meet its financial hardship obligations because it did not provide the complainant with an outcome of their request for assistance made on 30 December, despite it being required to do so within 21 days.

Even though the complainant failed to provide a Statement of Financial Position to enable the financial firm to assess their request for assistance, the financial firm did not issue a decline notice prior to sending the default notice, which it was required to do. The lack of communication by the financial firm over several months led to the complainant feeling confused about what their obligations were in respect to the home loans, which caused them extreme stress.

Consequently, AFCA determined that the financial firm must refund any fees it charged to the home loans regarding the issuance of the default notice, and pay the complainant $4,000 in compensation for non-financial loss due to the undue stress and confusion its conduct caused.

Case studies are used to demonstrate AFCA’s approach to an issue and have been simplified for length and clarity.

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Annual Review 2021–22

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