AFCA’s Six Month Report is an analysis of the complaints received and resolved by the financial complaints body.
Key statistics include:
To provide fair, independent and effective solutions for financial disputes.
To be a world class ombudsman service
Working with consumers, small business and industry, we will resolve and reduce financial disputes through innovative solutions, education and communication.
We will deliver to the Australian community services that are easy to use, free for complainants, efficient, timely and impartial.
A fair, ethical and trusted service that influences reform in the financial services sector
An excellent customer experience that meets diverse needs and delivers fair outcomes
A valued member experience that helps members to improve internal practices to avoid or resolve disputes
Highly skilled and engaged people with the tools they need to deliver high quality outcomes
In our first six months, we received over 35,000 complaints. This is over 35 per cent more than the combined average of the predecessor schemes. Based on the current volume of complaints, we now anticipate that we'll receive 80,000 complaints in our first year - a 25 per cent increase on our initial forecast. This doesn't include complaints arising from our new jurisdiction for legacy complaints going back to 2008.
The good news is we have already resolved 60 per cent of these complaints, in addition to more than 7-thousand Financial Ombudsman Service (FOS) and nearly two thousand Credit and Investment Ombudsman complaints. AFCA assisted consumers and small businesses to obtain $83 million in settlements.
On 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry handed down its final report and shone a bright and forensic light over the financial services sector revealing systemic failings.
We welcomed the recommendations made by Commissioner Hayne in the final report, as well as the Government's response to the recommendations. AFCA stands firmly on the side of fairness and we believe these recommendations are critical to ensuring that customers and small businesses are treated fairly.
As part of the Government's response, AFCA will have an expanded jurisdiction from 1 July 2019 to accept complaints about conduct dating back to 1 January 2008.
You can read more about the Royal Commission here.
AFCA's work generates a rich set of data, which means we can identify what is causing disputes and how they are being handled by the financial firms. We recognise the importance of making this data open and accessible to the public.
We want to give consumers and small businesses the tools to make informed choices about the financial products and services they use, and for members to have a statistical understanding of how they compare with their counterparts and areas where they can improve.
Even though we are not a regulator, we want to be loud and clear at calling out bad practices and unfair treatment.
Our priority is to provide information to consumers, small businesses and financial firms in a way that is accessible and useful, so they can see how different financial firms resolve - or fail to resolve - complaints and what industry trends are appearing.
AFCA recognises that we have a significant role to play in rebuilding trust in the Australian financial services sector, and a key part of this role involves working directly with financial firms to improve their complaint handling processes.
Our long-term aim is to avoid customer complaints arising in the first place and where they do arise, we want to see these resolved fairly and quickly by the financial firms themselves. To achieve this, we are assisting our members by providing clarity and certainty around the complaint resolution processes and supporting them to develop and strengthen their own internal processes.
Under the leadership of our new Executive General Manager - Communications and Stakeholder Relations, Kathy Bowlen, we're currently creating a dedicated member services team to work closely with financial firms to improve industry practice.
I would like to thank the AFCA Board and its chair, the Hon. Helen Coonan, for their support and guidance both pre-launch and in our first six months of operations. I would also like to thank my colleagues, the entire AFCA staff, for embracing the many changes and challenges that come with a new organisation and for their unwavering dedication to providing a fair and efficient dispute resolution service to all Australians.
David Locke
Chief Ombudsman and Chief Executive Officer
|
Product |
Total |
|---|---|
|
Credit cards |
5,191 |
|
Home loans |
2,921 |
|
Personal loans |
2,704 |
|
Motor vehicle - comprehensive |
1,789 |
|
Personal transaction accounts |
1,236 |
|
Issue |
Total |
|---|---|
|
Credit reporting |
2,286 |
|
Unauthorised transactions |
2,127 |
|
Delay in claim handling |
1,982 |
|
Incorrect fees/costs |
1,816 |
|
Denial of claim |
1,792 |
* One complaint can have multiple products and issues.
Of the members who had complaints:
AFCA operates a national dispute resolution scheme for financial services.
Overall, the numbers of consumers and small businesses who made complaints in each state or territory was relatively consistent with that state or territory's population proportionate to Australia's total population.
|
Product |
Total |
|---|---|
|
Credit cards |
5,191 |
|
Home loans |
2,921 |
|
Personal loans |
2,704 |
|
Personal transaction accounts |
1,236 |
|
Hire purchase/lease |
579 |
|
Issue |
Total |
|---|---|
|
Credit reporting |
2,282 |
|
Unauthorised transactions |
2,071 |
|
Responsible lending |
1,474 |
|
Misleading product/service information |
1,241 |
|
Incorrect fees/ costs |
1,127 |
Banking and finance complaints made up 61 per cent of the total number of complaints received. The majority of complaints were about credit at 45 per cent.
In the first six months, the top issue under AFCA for banking and finance was credit reporting, that is complaining about their consumer credit profile, with 2,282 complaints received.
The high number of unauthorised transaction complaints shows that financial firms need to do more to ensure that they have appropriate systems in place to detect fraudulent transactions, including in relation to financial elder abuse.
We continue to see large numbers of irresponsible lending complaints in relation to credit cards, personal loans and home loans, with 1,474 complaints lodged from 1 November 2018 to 30 April 2019. This large number of complaints correlates with the Royal Commission's focus on responsible lending.
67 per cent of complaints received related to the four largest banks.
AFCA has seen a dramatic increase in the number of banking and finance complainants that are in financial difficulty. In 2018 under FOS, there were 2,074; under AFCA in 6 months, there have been 3,819 complainants in financial difficulty. This continues the trend upwards and the high level of mortgage stress is being seen by AFCA.
|
Product |
Total |
|---|---|
|
Foreign exchange |
402 |
|
Self-managed superannuation fund |
160 |
|
Shares |
138 |
|
Mixed asset fund/s |
136 |
|
Timeshare schemes |
68 |
|
Issue |
Total |
|---|---|
|
Failure to follow instructions/agreement |
350 |
|
Inappropriate advice |
229 |
|
Failure to act in client's best interests |
141 |
|
Incorrect fees/costs |
133 |
|
Service quality |
93 |
AFCA received 1,684 investments and advice complaints in our first six-months, which made up five per cent of total of complaints received. This is a 69 per cent increase on investment and advice complaints received by FOS (998) over the same period.
We have seen a sharp increase in complaints about foreign exchange trading accounts, which is an area that has also been receiving recent media attention. Complaints about these accounts cover a range of issues, including difficulty withdrawing funds, misleading conduct, pricing errors and discretionary trading.
We received 402 foreign exchange complaints, which accounted for 24 per cent of all investment complaints. Almost 55 per cent of these foreign exchange complaints were against one financial firm who had their Australian Financial Services Licence suspended by Australian Securities and Investments Commission (ASIC) but remains a member of AFCA, which enables AFCA to deal with complaints.
We also received a high number of complaints about financial advice, including 350 complaints about failure to follow instructions/agreement, 229 complaints about inappropriate advice and 141 complaints that the advisor failed to act in their client's best interest. One of the issues highlighted by the Royal Commission was fees charged by financial advisors where no service was provided. We received 133 complaints about incorrect fees.
|
Product |
Total |
|---|---|
|
Superannuation account |
1,060 |
|
Total and permanent disability |
508 |
|
Death benefit |
246 |
|
Total and temporary disability |
152 |
|
Pension |
55 |
|
Issue |
Total |
|---|---|
|
Incorrect fees/costs |
416 |
|
Delay in claim handling |
332 |
|
Account administration error |
229 |
|
Death benefit distribution |
200 |
|
Denial of claim |
198 |
In the first six months, superannuation complaints accounted for 9 per cent of total complaints. This is more than double the number of superannuation complaints that we had initially expected.
The top superannuation issue related to incorrect fees and costs, with 416 complaints received. In comparison, the number of incorrect fees and costs complaints received by the Superannuation Complaints Tribunal (SCT) was quite small.
The second highest issue for superannuation was delays in claims handling with 332 complaints received.
Given the media focus on responsiveness to consumers and dealing with their matters as quickly as possible, financial firms need to ensure that their internal dispute resolution and external dispute resolution teams are adequately resourced to deal with the complaints coming through the doors.
|
Product |
Total |
|---|---|
|
Income protection |
276 |
|
Term life |
105 |
|
Funeral plans |
71 |
|
Total and permanent disability |
66 |
|
Trauma |
63 |
|
Issue |
Total |
|---|---|
|
Denial of claim |
113 |
|
Incorrect premiums |
101 |
|
Delay in claim handling |
73 |
|
Claim amount |
68 |
|
Cancellation of policy |
54 |
In the first six months, AFCA received 879 complaints about life insurance, which makes up 2 per cent of total complaints received.
In comparison with the same period last year, life insurance complaints have increased 28 per cent, from 685 under FOS. The increase may partially be driven by an increase in complaints about level premium increase for income protections policies, which are up 52 per cent from 182 under FOS to 276 under AFCA. Some of this increase appears to be driven by a general misunderstanding among consumers about how level premiums work. In our view, the life insurance industry could be doing more in terms of the information provided at the time of taking out the policy to help consumers understand this better.
|
Product |
Total |
|---|---|
|
Motor vehicle - comprehensive |
1,789 |
|
Home building |
1,176 |
|
Travel |
793 |
|
Motor vehicle - uninsured third party |
529 |
|
Home contents |
300 |
|
Issue |
Total |
|---|---|
|
Delay in claim handling |
1,476 |
|
Claim amount |
1,327 |
|
Denial of claim - exclusion/ condition |
1,227 |
|
Denial of claim |
1,011 |
|
Service quality |
422 |
In general insurance we received 7,969 complaints in our first six months, which accounts for 23 per cent of all complaints and a 20 per cent increase on the number of complaints FOS received over the same period last year (6,617).
The transition to AFCA for the general insurance industry has been relatively seamless. While we have seen an increase in the complaints received this has been more than matched by the resolution of those matters at our registration and referral stage, with the industry now resolving more than 45 per cent of matters early. This is a better outcome for consumers, small businesses and the industry.
There has been no substantial change in the type of complaints received, with motor vehicle and home insurance matters being the most complained about products.
The high number of complaints we see relating to delays in claims handling (1,476) and service quality (422) indicate that the industry is still not meeting customers' expectations.
In our view, complaints relating to delays or service quality should be able to be resolved by financial firms internally and should not be one of the top issues in complaints we receive. General insurers need to make sure their teams are adequately resourced and have the right skill sets to deal with these sorts of complaints at the internal dispute resolution stage.
Financial difficulty complaints occur when consumers unexpectedly cannot meet their repayment obligations. This may be because of an accident, separation, sickness, natural disaster, death of a family member, unemployment or other factors.
AFCA accepts financial difficulty complaints from both individuals and small businesses relating to a range of credit products and services, such as credit cards, home loans, personal loans and business loans.
In the first six months of operations, we received 3,831 complaints that involved financial difficulty compared with 2,086 complaints for the same period at the predecessor schemes.
We anticipate even higher levels of financial difficulty complaints as the awareness of AFCA increases.
We find that the best solutions occur when the parties work together to develop a plan for overcoming financial difficulty. For this reason, we encourage the parties to be willing to communicate and exchange information with each other.
AFCA is able to consider complaints from a wider range of small businesses than the predecessor schemes.
Under the AFCA Rules, a small business is defined as an organisation with less than 100 employees (an increase from 20 employees under predecessor schemes). The monetary and compensation limits for small business complaints have also seen a substantial increase from $323,500 to $1 million, and primary producers have a compensation cap of $2 million.
We received 2,133 complaints from small businesses in our first six months. This is more than double the small business complaints (1,020) received by FOS over the same period, however 700 of the 2,133 complaints related to a single marketing business going into liquidation. In our first six months we awarded $5 million in compensation to small businesses.
In February 2019, we appointed an inaugural Lead Ombudsman - Small Business, Mr Geoff Browne GAICD. The appointment of a dedicated Lead Ombudsman for small business is an important step in ensuring that AFCA understands small business needs relating to financial services and works collaboratively with small businesses and financial firms to resolve issues.
AFCA has obligations to identify, refer and report systemic issues and contraventions of the law, which we take very seriously. During our first six months of operation, we identified 16 potential serious contraventions and other breaches. At the end of April we also had 85 definite systemic issue investigations open.
A systemic issue is one that has implications beyond an individual complaint. The issue may have been raised in one or more complaints or we may have identified it through other information we have received.
Common issues we are currently investigating include:
Some of the outcomes from systemic issues that have been resolved include:
Sometimes we investigate issues that are ultimately determined not to be systemic. The issue may involve substantial investigation and result in a change to a financial firm's process or comment from a Lead Ombudsman about relevant industry practice.
We're undertaking a 'fairness project' to map community expectations and produce a set of criteria for fairness which can be plainly understood and will explain how we assess fairness in any given complaint.
This approach will ensure we deliver clear, consistent and quality decision making and will set the bar for financial firms when applying fairness to their own internal dispute resolution processes. The project consists of two elements:
We have engaged independent consultants to conduct a review of a sample of our decisions and test them against our current decision-making criteria, as set out in the AFCA Rules. The sample will be representative of the wide range of complaints that we receive.
The second element is to develop a roadmap of our approach to fair outcomes. This is an investigation into how we assess fairness in the relationship between a financial firm and a complainant.
Our purpose is to provide fair, independent and effective solutions for financial complaints. We understand that resolving complaints in a fair and timely manner is by far the most important service we can offer.
We also want to provide a valued member experience that helps members improve internal practices to avoid and resolve disputes. To achieve this goal we are developing a plan to deliver member services such as:
We recently concluded member research in partnership with a research company, Kantar Public, who facilitated member workshops and conducted an online survey of our members. The final report indicates that members want to see:
AFCA is committed to providing an accountable and transparent service to consumers, small business and financial firms.
One of the ways that we ensure accountability is by having a complaints and feedback process available for all users of our service who wish to complain about our standard of service. We take all complaints and feedback received seriously. If a user of our service is not satisfied with our response to their service complaint, an Independent Assessor appointed by the AFCA Board reviews and assesses, on a case by case basis, our standard of service.
Since 1 November we have received 315 complaints about our service; 185 relate to complaints about predecessor schemes, while 130 relate to complaints about AFCA. The 130 complaints that relate directly to AFCA raised 215 issues. Issues raised include delays, incorrect or insufficient information provided, an inability to understand the information provided and disagreement with AFCA's decision to discontinue a complaint. To address the issues complainants brought to us, we provided clarifications of process/decision (68), explained our process in detail (58) and where we didn't provide a good level of service to the complainant (50).
We are committed to understanding the needs of consumers and small businesses and ways we can improve our service. We have implemented a number of improvements to ensure we deliver outstanding service to complainants.
We are running a series of workshops to educate our staff about embedding 'helpfulness' into everything we do at AFCA. Consumers and small businesses often don't have the time, resources or documentation that large financial organisations have and so it is essential that we are helpful to them by providing flexibility in our processes and recognising potential barriers they may face in meeting our timeframes or requirements.
Over 200 staff so far have attended the workshops, with more to attend in the future. The workshops are also now part of our standard induction process for new staff.
We have hired a call quality coach for the contact centre to ensure we maintain a high-quality service and we are proactive resolving any issues with our service.
We are trialling progressive surveys of complainants to understand their experience throughout the process rather than just at the end.
In the first six months, we have held or attended 177 events and meetings, giving us the opportunity to talk to stakeholders across the country, including: government, regulatory bodies, member financial firms, industry associations, consumer groups, media and other ombudsman schemes.
Community outreach is at the core of our work. We aim to raise awareness of AFCA as an avenue for financial disputes.
We will continue to make it a priority to connect with the community to understand and reduce any barriers to accessing our service.
Chief Ombudsman and Chief Executive Officer David Locke, along with Directors, members of the Senior Leadership Group and staff are planning to be on the road in late 2019.
We will stop in over 70 towns and cities around Australia and is part of our commitment to providing an accessible service to all Australians.
This nation-wide roadshow will allow us to hear from regional and remote communities about their financial issues first-hand and understand any barriers they may have in accessing our service.
Our new AFCA Consumer Advisory Panel (ACAP) met for the first time in March. This panel allows us to consult with leading consumer representatives on all major initiatives and provides us with unique perspectives that can help inform our work.
Panel members are advocates for the diverse communities we serve, including older Australians, Indigenous and Torres Strait Islander peoples, culturally and linguistically diverse communities and people experiencing financial difficulty.
Direct feedback from advocates helps us to meet community expectations and understand the varying circumstances that impact accessibility. The panel meets quarterly in different locations across Australia.
AFCA Consumer Advisory Panel inaugural meeting, March 2019
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry handed down its final report to the Governor-General on 1 February 2019. This substantial report marks an important milestone for financial services in Australia, containing 76 recommendations. In February, the Government announced it is taking action on all 76 recommendations.
There were two recommendations that directly related to AFCA, which the Government has responded to:
We were very pleased that the Government announced a compensation scheme of last resort. This is a scheme that AFCA and the predecessor schemes have been long-standing advocates of for over 10 years.
A compensation scheme of last resort is an important backstop that ensures that people who have been the victims of misconduct, and lost out through no fault of their own, can finally be properly compensated. Consumers who have fairly been awarded compensation will finally receive the redress they deserve. The compensation scheme of last resort will provide compensation in the future for consumers who have received a decision from AFCA or a court or tribunal in their favour, but who have not received their compensation due to the financial firm ceasing business.
The Government will also be funding $30 million to cover the payment of legacy unpaid determinations from the FOS and CIO.
On 6 April 2019, the Government’s announced that financial firms will be required by law to cooperate with AFCA to resolve financial complaints.
This was an important step in ensuring consumers and small businesses have their financial complaints solved effectively and efficiently. AFCA expects all financial firms to cooperate fully and respond promptly and comprehensively to all requests.
In the Government’s response to the Royal Commission it, announced that AFCA’s jurisdiction would be increased.
Australian consumers and small businesses who have suffered from misconduct by financial firms but have not yet been heard, will be able to take their cases to AFCA and have them considered. The Government has announced that AFCA’s remit will be expanded for a period of 12 months to accept financial complaints about conduct going back to 1 January 2008.
We will consider eligible complaints between 1 July 2019 and 30 June 2020, after the AFCA Rules have been revised. This is a positive step which means that many more people will be able to get access to justice and have their matters properly considered.
The Code Compliance and Monitoring Team (Code Team) is a separately operated and funded business unit of AFCA. The Code Team supports independent committees to monitor compliance with codes of practice in the Australian financial services industry to achieve service standards people can trust. The Code Team administers five different codes of practice and from 1 November 2018 to 30 April 2019 it has worked with the relevant committees on numerous projects and reports. A few of the highlights from this period are mentioned below:
Administered by the Banking Code Compliance and Monitoring Committee (CCMC)
The CCMC has also launched an inquiry into banks' conduct when accepting and enforcing guarantees: ccmc.org.au/2019/05/29/media-release-ccmc-announces-inquiry-into-banks-conduct-when-accepting-and-enforcing-guarantees
Administered by the General Insurance Code Governance Committee (GICGC).
The GICGC has also launched an inquiry into the adequacy of 45 subscribers' compliance monitoring and reporting frameworks.
Administered by the Life Code Compliance Committee (Life CCC).
Administered by the Insurance Brokers Code Compliance Committee (IBCCC).
Administered by the Customer Owned Banking Code Compliance Committee.
Disclaimer: All statistics in this report are from 1 November 2018 to 30 April 2019, unless otherwise specified.
