08 Feb 2021
More than one year on, the COVID-19 pandemic has had a major impact on Australian consumers with many people finding themselves in financial situations not experienced before.
A huge effort was made by the banking industry in assisting consumers throughout 2020. In fact, there were significantly fewer complaints made to the Australian Financial Complaints Authority (AFCA) about financial difficulty. Complaint numbers have halved.
"Understanding the big picture can help unpack these issues and move towards resolution.”
Financial stressors – not just those created by COVID-19 – have always existed. When circumstances change it is not always possible for people to meet their financial obligations with the pressure of everyday bills and anxieties about big-ticket items like mortgages and car loans mount. The levels of shame, stress and humiliation that follow mean that there are very human emotions displayed including avoidance, frustration, anger and fear.
Even when a problem isn’t driven by a change in circumstances, stress from any sort of financial issue is usually very high. AFCA generally only becomes involved after a consumer has been trying to resolve their issue with their provider for weeks, months or sometimes years.
Understanding the big picture – the whole personal context behind a complaint – can help unpack these issues and move towards resolution. Consumers might be experiencing other issues such as relationship or family breakdown, unemployment, mental illness or accessibility difficulties. This means their complaint isn’t a straightforward financial problem.
Identifying and acknowledging these complexities, being clear on limitations to resolving the complaint and referring to other specialised services where possible is part of the ‘resolution mindset’ needed to advance resolutions for customers.
Put simply, complaints are often about people and relationships. Good relationships based on mutual trust and respect result in issues being communicated and resolved early. However, when communication breaks down things can get very messy, very quickly.
Complaints resolution works well when the financial firms involved have staff with a resolution mindset rather than a legal mindset. They’re able to consider the human behind the complaint. They focus on their customer as a valuable asset and they work together to unpack and understand what has gone wrong.
Of course, there are always going to be complex matters brought to AFCA however industry data show a trend to earlier resolution recently, up from 40 per cent pre-COVID to 50 per cent post-COVID. This shows a commitment from firms to actively address and resolve issues.
Front line staff are key partners in complaint resolution
Consumers often don’t understand how to make a formal internal complaint to their financial provider and so come to AFCA before the IDR process. Customer service keeps going after the sale is made and we believe it is important for financial institutions to ensure the internal dispute resolution process is clear and easily accessible. The strength of the relationship built with frontline staff has a significant impact on the success of complaint resolution. Acknowledging the issue and being prepared to say sorry can go a long way. This only works of course if it is genuinely meant: how do you react if you are frustrated and someone tells you they “are sorry you feel that way”?
Our first message to consumers is to always talk to their financial firm first. However, this only works if the bank teller, mortgage broker or business banker can identify a complaint and knows how to refer the complaint onwards internally – letting their customer know what the process is and when they can expect a response.
Best practice complaints handling
We know responsive and proactive complaints handling will yield the best outcomes for all parties. We encourage our members to engage by phone as much as possible and to listen and understand with empathy. Often assumptions on both sides are a problem, so we ask institutions to try and explore what the customer understands – and what they don’t. A tailored response written in plain English will help customers feel acknowledged and validated.
Sometimes emotion can get the better of people and we see unreasonable behaviours. We remind financial institutions their own people may need support after having tough conversations. A policy framework that has clear escalation points is critical as is training on dealing with these issues. Understanding how to separate the behaviour from the issues and facts in the dispute, as well as effectively setting and managing expectations up front, will help to reach a better outcome.
We emphasise it is important for institutions to do what they say they will, explain their approach, and avoid surprises. Institutions should also provide information on a range of referral services to support any other issues. And to avoid prolonging the complaints process, it’s important to have the right resources and procedures in place and staff are authorised to get the matter resolved.
The industry and government response to COVID-19 has undoubtedly played a massive role in reducing financial stressors and this is borne out in the reduction of financial difficulty complaints AFCA has received in the past year.
However, as hardship assistance winds down, we expect some issues to flare up again over the course of 2021.
David Locke is Chief Ombudsman and CEO of the Australian Financial Complaints Authority
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
08 Feb 2021
13 Nov 2020