Why aren’t financial firms resolving more of their own customer complaints?

The Australian Financial Complaints Authority (AFCA) is often the last best hope for people who have suffered a financial loss due to negligence or wrongdoing by a financial services provider.

But before you can lodge an AFCA complaint, you generally have to give the firm the opportunity to resolve it through their own internal processes.

The fact that the free external dispute resolution service resolves over half the complaints it receives through informal meditation between the firm and the complainant – perhaps an email exchange and a follow up call – suggests that some financial firms aren’t trying very hard to resolve the complaint before they go to AFCA.

These are generally simple complaints that don’t require a full investigation by AFCA’s experts.

More difficult cases may proceed to the determination phase, where AFCA makes a ruling that is legally binding on the financial firm but not the complainant.

In financial year 2025–26, AFCA resolved 117,150 complaints and awarded $834 million in compensation. (A small portion of this, around $465,000, was subject to the $150,000 compensation cap imposed by the Compensation Scheme of Last Resort, so the total payout could have been more.)

AFCA is a one-stop-shop for virtually all financial complaints, and the number it received in 2025–26 once again broke the previous financial year’s record. The complaint volume in the first quarter of the current financial year suggests the record will be smashed again in 2026–27. And the free external dispute resolution service’s remit is growing.

Starting on 31 March 2027, AFCA will begin operating the Australian Scams Ombudsman, which will accept complaints about banks, telcos and digital platforms, filling a longstanding void.

Internal dispute resolution falling short

One contributing factor to the continued year-on-year increase in complaints is that financial services providers are increasingly failing to arrive at a resolution on their own, in effect outsourcing complaints that don’t require the expertise of AFCA staff to resolve.

It’s an ongoing trend that AFCA Chief Ombudsman and CEO David Locke is keen to see come to an end.

“Internal dispute resolution is an opportunity for financial firms to put things right, and stop the complaint from escalating to AFCA,” Locke says.

“Nobody wants to see this number of complaints. The data reinforces the need for firms to resolve issues early where they can. We want to be resolving the complex cases that require dispute resolution expertise.”

Catastrophic collapse drives super complaints

The demise of the Shield and First Guardian Master Funds, which erased over $1 billion in retirement savings for around 12,000 superannuation account holders, was behind a huge spike in super complaints to AFCA in 2025–26, 42% more than in the previous financial year.

“As more Australians move into and through retirement, their relationship with their superannuation fund becomes increasingly important,” Locke says.

“For many people, these funds represent a lifetime of work and financial security in retirement.”

In this case, the financial firms in question are no longer in a position to resolve complaints, since they no longer exist. In the case of First Guardian, liquidators have recovered only around $8 million, and most of that has been consumed by liquidation and administrative fees.

AFCA has proven an especially critical service in the super sector due to widespread failings in the internal dispute resolution processes of super funds. According to a recently published review of complaint handling by the Australian Securities and Investments Commission (ASIC), funds are largely blaming account holders for any problems they encounter.

When super-related complaints have been escalated to AFCA, the service was almost twice as likely to identify systemic issues as the funds themselves.

“Customers are telling funds what’s going wrong, but far too many aren’t listening. It’s extraordinary that an external complaints body is doing a better job of spotting problems than the funds sitting on mountains of customer complaints,” says Xavier O’Halloran, CEO of CHOICE-affiliated Super Consumers Australia.

“Every complaint is a chance to stop the same thing happening to someone else. If a fund doesn’t investigate what’s gone wrong and fix the underlying problem, it’s leaving the next customer to suffer the same harm.”

ASIC says it’s willing to take some funds to court over their failure to adhere to regulations, which since 2021 has included the requirement to monitor and analyse complaints to uncover systemic issues.

Banking and finance drive the most complaints

Over half the complaints (66,971) lodged with AFCA in 2025–26 involved disputes about banks and other financial services providers, and the two biggest issues were scams and unauthorised transactions (where a scammer gains access to a victim’s bank account).

“Scams and unauthorised transactions continue to cause significant harm and our data shows there is more work to do to stop people falling victim to these sophisticated attacks,” Locke says.

The Australian Scams Ombudsman, which will be open to receive complaints from 31 March next year, “will give consumers an independent place to turn when they can’t resolve a scam complaint directly with the organisations involved”, he adds.

Given the banking industry’s abysmal record of dealing fairly with scam complaints or even engaging with victims at all, it seems likely that the Australian Scams Ombudsman will also end up playing a role that banks should be playing themselves, adding to AFCA’s bulging caseload.

AFCA’s chief customer officer, Deborah Jenkins, tells CHOICE that “a good internal dispute resolution process gives consumers an opportunity to have their concerns heard and addressed, without having to come to AFCA. Straightforward issues, such as lack of communication, poor service experience or clarity about a product, should be addressed through that process.”

At the heart of the problem is that financial firms often concentrate more on driving profits than keeping their customers happy. For Jenkins, the solution is straightforward.

“Firms should make sure they have the right resources in place to deal with issues raised by their customers.”

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Andy Kollmorgen

Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn

Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn