AFCA complaints: a guide for property borrowers

What AFCA is

The Australian Financial Complaints Authority is the external dispute resolution scheme for the Australian financial system. It deals with complaints about banks, credit providers, brokers, insurers, superannuation funds and investment businesses that are members of the scheme. Using AFCA is free for the person complaining. Its website is afca.org.au.

AFCA is not a regulator and it is not a court. It does not license businesses or punish them for breaking the law; that is ASIC's role. Instead, it looks at an individual complaint and decides what is fair in the circumstances, having regard to the law, industry codes and good industry practice. Firms that are members agree to be bound by its decisions, while complainants who do not accept a decision usually keep their right to go to court.

Who must belong

Holders of an Australian Credit Licence and their credit representatives are generally required to be AFCA members. So are holders of an Australian Financial Services Licence that provide services to retail clients. That means most lenders and brokers dealing with regulated consumer loans are members.

Business-purpose lenders that do not hold a licence may not be required to join. Some join voluntarily because borrowers and brokers ask about it. Before you sign, search AFCA's member list, and use our guide to ASIC registers to check what licences the business holds.

Step one: the internal complaint

AFCA generally expects you to complain to the business first. Licensed firms must have an internal dispute resolution process and must respond within set timeframes. Write your complaint clearly:

• who you are and the loan or account it concerns;
• what happened, in date order;
• what you think the business did wrong;
• what outcome you want, such as a refund of a fee, a corrected statement or a hardship arrangement.

Keep copies of everything you send and receive. If the business does not respond within its required timeframe, or you are not satisfied with its answer, you can take the complaint to AFCA.

Step two: lodging with AFCA

You can lodge a complaint online, by phone or in writing. AFCA will first check whether the complaint is within its jurisdiction. It then usually refers the complaint back to the firm for a final chance to resolve it, before moving to conciliation, investigation and, if needed, a formal decision.

During the process AFCA may ask both sides for documents. Useful material includes the loan contract, the term sheet and letter of offer, statements, emails, notes of phone calls and any valuation or default notices. Our lesson on default and enforcement explains the notices you may receive if a loan falls behind.

What AFCA can and cannot look at

AFCA's jurisdiction is set by the AFCA Rules. Some points matter especially for property borrowers.

Small business complaints. AFCA can consider complaints from small businesses about credit facilities, but the rules define what counts as a small business and limit the size of facilities and claims it can consider. Larger development or commercial facilities may fall outside those limits.

Monetary limits. There are caps on the amount of compensation AFCA can award. If your claim is larger, AFCA may not be the right forum. Check the current limits in the AFCA Rules before you lodge.

Time limits. Complaints generally need to be lodged within a set period after you became aware of the loss, or after the firm's internal response. Do not delay.

Commercial judgment. AFCA generally does not second-guess a lender's legitimate commercial decision to decline credit, as long as it followed its own processes and the law. It is more likely to look at how the lender behaved, what it told you and whether it met its obligations.

Hardship is a separate path

If you are struggling to make repayments, you do not have to wait for a dispute. For regulated consumer loans, you can ask the lender for a hardship variation, and the lender must consider the request. For business-purpose loans the statutory hardship rules may not apply, but many lenders will still talk about arrangements. Our lesson on financial hardship and complaints covers this in more detail, and the National Debt Helpline offers free financial counselling.

When court or other options make more sense

For large commercial disputes, complaints against non-members or matters involving urgent enforcement action, legal advice is essential. A lawyer may suggest negotiation, mediation, an urgent application to court or a dispute process set out in the loan contract. AFCA may not be able to stop a lender enforcing its security while a complaint is considered, depending on the circumstances, so get advice quickly if a lender has issued default notices.

Preparing before problems happen

The time to think about complaints is before you sign. Check AFCA membership, keep copies of every document, ask for explanations of fees in writing and read the default clauses carefully. Our guide to term sheet fees and default clauses explains the charges that most often lead to disputes, and our article on caveat and second mortgage registration explains how security is enforced.

If your loan involves land tax, duty or GST, disputes can also involve a government agency rather than the lender. Those complaints go to the relevant revenue office or the Australian Taxation Office, not AFCA. See land tax charges and mortgage priority for how state charges interact with your lender.

Other help

• The Commonwealth Ombudsman handles complaints about Australian Government agencies, including some tax administration matters.
• Moneysmart explains how to complain about financial firms in plain language.
• Each state and territory has a fair trading or consumer affairs agency for general consumer complaints.

A checklist before you lodge

Before you lodge, gather the documents in one place, write a short timeline of events, note every person you spoke to and when, and set out exactly what you are asking for. A clear, well-organised complaint is easier for both the lender and AFCA to resolve. Keep a copy of your submission and every reply, and note the dates AFCA gives you for responses so nothing lapses.

A worked example

Consider Priya, who runs a small cafe business and took a short-term loan secured over an investment unit. At discharge, the lender charged an exit fee she believes was never disclosed. Priya writes to the lender's complaints team, attaching the term sheet and loan contract and asking for the fee to be refunded. The lender replies that the fee appears in a schedule to the contract. Priya disagrees, because the term sheet she signed listed every other fee except this one. She checks AFCA's member search, confirms the lender is a member and lodges a complaint online. AFCA refers it back to the lender for a final response, and the matter is resolved in conciliation with a partial refund. Her clear records made the process faster.

Common reasons complaints stall

Complaints often slow down because the timeline is unclear, documents are missing or the outcome sought is vague. Others stall because the complaint is really about a commercial decision, such as declining an extension, rather than about conduct. Focus on what the business said or did, what the documents show and how that differs from what you were told.

Further reading

• How to check a lender
• Scams and red flags
• Second mortgage loans
• APRA rules and bank lending limits