Financial complaints watchdog inundated with calls linked to pandemic

The financial complaints watchdog has hit out at “poor communication” from major banks, insurance companies and superannuation funds as the cause of a deluge of complaints linked to COVID-19.

The Australian Financial Complaints Authority on Wednesday said it had received more than 3180 COVID-19 related financial complaints since the government declared the crisis a pandemic in March.

Banking and finance companies were the targets of almost half of the complaints, and almost 700 related to customers in financial difficulty, while there were 1070 complaints about general insurers and slightly more than 600 complaints against super funds.

AFCA chief operating officer Justin Untersteiner said most of these complaints related to loan break costs, disputed transactions, requests to extend payment terms, denial of travel insurance claims, and delays in the early release of superannuation.

Australia’s banking sector has deferred more than 700,000 loans worth more than $200 billion as a result of the crisis, and lenders have ramped up numbers of front-line staff to handle customer queries.

The superannuation sector has also paid out almost $15 billion to more than 1.5 million members, with 94 per cent of payments being made within five days.

However, some customers have complained about extended waiting times and some funds have dragged their heels on making payments, such as Millennial-focused Future Super, retail and hospitality fund Intrust, and airline worker fund Qantas Super.

Mr Untersteiner urged financial firms to provide early, proactive communication with consumers following an increase in complaints relating to COVID-19 and said he anticipated more financial difficulty complaints in the next six to 18 months.

“Many of these complaints result from poor communication, where a consumer has trouble contacting their firm, does not understand their policy, or is confused about the information they receive,” he said.

“To support consumers, we encourage financial firms to ensure their contact details and resources are visible and accessible and allow for genuine engagement with customers to resolve issues early on.”

The Australian Securities and Investments Commission has put insurers on notice to handle insurance claims in good faith, and to process claims fairly and promptly, while the Australian Prudential Regulation Authority has warned super funds to strive to meet expected payment deadlines.

The Financial Services Council recently urged life insurers to pay out policyholders who have become disabled or are unable to work due to injury, even if they lost their job due to the coronavirus pandemic, and when work-test clauses may block claims.

Meanwhile, the small business ombudsman has urged banks to continue to support business borrowers well beyond the hibernation stage of the COVID-19 crisis, and lenders are prepared to “check in” with customers at the end of June, which will mark three months since the loan repayment holidays were first introduced.

Mr Untersteiner said companies needed to communicate with customers early and to prepare customers for delays in service.

“We expect to see more complaints from vulnerable consumers or others who struggle to repay mortgages or other debts as government and sector support initiatives come to an end,” Mr Untersteiner said.

“This won’t just be an issue for banking and finance. Many will turn to their insurance policies to look for help and in some cases they will not be covered, which will lead to disputes.

“We also expect to see an increase in responsible lending complaints, disputes relating to scams, and a rise in business interruption insurance complaints, and additional complaints relating to early access to superannuation from June to September.”