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.

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Small businesses secured $23.4 million from financial firms in compensation and refunds after coming to AFCA, up 16 per cent on $20 million the previous financial year.

But AFCA’s Lead Ombudsman for Small Business, Suanne Russell, told AFCA’s recent Member Forum that the national financial dispute resolution service had not seen the increase in financial difficulty complaints that might have been expected amid difficult global and domestic economic conditions.

Financial difficulty complaints related to small business lending fell 1 per cent to 475 complaints in 2022-23.

“This decrease was not what we were expecting, particularly when we hear of increases in personal and corporate insolvency,” Ms Russell said. “Obviously, this is an area we are watching closely to see if the position changes.

“Small businesses have proven to be incredibly resilient in the aftermath of COVID and in the current economic environment, with increased costs and rising interest rates,” she added.

Business loans were again the most commonly complained about financial product – accounting for about one in three small business complaints received by AFCA. However, the 1,347 complaints about loans was a fall of 7 per cent from the previous year. (See the tables below for further detail.)

The top five products were rounded out by complaints related to business transaction accounts, commercial property, credit cards and commercial vehicles.

Service quality was the top issue in small business complaints, though this type of complaint was down 21 per cent. The top five issues were rounded out by unauthorised transactions – a category that includes scam activity – financial firm failure to respond to a request for assistance, denial of an insurance claim due to an exclusion or condition, and insurance claim amount.

AFCA provides an independent and impartial financial complaints resolution service that is free for small businesses and consumers.

Overall, it received a record 96,987 complaints in 2022-23, an unprecedented rise of 34 per cent.

Small business complaints accounted for about 4 per cent of those complaints, with the remainder coming from individual consumers.

Not all small business lenders are required to be members of the AFCA Scheme, Ms Russell noted. Membership is mandatory for Australian Financial Services and Australian Credit License holders and is a condition of codes of practice such as the Online Small Business Lenders Code, but lenders who lend only to small business do not need an AFSL or ACL and therefore do not have to belong to the AFCA Scheme.

Nearly half (48%) of small businesses’ complaints were resolved within 60 days of being lodged with AFCA.

AFCA opened its doors on 1 November 2018 and has just marked its fifth anniversary. In that time AFCA has helped to secure $106 million in compensation and refunds for small business complainants, after registering more than 20,000 complaints from small businesses.

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The AFCA board confirmed his appointment after a competitive selection process. Mr Singh had been acting in the role.

“Shail brings deep and diverse experience to this role, having worked in dispute resolution for over a decade and having been a financial planner himself,” AFCA’s Deputy Chief Ombudsman Dr June Smith said.

“He is a respected specialist in investments and advice complaints, in areas such as financial planning, derivatives, managed funds, timeshare, cryptocurrency and stockbroking.

“Shail has forged strong relationships with key stakeholders, among other things initiating a financial advice liaison group and a cryptocurrency liaison group,” Dr Smith noted.

Mr Singh is a lawyer by profession and worked both as an in-house legal counsel and for regulators including WorkSafe Victoria and the Medical Practitioners Board of Victoria. He then trained and worked as a financial planner before becoming a case manager with an AFCA predecessor, the Financial Ombudsman Scheme, in 2010. He was appointed as an Ombudsman when AFCA opened its doors in November 2018, becoming Senior Ombudsman, Investments and Advice, in 2021.

He stepped in as acting Lead Ombudsman in January 2022 when his predecessor, Natalie Cameron, became Lead Ombudsman for Banking and Finance.

“I’m extremely excited to be appointed to this role,” Mr Singh said. “I’m looking forward to continuing my work with firms to prevent disputes, and to being involved in improving our systems and processes to deliver an even better dispute resolution service that is transparent, timely, efficient and above all fair.”

AFCA is the ombudsman service for the financial services sector, handling complaints in four areas: banking and finance, investments and advice, insurance, and superannuation. In addition, a dedicated small business ombudsman oversees complaints from small business.

The five lead ombudsmen are responsible for AFCA’s approach to decision making in their respective areas. Together they head teams totalling more than 100 ombudsmen and adjudication panel members. AFCA’s other Lead Ombudsmen are Natalie Cameron (Banking and Finance), Suanne Russell (Small Business), Emma Curtis (Insurance) and Heather Gray (Superannuation).

AFCA is on track to register about 100,000 complaints in the 2022-23 financial year and has secured $1 billion for complainants since inception in November 2018.

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