Suanne Russell
Against a backdrop of high complaint numbers from small businesses to the Australian Financial Complaints Authority (AFCA) last financial year, AFCA is urging small business owners to consider the risks of dealing of with lenders that are not members of AFCA.
Under the current law, not all small business lenders are required to be members of AFCA, leaving business owners taking out loans with non-AFCA members with fewer options for redress if something goes wrong. When applying for a loan you can ask if your small business lender is an AFCA member.
In the financial year 2024-25, AFCA closed 2,063 small business complaints about “finance” with 21 per cent of them closed because they were outside AFCA’s rules. Of the small business complaints that were closed, a large proportion were not able to be considered because the financial firm was not an AFCA member.
“If a small business lender is not a registered member of AFCA, the small business cannot lodge a complaint with us if things go wrong, leaving these business owners vulnerable,” said AFCA’s Lead Ombudsman for Small Business, Suanne Russell.
“We’re seeing an increase in complaints being lodged about finance that we cannot consider, and this is a growing concern for us.”
Small businesses took 4,648 complaints to AFCA in the last financial year, a rise of 4 per cent following a record high in the previous financial year.
“For the second year in a row, we have seen a record number of complaints from small businesses. This increase underscores the mounting pressures business owners face, from cash flow and financing difficulties, to rising costs and interest rates,” said Suanne.
Business transaction accounts overtook business loans to become the most complained about financial product over the 12 month period, rising 32 per cent to 1676 complaints.
The other most disputed products related to commercial property, credit cards and commercial vehicles.
The top issue for small businesses was service quality, rising 43 per cent to 337 complaints, followed by a financial firm’s failure to respond to requests for assistance, with 310 complaints. There was also a 36 per cent increase in complaints around incorrect fees, premiums and charges, with 301 complaints.
“At a time when small business owners are facing a challenging economic environment, it’s concerning that the top three issues relate to customer service and communication,” Suanne said.
“We urge financial firms to consider the requests from their customers, meet them where they can, and communicate their decisions and actions appropriately – especially when they are dealing with small, often family-run businesses.”
AFCA can consider complaints from small businesses with fewer than 100 employees but the complaint must be lodged against a financial firm with an AFCA membership. AFCA can consider complaints about products, lending practices and conduct.
“We urge any lenders who are not yet members, especially those servicing small businesses, to consider joining AFCA, giving their customers access to external dispute resolution should they need it,” she added.
Last financial year, AFCA closed 4,017 small business complaints and secured $27 million in compensation for small businesses.
AFCA provides an independent and impartial financial complaints resolution service that is free for small businesses and consumers.
Read the 2024-25 AFCA Annual Review here.