As federal Treasurer Josh Frydenberg lashed two of the Big Four banks for not immediately passing on the Reserve Bank’s interest rate cut to customers, the chair of the new government financial dispute authority has launched her own attack, accusing the banks of “appalling” treatment of customers.
The Australian Financial Complaints Authority (AFCA) opened last November, before the scathing findings of the financial services royal commission were handed down by Commissioner Kenneth Hayne. It was initially averaging 310 complaints per business day; this has ‘settled’ to 5900 complaints a month.
Chair Helen Coonan says AFCA “is playing an important part in restoring shattered community trust and confidence in the financial services sector” and has accused banks of “arrogant indifference” to risk.
It received 35,000 complaints in its first six months, awarded customers $83 million in compensation and identified 85 cases of “systemic” risk, where an issue is likely to affect a class of people beyond the original complainants, The Age reports.
Community trust in the sector had been “shattered”, with financial institutions causing “despair and hopelessness in many broken lives and broken businesses”, Ms Coonan said.
Thousands of consumers had felt “badly let down” by financial institutions as far back as the global financial crisis.
“Poor culture in financial institutions has been fingered as the main culprit that permitted a slew of bad practices, appalling treatment of consumers and small businesses, and in many cases arrogant indifference to regulatory and compliance risk,” she said.
“The task ahead of banks to address the poor culture deeply embedded throughout their organisations is, no doubt, a monumental one.
“Now almost seven months old, AFCA is playing an important part in restoring shattered community trust and confidence in the financial services sector.”
Sally Tindall, research director at financial comparison site RateCity, said that despite Tuesday’s interest rate cut, banks could be encouraged to offer more competitive rates if customers used their collective clout.
“If term deposits and savings accounts continue to fall, people may start seeking alternatives that come with greater risk, like on the stockmarket or peer-to-peer lending,” she said.
“If people stopped putting money into the bank, it would force banks to be more competitive in this space.”
In addition to the complaints service offered by the AFCA, there is another positive development on the financial services front – Australians will soon know which bank or super fund is the worst to deal with.
The Australian Securities and Investments Commission (ASIC) is consulting with the financial services sector on new standards governing how banks, insurers, superannuation funds and other providers of financial services, such as credit issuers, handle customer complaints.
Under the proposals, consumers will be able to look up data – from June 2021 – that compares how quickly financial institutions resolve disputes.
The proposals are expected to receive significant resistance from the sector.
ASIC says that financial groups will need to dramatically reduce the time taken to respond to complaints. A report last December found that 3.2 million people aged 18 and over – or 17 per cent of the adult population – had considered making a complaint to a financial service provider in the proceeding 12 months, but only 1.5 million actually made a complaint.
The report also found that 18 per cent of surveyed complainants dropped out or withdrew their complaint before it was concluded, mostly because it took too long to resolve the matter.
Almost half of the complaints were about fees and charges, while a quarter related to customer service issues and one-in-five about a decision made by the company, The Age reports.
Has your trust in banks and other financial institutions been restored in the months since the royal commission? Have you had cause to make a complaint to the AFCA?
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