AFCA concerned about unresponsive lenders

AFCA has revealed that financial difficulty complaints increased by 25 per cent in 2023 to 5,396 (compared to 2022), with a third of the complaints coming from customers with home loans.

David Locke, the chief ombudsman and chief executive of AFCA, said that more than 50 per cent of financial hardship complaints involved a lender failing to respond to a customer’s request for hardship assistance.

Buy now, pay later (BNPL) providers and small lenders were particularly flagged by AFCA as being unresponsive to financial hardship assistance requests, which the CEO said was “concerning”.

Locke commented: “These are not complaints about what the lender’s decision was, but consumers saying there was no response at all.

“Failure to respond to such a request is a breach of the lender’s obligations and there is no excuse for this.”

AFCA also noticed a rise in complaints that reported lenders for providing customers with standardised responses that “did not consider the customer’s individual circumstances”.

Locke added that “genuine consideration” is required from the lender when processing a customer’s request for assistance.

The Banking Code of Practice and National Credit Code require banks to collaborate with their customers and understand their individual circumstances to support them while they endure financial hardship.

Moreover, Natalie Cameron, lead ombudsman of banking and finance at AFCA, revealed that the complaints organisation has seen lenders issue default notices to customers who had previously agreed to repayment arrangements.

AFCA has also noticed a rise in complaints about lenders placing “unnecessary barriers” between customers and financial counsellors, as well as lenders taking debt recovery action while a complaint is before AFCA (which is not permitted).

Cameron said that lenders should be providing customers who are experiencing “vulnerability” with the relevant assistance.

She commented: “Vulnerable complainants are not always identified or given the care required.

“Sometimes they are simply not in a position to navigate the process and provide the required information in the requested format.”

What can borrowers do?

Cameron said that borrowers experiencing financial hardship should contact their lenders as soon as possible, preferably before a customer becomes overdue on repayments.

She commented: “Don’t wait until overdue repayments and arrears are already accumulating. Act quickly so as many options as possible remain open to you.

“We’d also encourage people to seek help from a free financial counsellor sooner rather than later.”

If a borrower is unsatisfied with their lender’s response, Cameron suggested that customers lodge an internal complaint with their lender, from which the bank has approximately 30 days to respond.

The lead ombudsman said: “If they remain unhappy after the complaint has been considered by the lender, or the complaint hasn’t been considered in time, they can access AFCA’s free and impartial dispute resolution service.”

The announcement came after Locke revealed that AFCA’s complaints were rising faster in 2024 compared to 2023.

2023 was a record-breaking year for the complaints organisation as complaints exceeded 100,000 for the first time since the organisation was established in 2018.

[Related: AFCA complaint volumes rising faster than 2023]