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Demystifying AFCA – Part Three: Powers and Remedies

AFCA complaints against financial firms in the banking and finance space rose 27% in FY23, bringing the total complaints in that field to 53,638. In a recent report from AFCA, Chief Ombudsman and CEO, David Locke, said that rising interest rates and the cost of living crisis largely contributed to that increase. The full report from AFCA can be found here.

So far in the Demystifying AFCA series we have looked at the role of AFCA, the complaints process, and the restrictions placed on financial firms once a complaint is lodged. In this instalment, we will focus on the powers and remedies available to AFCA when determining complaints and consider the issues arising by considering a case study.

Remedies available to AFCA decision makers

Broadly speaking, AFCA decision makers can determine a complaint at their discretion by any of the following remedies:

  • directing a party to pay a sum of money

  • the forgiveness or variation of a debt

  • the release of security for a debt

  • repayment, waiver or variation of a fee or other amount paid to or owing to the financial firm (including the variation in the applicable interest rate on a loan)

  • reinstatement, variation, rectification, or setting aside a contract

  • requiring a party not to enforce a default judgment

  • directing a party to give an apology.

The financial amounts involved are not insignificant, and AFCA recently reported that approximately $254 million in compensation was secured for complainants from financial firms in FY23.

In the case of a financial hardship complaint, AFCA may recommend that a credit contract be varied to extend the period of the contract, reduction of the amount of repayments, postponement of repayments, and reduction of the applicable loan interest rate for a period.

In deciding whether to grant a remedy, the decision maker can have regard to established legal principles. For example, the decision maker will consider causation, remoteness, and whether the complainant took steps to mitigate their loss.

Are AFCA determinations binding?

In our last article we explained the difference between a preliminary assessment and a final determination by AFCA. In short, a preliminary assessment is not binding unless the parties agree to settle based on the recommended outcome set out in the preliminary assessment. If either party does not accept a preliminary assessment, then the complaint will progress to a final determination.

AFCA final determinations are binding on financial firms by reason of their membership with AFCA. In Australia Capital Financial Management Pty Ltd v AFCA [2022] NSWCA 204, the NSW Court of Appeal noted that, “once a complaint is made, the AFCA Rules form a binding tripartite contract between the complainant, AFCA and the member.”

There are limited avenues of appeal to the Courts for a financial firm, such as where there has been a lack of procedural fairness (although this is difficult to establish). It should be noted that AFCA is required to report a financial firm to ASIC if it does not comply with a determination.

On the other hand, an AFCA determination is not binding on a complainant unless they choose to accept it as a binding resolution of their complaint. If a complainant does not accept the determination then they retain their right to pursue the claim against the financial firm through the Courts. A complainant should seek legal advice before doing so.

Case study - compensation for non-financial loss

In this case, AFCA determined that a bank should reduce the balance of its loan and pay the complainant $13,000 in compensation for non-financial loss suffered by the complainant.

The complainant and her ex-partner held two loans with their bank. One loan was used to purchase a property. Amongst other things, the complainant argued that the bank:

  • lent irresponsibility by not making reasonable inquiries as to the loan affordability

  • failed to follow instructions not to contact the complainant’s ex-partner

  • allowed the ex-partner to access $51,700 from the complainant’s account.

A preliminary assessment was released by AFCA that was accepted by the bank but was rejected by the complainant. Accordingly, the matter progressed to a determination.

AFCA was critical of the bank’s conduct in contacting the complainant’s ex-partner, despite the ex-partner being a co-borrower on at least one of the loans, and for failing to abide by responsible lending obligations. In the determination, AFCA noted that monetary compensation for non-financial loss was “appropriate compensation for the stress that the complainant has suffered from the bank’s conduct.”

This determination demonstrates the broad scope of remedies that can be ordered by AFCA.

Costs of a complaint

There is no fee for a consumer to lodge a complaint with AFCA. The scheme is funded by financial firms through membership fees, user charges, and complaint fees.

User charges are designed so that firms who receive a large number of complaints are required to pay higher annual fees. Complaint fees refer to a fee payable by the financial firm whenever a complaint is lodged against a financial firm. This system is designed to encourage firms to take reasonable steps to resolve disputes before a complaint is lodged against them.

AFCA also has the power to determine that a financial firm contribute up to $5,000 of a complainant’s costs (including legal costs) during the course of the complaint. A complainant will not be required in any circumstance to pay a financial firm’s costs.


AFCA has discretion to make a wide range of determinations and remedies. Its decisions are binding on financial firms with limited avenues of appeal. On the other hand, AFCA’s determinations are not automatically binding on complainants.

AFCA fulfils its mandate to be accessible for consumers in a number of ways, including by having no fees to file a complaint. However, it does monitor lodged complaints for anything frivolous or vexatious and will take issue against the complainant if required.

As tight economic conditions persist in Australia, responsible lending obligations remain paramount and complaints to AFCA will likely continue to rise.

The key takeaway for financial firms is to have practices and procedures in place to deal with dissatisfied consumers and ensure that the right steps are being taken to store relevant documents and information, and manage customer complaints in a proactive, sensitive and timely manner.

For borrowers who may become complainants, it is important to remember that if you are dissatisfied with the actions being taken by your lender, you have an inexpensive avenue available to you to seek redress without needing to engage lawyers and incur unnecessary legal costs.

Authors: Gavin StuartEmma Boyce and James Duff


Related reading:

Demystifying AFCA - Part One: Overview and complaint fundamentals

Demystifying AFCA - Part Two: The complaints process and restrictions on financial firms