The Australian credit licences of 24 finance providers have been suspended by the Australian Securities and Investments Commission (ASIC) on the grounds that they were not members of the Australian Financial Complaints Authority (AFCA), a move that was welcomed by the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson.
Australian credit licence holders are legally required by law to be AFCA members. AFCA provides consumers and small businesses with an alternative to tribunals and courts to resolve complaints with financial firms, by operating a free independent dispute resolution scheme.
Mr Billson emphasised the importance of AFCA’s service for small businesses, and the need for finance providers to comply with the rules.
“AFCA provides free, fast and binding dispute resolution to small businesses, saving them time and money by significantly reducing the need for litigation,” Mr Billson said.
He noted that small businesses generally lack the time and money to hire lawyers and challenge banks and other financial institutions through the court system.
“If a finance provider that is an AFCA member can’t resolve a complaint directly with a customer, including a small business customer, AFCA decides what a fair and appropriate outcome is and the decision is binding on the financial firm,” Mr Billson said.
“This is a really important service, as finance is the oxygen of enterprise, yet, too often, small and family businesses feel powerless in sorting out complaints they may have with finance providers.”
Mr Billson called ASIC’s move a timely and critical reminder to small businesses to ensure the lender or financier they are considering dealing with is an AFCA member.
“Small business borrowers can only access AFCA’s free and independent dispute resolution ‘umpire’ process for their financial complaints if their lender is an AFCA member,” the ASBFEO said.
“Not all lenders are AFCA members — in fact, many are not — and small businesses need to be aware of the risks and inability to reach out to AFCA to decide a matter.”
The ASBFEO regularly hears from small businesses that are struggling to resolve disputes with non-AFCA members, according to Mr Billson.
“My tip is to always check out your financing options with an AFCA member for your own piece of mind,” he said.
The recent round of cancellations was carried out between the period of 1 January and 30 June 2021.