AFCA serves as an independent dispute resolution body for the banking, finance, and insurance sectors. Membership in AFCA is mandatory for major banks, insurers, superannuation trustees, and mainstream lenders, encompassing approximately 35,000 organisations. However, certain small business lenders operate without the requirement of AFCA membership, leaving borrowers vulnerable when disputes arise.
In the last financial year, AFCA received a record 4,648 complaints from small businesses, with 2,063 related to financial services. Alarmingly, 21% of these finance-related complaints had to be dismissed solely because the lenders involved were not AFCA members. This situation underscores the importance for SMEs to conduct due diligence before entering into financial agreements.
Suanne Russell, AFCA's lead ombudsman for small business, expressed concern over the increasing number of complaints that the authority cannot consider. She emphasized the growing pressures on business owners, including cash flow challenges, financing difficulties, and rising operational costs. In light of these challenges, AFCA urges small businesses to verify a lender's membership status through their online platform before finalizing any financial arrangements.
For SMEs, this advisory serves as a crucial reminder to prioritize lender verification as part of their financial decision-making process. Ensuring that a lender is an AFCA member provides a safety net, offering access to dispute resolution services should issues arise. This proactive approach can safeguard businesses from potential financial pitfalls and contribute to more secure and informed financial planning.
