Report: Spike in consumer complaints against lenders
The number of complaints investigated against lenders has more than doubled since last year, according to the annual report just released by Financial Services Complaints (FSCL).
The rise in cases highlights financial illiteracy, the report says, particularly among vulnerable groups such as low-income earners, beneficiaries and those who speak English as a second language.
Funded by financial service providers, FSCL was created by the Minister for Consumer Affairs to provide independent dispute resolution to the industry and consumers about their products and services.
“Problems are caused by loan contracts that are long and written in very small print. They often include complex legal clauses that are very difficult for consumers to read, let alone understand,” the report says.
For the year end June 30 investigations against lenders saw a sharp rise to 39, up from 17 last year. Maladministration reigned as the biggest issue with these financial providers.
Complaints claimed lenders refused to agree to hardship relief, engaged in unfair repossession practices or set unrealistic demands for higher loan repayments.
The FSCL says some reprieve could be in the pipeline with the Credit Contracts and Consumer Finance Reform Bill currently in Parliament. The reform aims to revamp legislation governing consumer credit contracts. It was introduced in April with submissions due this Friday.
Under the proposed law lenders wouldn’t be allowed to repossess essential household items such as beds, refrigerators and washing machines. The law would also limit repossession to identified goods rather than everything the borrower owns at the time the loan agreement is signed, or everything the borrower might own in the future.
Lenders weren’t the only providers under investigation. Similar to last year, insurers earned the top spot for number of disputes at 54. Insurance brokers were third with 17 complaints investigated.
Most of the insurance complaints dealt with travel insurance.
In 2013, FSCL could award compensation for direct loss of up to $200,000, which was double the cap of the previous year. In total the FSCL negotiated or recommended compensation of $514,785.62 for consumers, up from $251,410.21 the year prior.
FSCL received 1,708 calls or emails from consumers asking how to make a complaint, up from 1,259 the year prior. The FSCL took 162 cases for investigation, up from 115 the year prior.