The Australian Financial Complaints Authority (AFCA) has reported a 17% rise in complaints from small businesses in the 2023-24 financial year, with 4,466 cases lodged.
The increase marks the highest level of complaints recorded by the national ombudsman service, which also highlighted a growing number of disputes related to financial difficulties amid ongoing economic challenges.
Suanne Russell, AFCA’s lead ombudsman for small business, attributed the rise to several factors, including:
“This record number of complaints to AFCA reflects the pressure small businesses are under as they struggle to manage challenges with cash flow and financing, along with higher costs and interest rates,” Russell said.
Russell also cautioned that financial difficulty complaints could continue to grow in the coming year.
She urged small businesses to seek support from financial service providers early and encouraged firms to respond effectively to customer requests for assistance.
Complaints related to scams also surged, with 263 cases reported in 2023-24, a 48% increase from the previous year.
AFCA noted that email compromise scams – where scammers intercept payment instructions and alter banking details – were a significant concern. Such scams often target property settlements or high-value transactions, leading to substantial financial losses for small businesses.
Small businesses are particularly vulnerable to scams due to limited resources for fraud prevention and the larger transaction values they often handle, Russell explained.
“Scams are a growing threat to small businesses and can have a significant impact on business owners. We believe financial service providers should enhance protections for their small business customers to help prevent these damaging losses,” she said.
Russell welcomed the introduction of the government’s Scams Prevention Framework, which aims to improve prevention measures and assist businesses and consumers affected by fraudulent activity.
Complaints about business loans were the most common type of grievance, increasing 16% over the year. Other areas of concern included business transaction accounts, commercial property loans, credit cards, and commercial vehicle financing.
A significant rise was seen in disputes over the interpretation of product terms and conditions, which grew by 84%.
Russell emphasised the need for clearer communication by financial institutions to help reduce misunderstandings and complaints.
“We encourage financial firms to make sure they’re communicating clearly and effectively with small business customers,” she said.
AFCA resolved 4,380 small business complaints in 2023-24, resulting in $20 million in compensation for cases where complaints were upheld.
The service provides free, independent dispute resolution for small businesses and individual consumers dealing with financial disputes.
Russell encouraged small businesses to take advantage of AFCA’s services, noting its role in helping resolve complex financial challenges.
