AUSTRALIANS in dispute with banks, insurers, superannuation funds, investment firms and financial advisers lodged more than 70,000 complaints with the Australian Financial Complaints Authority (AFCA) in the past 12 months.

They secured more than $240 million in compensation and refunds after seeking AFCA’s help, as well as outcomes such as fee waivers, debt forgiveness and apologies. 

In addition, AFCA’s investigations into a range of systemic issues resulted in remediation payments to consumers totalling nearly $32 million in the past financial year.

AFCA has now helped to secure more than $610 million in compensation and refunds, and over $220 million in remediation payments, since starting operation on November 1, 2018.

In 2020-21, individual consumers and small businesses – who can also access the free ombudsman service – made 70,510 complaints to AFCA.

A preliminary data 'snapshot' as of June 30 also shows that nearly 70 percent of cases were resolved by agreement after AFCA brought the parties together, and that nearly 60 percent of cases were resolved within 60 days.

The most complained about product in 2020-21 was credit cards, accounting for 14 percent of all complaints, followed by home loans (9 percent) and personal transaction accounts (8 percent). With credit cards, the most common issues were default listings and unauthorised transactions – the latter accounting for 11 percent of card complaints.

Government support, business relief measures and a steadying economy had a positive effect on complaint levels in 2020-21, including complaints involving financial difficulty, AFCA’s chief ombudsman, David Locke said. 

“Significantly, complaints involving financial difficulty were down nearly 40 percent from the numbers we saw the previous year,” Mr Locke said. “That’s a great outcome and reflects the positive response from government and industry to the impact of COVID. 

“However, it’s too early to say we’re out of the woods yet. It may be some months before we know the full impact of the end of government emergency support and assistance from financial firms such as deferred loan repayments. And, of course, we are still living with COVID-19.

“It’s important that consumers and financial service providers continue to work together to resolve issues quickly as they emerge,” Mr Locke said. “The past 12 months show what’s possible when that happens.” 

Overall, complaints were down 12 percent on 2019-20, a year that included the initial months of the COVID-19 pandemic and a spike in complaints in areas such as travel insurance.

In 2020-21, there were 8,303 COVID-related complaints, up from 5,013 in just four months at the end of 2019-20 after the pandemic was officially declared. That translates to an average of 692 a month in 2020-21, down sharply from an average of 1,253 a month from March through June 2020.

The past 12 months included 165 complaints related to insurance cover for business interruption associated with COVID-19. More complaints are expected in the coming year, once the second of two test cases brought by the insurance industry is resolved.

The AFCA data for 2020-21 also shows travel insurance complaints down 22 percent, as Australians stayed at home, and superannuation complaints down 31 percent, after a jump the prior year when the government allowed the early release of super at the start of COVID. 

On the other hand, complaints related to personal transaction accounts rose 48 percent, with unauthorised transactions accounting for 29 percent of those complaints. Also, complaints about electronic banking increased 76 percent, with unauthorised transactions accounting for 28 percent of those complaints and mistaken internet payments accounting for a further 19 percent.

“There’s no single reason for these increases but people transacting online more during COVID will have contributed,” Mr Locke said. “Scams, which have accelerated during the pandemic, are also leading to growing complaints about transactions.”

Complaints about sales of funeral insurance in Indigenous communities continued to be troubling in 2020-21, Mr Locke said. “There’s a pattern of poor conduct in regional and remote communities that’s concerning.”

One provider accounted for 98 percent of funeral insurance-related complaints and was the subject of multiple determinations in favour of complainants.


About AFCA

  • The Australian Financial Complaints Authority (AFCA) is a non-government ombudsman service providing free, fair and independent help with financial disputes.
  • It is a one-stop-shop for consumers and small businesses who have a dispute with their financial firm, in areas such as banking, credit, insurance, advice, investments and super.
  • Where an agreement cannot be reached between parties, AFCA can issue decisions that are binding on financial firms.
  • AFCA has searchable public data on financial complaints available at data.afca.org.au.

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THE Australian Small Business and Family Enterprise Ombudsman, Bruce Billson has urged struggling small and family businesses to be proactive at tax time, as a new report reveals declining payment plans, despite record collectible debt owed to the Australian Taxation Office (ATO).

Mr Billson said the report, released today by the Inspector General of Taxation and Taxation Ombudsman (IGTO), shows that although SMEs owe $21 billion to the ATO – well over half of this collectible debt is held by just 6.4 percent of SMEs.

 “The vast majority of small business owners are doing the right thing and complying with their tax obligations,” Mr Billson said. 

“This report shows that while collectible debt owed by small businesses to the ATO has reached an all-time-high, in reality the breakdown sees the majority of debt owed by very few SMEs while the remainder is very small amounts of debt spread over a small percentage of Australia’s more than 2 million SMEs.

“In fact, less that one percent of small businesses owe $2.5 billion to the ATO, according to the IGTO’s report.”

Mr Billson said the reported decline in small business payment plan arrangements over the past three years is a concern.

“For those small businesses that are struggling to meet their tax obligations, now is not the time to put your head in the sand,” Mr Billson said.

“Small businesses are strongly encouraged to get on the front foot by lodging now and reaching out to the ATO – either online or by phone – for a tailored payment plan, if having difficulties meeting payment obligations.

“The ATO has told my office it is also introducing a system for payment plans in arrears to give small and family businesses a chance to get back on track rather than falling into default and having to start again.

“While the ATO is signalling plans to return to collection action, which it relaxed during the pandemic, it has also indicated to my office that its predominant strategy is to support and assist small businesses wherever possible," Mr Billson said.

“The ATO has acted on key recommendations in ASBFEO’s report: A tax system that works for small business to turn its small business independent review service into a permanent offering.

“This is in addition to the Australian Government giving the Administrative Appeals Tribunal (AAT) greater powers to pause or change debt recovery action applied to small businesses in dispute with the ATO.”

Small businesses engaged in a tax dispute are encouraged to contact ASBFEO for assistance on 1300 650 460 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

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LAW COUNCIL president, Jacoba Brasch QC, has come out in support of the move by the state and federal Treasurers to focus together on an agreed approach to electronic legal documentation processes and systems.

“The Law Council of Australia is fully supportive of today’s decision by Commonwealth, State and Territory Treasurers to work together towards a common approach for electronic document execution," Dr Brasch said. 

"During the COVID-19 pandemic, the electronic execution of documents was a game changer, especially in the commercial law space. It will remain a game changer by offering real potential for trade and commerce to flow in a more efficient and cost-effective way.

"For the upheaval that was 2020, there have been positive outcomes in the service of document execution that will have long lasting positive outcomes for clients. However, the need for consistency across the states and territories is paramount, which is why today’s announcement is crucial.

"The Law Council looks forward to working with the government to ensure that fidelity and veracity of the process for the execution of electronic documents is maintained," Dr Brasch said.

"The Law Council supports further investigation into what additional permanent improvements can be made as a result of technology which may further improve the follow of commerce in this country, efficient service delivery and cost effectiveness for clients.”

 

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Australian Small Business and Family Enterprise Ombudsman, Bruce Billson said significant reforms to the Franchising Code of Conduct announced by the Australian Government yesterday will help level the playing field across the franchising sector.

Mr Billson said the reforms to the Code, which come into effect from July 1, 2021, "will go a long way to addressing the power imbalances that often exist between franchisees and franchisors, particularly when disputes arise".

“These reforms are an important step towards getting the balance right for our small and family businesses in the franchising sector,” Mr Billson said.

“In particular, providing greater powers to my office to appoint an independent arbitrator when both parties agree, will help resolve disputes in a cost-effective and timely manner, while crucially protecting business relationships. This supports a no-surprises, collaborative and mutually respectful commercial relationship between franchisees and franchisors.

“Allowing my office to facilitate group mediation when several franchisees are in a similar dispute with the same franchisor, is another critical reform that will help restore confidence in this sector. 

“The changes to the Code mean prospective and current franchisees will be better armed with vital information needed to run their business," Mr Billson said.

“This includes more transparency around the marketing fund, with an annual financial statement which sets out meaningful information regarding expenditure. Greater visibility around rebates and leasing arrangements will be achieved by these reforms.

“The new mandatory Franchise Disclosure Registry, which is scheduled for release in early 2022, is key to providing prospective franchisees with vital information needed prior to entering a binding franchise agreement.

“Over the past six months my office has fielded over 240 calls from franchisees seeking information regarding disputes under the Franchising Code of Conduct," he said.

“This demonstrates just how critically important it is for prospective franchisees to know exactly what they are getting into before signing on the dotted line.

“Ultimately these much-needed reforms to the Franchising Code of Conduct will play an important role in making Australia the best place to start, grow and transform a business.”

Businesses involved in a franchise dispute under the Code can contact ASBFEO for assistance on 1300 650 460 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

www.asbfeo.gov.au

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THE Australian Small Business and Family Enterprise Ombudsman Bruce Billson said small businesses in dispute with the ATO will get a fairer go, under new rules proposed by the Australian Government.

Mr Billson welcomed the pre-Budget announcement, giving the Administrative Appeals Tribunal (AAT) greater powers to pause or change debt recovery actions applying to a small business in dispute with the ATO.

“Small businesses disputing an ATO debt in the AAT will get a fairer go by stopping the ATO from relentlessly pushing on with debt recovery actions against a small business, while the case is being heard,” Mr Billson said. 

“I commend the government which has acted quickly to implement a key recommendation in our recently released report: A tax system that works for small business which will allow small businesses to pause ATO debt recovery actions until their case is resolved by the AAT.

“Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system. This can be prohibitively expensive and time consuming for a small business," Mr Billson said.

“Under the proposed changes, small businesses can save thousands of dollars in legal fees, not to mention up to two months waiting for a ruling.

“In line with the recommendations in our report, the AAT will be able to pause or modify any ATO debt recovery actions, such as garnishee notices, interest charges and other penalties until the dispute is resolved by the AAT.

“It means that rather than spending time and money fighting in court, small business owners can get on with what they do best – running and growing their business.

“These proposed changes follow the ATO’s decision to turn its small business independent review service into a permanent offering.

“ASBFEO’s tax concierge service and ongoing advocacy work has led to substantial tax administration improvements for SMEs, with leadership from ATO Deputy Commissioner Small Business Deborah Jenkins and government support.

“Collectively, these changes align with ASBFEO’s vision of a tax system that works for the small business sector, so businesses can achieve greater productivity, return to profitability and grow employment.”

The new powers for the AAT will be available following Royal Assent of the legislation.

Small businesses engaged in a tax dispute are encouraged to contact ASBFEO for assistance on 1300 650 460 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

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FINANCIAL RIGHTS Legal Centre is calling on the Australian Government to respect the rights of joint bank account holders to control their own data.

Financial Rights chief executive officer Karen Cox said the government should rescind its proposal to automatically opt Australians in to data sharing under the Consumer Data Right (CDR) and Open Banking regimes.

These are the key recommendations of an important joint submission to the Australian Treasury led by Financial Rights. Ms Cox said the government’s proposed “opt out regime” for Open Banking data sharing for joint account holders fundamentally undermines the right to affirmative consent.

“Australians want a safe and secure data environment that puts their privacy ahead of the increasingly rapacious desires of industry,” Ms Cox said.

“Treasury’s proposal undermines the privacy rights of citizens and subverts the Open Banking regime’s own requirements to provide Australians with the ability to voluntarily and expressly consent to the sharing of their data with other parties.” 

The Treasury proposal means joint account holders would be automatically opted in to sharing their personal financial data if one account holder chooses to engage with Open Banking.

Australians will only be able to prevent such sharing if they engage and turn it off prior to the sharing or stop the process after it has occurred.

“This proposal contradicts basic privacy principles already set out in the Consumer Data Right,” Ms Cox said.

“It runs counter to the Australian Competition and Consumer Commission’s (ACCC) recommendations to strengthen consent requirements and puts the business interests of the FinTech sector ahead of the need to protect consumers’ privacy and security.

“It also poses significant risks to vulnerable people facing financial, elder or domestic abuse.”

Ms Cox said the proposal would undermine consumer trust in the CDR before it even gets going.

“Consumers – be they joint account holder or not – should be free to decide how much or how little of their information they wish to share in exchange for the use of Open Banking services.”

The submission: https://financialrights.org.au/submission/

 

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BEFORE she left of office. former Australian Small Business and Family Enterprise Ombudsman,  Kate Carnell called for an overhaul of Australia's dispute resolution framework, saying the current court system "does not work for small businesses".

When she released the Access to Justice Report, Ms Carnell said small businesses urgently needed pathways to resolve their disputes quickly and cost-effectively.

“Trying to resolve a dispute through the courts is just not a viable option for most small businesses,” Ms Carnell said before leaving the role and handing over to Bruce Billson, a former Federal Government Minister whose portfolio represented the small business sector.

“It’s prohibitively expensive and time-consuming," Ms Carnell said at the time. "We know small businesses are more likely to abandon both the dispute and the commercial relationship, than suffer the cost and mental load of taking legal action. 

“Our report essentially provides a five point plan to ensure small businesses have access to tailored dispute resolution processes that are less formal, more timely and cost effective.”

The report includes a suite of recommendations as part of the five umbrella findings. These include:

-       Strengthening Unfair Contract Terms protections;

-       Promoting alternative dispute resolution;

-       Providing access to voluntary, binding arbitration;

-       Greater access to tribunal and court determinations for disputes;

-       Supporting the wellbeing of small business owners through permanent funding of the Beyond Blue NewAccess for Small Business program.

Ms Carnell said small businesses had been hit hard by the COVID crisis and in this time of unprecedented hardship, disputes inevitably arise.

“My office saw commercial lease disputes increase nine-fold during the peak of the pandemic, with more than 570 cases in the June quarter alone,” Ms Carnell said..

“We know that state-based small business commissioners’ offices were also inundated with these kinds of disputes.

“Commercial disputes are very common, but they can be devastating when not handled correctly.

“Clearly, alternative dispute resolution through mediation, conciliation and arbitration is the best way to preserve commercial relationships. Litigation, on the other hand, is a relationship killer," Ms Carnell said.

“When businesses can’t resolve a dispute with the help of experts, we need to have a system in place that allows for an external party to make a determination, without small businesses having to wait for lengthy periods or go bankrupt due to excessive legal fees.

“Our report recommends forming a small business jurisdiction as part of the Federal Circuit Court to hear matters which cannot be heard by current state or territory tribunals. Damages would be capped at $5 million, matters would be aimed to be resolved within 60 days and small businesses could apply for a no adverse costs order so they are not saddled with the other party’s costs.

“Current state tribunals have been found to be effective for small businesses but they are limited in dealing with cross-border and international disputes. For instance, a Queensland farmer who deals with a NSW processor would not be able to seek a resolution through either state tribunals.

“While the vast majority of disputes are resolved through mediation and conciliation, there also needs to be a cost-effective, timely and binding judicial process for those small businesses that need it.

“Given the enormous pressure small business owners are under as a result of the COVID crisis and the inevitable stress that comes with being involved in a dispute, it is important that our dispute resolution avenues are supportive of participants’ wellbeing.

“Our report recommends mental health measures be integrated into all dispute resolution processes and reviewed regularly to ensure they are meeting the needs of small business owners," Ms Carnell said.

“Ultimately the purpose of this report is to create a framework that supports small businesses and family enterprises in this critical recovery phase.” 

www.asbfeo.gov.au

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