Written byThe Australian Financial Complaints Authority (AFCA) is the free, independent body that resolves disputes between consumers or small businesses and the lenders, insurers and financial firms they deal with.
Also known as: AFCA, Australian Financial Complaints Authority, financial complaints authority
Key points
- Every lender, broker and insurer that holds an Australian credit licence or financial services licence must be an AFCA member.
- AFCA recommends complaining to the firm first; if its internal dispute resolution fails or drags on, AFCA takes the case at no cost.
- AFCA can order compensation for loss caused by a firm's error or misconduct, but it does not fine firms; that is ASIC's job.
- It replaced the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal, so a reference to FOS now means AFCA.
How AFCA works
AFCA is a not-for-profit company, not a government department, funded by the firms that are required to belong to it. A consumer, or a small business with fewer than 100 employees, is encouraged to raise the problem with the firm's own complaints process first. If that fails or drags on, they lodge with AFCA online. AFCA passes the complaint back to the firm for one more attempt, then steps in to negotiate or conciliate.
If no agreement is reached, AFCA investigates and issues a decision, called a determination. Once the complainant accepts it, the firm is bound; the complainant is free to reject it and go to court instead. Time limits apply, so a complaint should be lodged reasonably soon after the problem and the firm's response.
Complaints AFCA sees about lending
Credit complaints are among its biggest categories. They include loans a borrower says should never have been approved under the responsible lending obligations, poor handling of a hardship request, defaults listed on a credit file in error, disputed fees and interest, repossessions, and the conduct of brokers when arranging finance.
Insurance disputes over claims, banking complaints about scams and unauthorised transactions, and superannuation matters make up most of the rest. AFCA publishes its determinations and complaint statistics by firm, which is one of the few public windows into how lenders treat customers when things go wrong.
What AFCA means for brokers and lenders
Membership is a condition of holding a credit or financial services licence, and ASIC has cancelled licences for firms that let it lapse. Members must tell customers how to complain and name AFCA in documents such as the credit guide, and they must run an internal dispute resolution process that meets ASIC's standards before a complaint escalates.
AFCA charges members for each complaint it handles, which gives firms a strong reason to fix problems at the internal stage. For a broker, a clean complaints record and a working internal dispute resolution process are part of what aggregators and lenders look at when deciding who to accredit.
Example
A sole trader in Townsville finds a default listed on his credit file for a personal loan he had already settled under an agreed payment plan. He complains to the lender in writing, gets an acknowledgement and then silence for weeks. He lodges with AFCA, attaching the payment plan letter and bank records. Once AFCA is involved the lender reviews the account, agrees the listing was made in error, has it removed from the credit bureau and refunds the fees charged while the account was wrongly in default, resolving the complaint without a formal determination.
Not to be confused with
Frequently asked questions
Is AFCA free to use?
Yes, for the person or small business making the complaint. AFCA is funded by its members, the financial firms, through levies and per-complaint fees. You do not need a lawyer, although you can use one, and lodging a complaint does not stop you taking the matter to court later if you reject AFCA's decision.
Do I have to complain to my lender before going to AFCA?
AFCA recommends it, and in practice it sends a new complaint back to the firm for a final look anyway. Raise the problem with the firm's internal dispute resolution process and give it a reasonable chance to respond; ASIC sets the maximum time a firm has. If it does not resolve the matter in that time, or you are unhappy with the answer, lodge with AFCA.
Can a small business complain to AFCA?
Yes. AFCA accepts complaints from sole traders, partnerships, companies and clubs that carry on a business and have fewer than 100 employees. Small business complaints about loans, equipment finance, guarantees, insurance claims and banking are all within scope, subject to limits on the size of the credit facility and the compensation AFCA can award.
Is an AFCA decision binding?
It is binding on the financial firm if the complainant accepts it. The complainant is not bound and can reject the determination and pursue the matter elsewhere. Most complaints never reach a determination; they are resolved by agreement once AFCA is involved, often at the stage where the firm is asked to look at the complaint again.
What can AFCA order a lender to do?
AFCA can require a firm to compensate you for financial loss caused by its error or conduct, to correct a credit listing, to vary or release a loan in some circumstances, and to apologise or take other non-financial steps. It cannot impose fines or penalties on the firm; that is the role of regulators such as ASIC.
Related terms
ASIC
ASIC is the Australian Securities and Investments Commission, the regulator for companies, markets, financial services and consumer credit, which licenses providers, keeps public registers and enforces conduct laws.
Read definitionAustralian credit licence (ACL)
An Australian credit licence (ACL) is the authorisation from ASIC that a business needs to provide consumer credit or credit assistance under the National Consumer Credit Protection Act.
Read definitionResponsible lending obligations
Responsible lending obligations are duties under the NCCP Act that require lenders and brokers to inquire into and verify a consumer's finances and not provide or suggest unsuitable credit.
Read definitionHardship
Financial hardship is when a change in your circumstances, such as job loss or illness, means you cannot meet your loan, credit or bill repayments on time.
Read definitionCredit guide
A credit guide is a prescribed disclosure document that a broker or credit licensee must give a consumer before providing credit assistance, covering licence details, remuneration and complaints handling.
Read definitionBroker
A broker is a licensed intermediary who connects borrowers with lenders, comparing finance options across a panel of lenders and submitting applications on the borrower's behalf.
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Sources
This article is general information only and is not financial advice.