Updated: 25 January 2024

The Australian Financial Complaints Authority (AFCA) has published its Lending to Small Business Approach (formerly Appropriate Lending to Small Business Approach), which provides guidance for financial firms and small businesses about how it considers these complaints.

The Approach to Lending to Small Business covers complaints made by an eligible small business about credit provided to them for business or investment purposes (other than investment in a residential property by an individual). Complaints can also be made by guarantors of small business loans under certain circumstances. 

AFCA’s Lending to Small Business Approach explains how it considers small business lending complaints, including: 

  • the types of small business complaints it can consider under AFCA’s Rules
  • how it assesses if a financial firm’s credit assessment was appropriate
  • how it considers industry codes, regulatory guidance and good industry practice in its decision making
  • how it determines fair outcomes where a firm has provided an inappropriate loan, and
  • how it calculates loss and determines how much compensation should be paid. 

AFCA’s approach is not new – it does not change or create new requirements – but it will help complainants and financial firms better understand how AFCA reaches decisions. It was developed in response to calls from stakeholders to provide greater clarity around AFCA’s existing approach and to ensure consistency in AFCA complaint outcomes in these complex areas. 

The Approach aligns with relevant regulatory guidance and applicable laws. It was finalised after significant input from financial firms, industry bodies, regulators, and consumer groups during the consultation process. 

“Our Approach was guided by the valuable contributions provided by our stakeholders during an extensive consultation process,” said Suanne Russell, Lead Ombudsman – Small Business. “We thank our stakeholders for their contributions and look forward to building on these relationships in the future.” 

The Approach outlines how AFCA applies legal principles, industry codes, regulatory guidance and considers good industry practice and principles of fairness when investigating complaints about lending to small businesses. 

The Approach is among a suite of approaches, on various topics, published on the AFCA website here

The Responsible Lending Approach document was also published, alongside a consultation feedback report, in December 2023.

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