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The Australian Financial Complaints Authority (AFCA) has warned small businesses (those with fewer than 100 employees) to be alert to the risks of dealing with some lenders, following an increase in complaints relating to lenders that aren’t covered by the Credit Act and are not members of the body.
AFCA, which provides free and independent dispute resolution services for financial complaints, flagged that not all small business lenders are required by law to be AFCA members, leaving business owners taking out loans with non-AFCA members with fewer options for redress if something goes wrong.
Currently, financial services licensees, credit licensees, credit representatives, and superannuation trustees are required to be AFCA members as part of their licensing requirements.
However, some financial firms that only serve small businesses are not required to be an AFCA member, such as asset leasing businesses and online and private equity lenders, where credit is only provided to business customers.
Moreover, small business credit facilities that exceed $5 million are not within AFCA’s jurisdiction.
According to AFCA, there was a record number of complaints from small businesses to AFCA in the last financial year (FY25) – the second year in a row that a new record was set.
Small businesses took over 4,600 complaints to AFCA in the last financial year, a rise of 4 per cent. This followed a record high in the previous financial year.
Business transaction accounts overtook business loans to become the most complained-about financial product from small businesses in FY25, rising 32 per cent to 1,676 complaints.
The other most disputed products related to commercial property, credit cards, and commercial vehicles.
The top issue for small businesses was service quality, rising 43 per cent to 337 complaints, followed by a financial firm’s failure to respond to requests for assistance, with 310 complaints.
There was also a 36 per cent increase in complaints around incorrect fees, premiums, and charges, with 301 complaints.
In the financial year 2025, AFCA closed more than 2,000 small business complaints about ‘finance’, with 21 per cent of them closed because they were outside AFCA’s rules.
Of the small business complaints that were closed, a large proportion were shut because the financial firm was not an AFCA member.
“If a small business lender is not a registered member of AFCA, the small business cannot lodge a complaint with us if things go wrong, leaving these business owners vulnerable,” AFCA’s lead ombudsman for small business, Suanne Russell, said.
“We’re seeing an increase in complaints being lodged about finance that we cannot consider, and this is a growing concern for us.”
Russell noted growing pressure on small businesses.
“For the second year in a row, we have seen a record number of complaints from small businesses. This increase underscores the mounting pressures business owners face, from cash flow and financing difficulties to rising costs and interest rates,” she added.
“We urge any lenders who are not yet members, especially those servicing small businesses, to consider joining AFCA, giving their customers access to external dispute resolution should they need it.”
Last financial year, AFCA closed more than 4,000 small business complaints and secured $27 million in compensation for small businesses.
AFCA’s warnings about the risks of unregulated lenders come after an Australian Securities and Investments Commission (ASIC) review into private credit found the market remains “relatively immature and untested”.
Earlier this week, the watchdog also warned of problematic sales tactics and a lack of oversight of brokers and dealers by auto finance lenders.
[Related: ASIC warns auto finance lenders to raise standards]
