Fee-Charging Complaint Firms Tripled Their Home Loan Lodgements While Cutting Total Volume 38%. Your Closed Files Are Now Their Pipeline

What the Annual Review actually says

Start with the context, because the broker-specific point only makes sense against it.

AFCA received 119,949 complaints in the year to 30 June 2026, up 19% and a record. Banking and finance complaints reached 66,971, up 23% from 54,581, and made up more than half of AFCA’s total workload. Within banking and finance, the most complained-about products were personal transaction accounts (17,011), credit cards (12,066), personal loans (7,200), home loans (7,014) and online accounts (3,334), according to The Adviser’s reading of the review.

Home loan complaints rose from 5,818 to 7,014, an increase of roughly 21%. Financial difficulty complaints rose 17% to 5,566, and home loans were the single product behind the largest share of them — 1,676, up from 1,541. The most common hardship issue was simple: a firm failing to respond to a request, raised in 3,076 complaints.

AFCA closed 117,150 complaints, up 16%, and cut the average time to close from 79 days to 69. It awarded more than $834 million in compensation, including $465 million in matters eligible for the Compensation Scheme of Last Resort, where awards are capped at $150,000.

David Locke, AFCA’s Chief Ombudsman and Chief Executive Officer, put the position plainly in the launch coverage: “Nobody wants to see this number of complaints.” He also said firms “need to do more to identify hardship early and provide meaningful support for these customers.”

The number inside the number

AFCA reports separately on complaints lodged by paid representatives. It defines a paid representative as “any person or business that is paid to represent and assist a complainant” — expressly excluding accountants, lawyers and financial counsellors, who have professional bodies overseeing their conduct. In practice the category means debt management and credit repair firms, insurance claims handling firms, and anyone else charging a consumer a fee to lodge and run a dispute.

Mortgage Professional Australia, reporting on 27 October, pulled the paid-representative tables out of the review. Those figures appear in that outlet’s coverage rather than in the general trade reporting, so they are worth attributing carefully. On MPA’s reading:

Read the first row and the second row together. The sector shrank by more than a third while its credit-side activity multiplied. That is the signature of a business model reallocating capital, not one winding down.

Why a complaints firm switches product

The consumer credit insurance line explains most of it. Paid-representative complaints about CCI went from 2,258 to 7,188 in one year, then collapsed to 2,468 in the next. That is the arc of a remediation wave: a well-defined cohort of mis-sold policies, a clear template for the complaint, and then a finite pool that empties out.

When that pool empties, the operating costs do not. These firms have call centres, marketing spend, lead funnels and a standing familiarity with AFCA’s process. The rational move is to point that machinery at the next category where consumer records are detailed, the paper trail is long, and an arguable complaint can be generated at low marginal cost.

Credit reporting is the obvious first stop, and the numbers show it — enquiries, repayment history and default listings all climbed sharply. Credit enquiries are instructive for brokers specifically: a complaint about unnecessary or unexplained credit enquiries goes to how an application was shopped. Home loans and credit cards are the next stop, because the dollar values are larger and the files are richer.

What AFCA asks of a paid representative

There is a genuine protection here, and brokers should know its shape rather than assume the worst.

AFCA holds paid representatives to a higher standard than unpaid ones. Under its Engagement Charter, representatives are expected to act in the best interests of the complainant and avoid conflicts of interest, act fairly and professionally towards AFCA and financial firms, avoid lodging complaints that are “frivolous, vexatious or without merit”, support reasonable negotiation including ensuring complainants attend, and participate actively without unnecessary delay. Where those expectations are not met, AFCA says it may be appropriate to refuse to consider the complaint further under AFCA Rule C.2.2(g).

Three further points from AFCA’s published guidance are worth holding onto:

• IDR comes first. A representative can take a matter to AFCA only where the firm’s internal dispute resolution process has not resolved it.
• Documents are due at lodgement. AFCA expects representatives to “provide all relevant documentation that could reasonably be expected upon initial lodgement of a complaint”, and to co-operate with its investigations.
• The consumer wears the fee. AFCA states that fees paid to a representative “will not be awarded as part of any compensation”, and that AFCA is free to use and unpaid representation is available.

There is also a licensing layer that predates all of this. ASIC announced in 2021 that, from 1 July 2021 and subject to transitional arrangements, providers of debt management services — including credit repair and debt negotiation in relation to a consumer credit contract — must hold an Australian credit licence with an authorisation covering those services, and had to apply and join AFCA by 30 June 2021. A firm operating in that space is a regulated entity with obligations of its own.

IDR is where this is decided

Because a paid representative must go through IDR first, your internal complaints process is not a formality at the end of the dispute. It is the gate.

ASIC’s Regulatory Guide 271 on internal dispute resolution applies to Australian credit licensees, and ASIC states on the guide’s own page that “the standards and requirements highlighted in this guide are enforceable”. AFCA’s member guidance sets out the maximum IDR response timeframes for complaints that have not previously been through IDR:

Your licensee or aggregator will have its own IDR procedure and its own internal deadlines, which are usually tighter. Confirm what yours requires rather than working from the outer limits above.

The economics point the same way. AFCA’s published fee structure charges members by the stage a complaint reaches — closed before Referral, Rules assessment, Registration and Referral, Case Management, Preliminary View, Decision — so cost rises the further a matter travels. In banking and finance, 64% of complaints closed at the Referral stage last year, and the average time to close fell from 62 days to 53. A complaint answered properly and early is cheaper, faster, and far less likely to become a determination that follows your licence around.

The hardship blind spot

Of the 5,566 financial difficulty complaints AFCA received, the most common issue was not an unfair outcome. It was a firm failing to respond to a request — 3,076 complaints. Separately, on MPA’s reading of the paid-representative tables, complaints about lenders ignoring hardship requests rose from 110 to 218.

Brokers do not assess hardship applications. But brokers are frequently the first person a struggling client rings, and are often the one who passes a hardship request to a lender or tells a client where to send it. If that handover is informal — a phone call, a text, a note to a BDM — there is no record that the request was made or when.

That gap is exactly what a representative builds a timeline around. The fix is unglamorous: confirm hardship referrals in writing to the client, note the date and the channel used, and keep the lender’s acknowledgement.

The file review to run this week

None of this calls for a compliance overhaul. It calls for a sample. Pull ten settled files from the last two years — weighted toward refinances, debt consolidations and anything where the client ended up on a higher rate or a longer term — and read them as a stranger would.

• Does the recorded reason actually reason? “Client wanted this lender” is a preference, not an explanation. The note should show what was considered and why the recommendation followed.
• Are the alternatives visible? If a cheaper or structurally different option was available and not recommended, the file should say why — in terms a reader who was not there can follow.
• Is every cost disclosed and dated? Fees, commissions, referral arrangements and any add-on product. Check what the client actually received, not what the template says is sent.
• Can you reconstruct the credit enquiries? Given the rise in enquiry complaints, you should be able to show why each lender was approached.
• Is the hardship trail written down? Any conversation about struggling repayments, confirmed in writing, with dates.
• Would it survive a gap of three years? Memory is not evidence. If a point rests on what you recall, it is not in the file.
• Do you know your IDR route? Who in your business receives a complaint, what the acknowledgement looks like, and which clock starts.

Where that sample turns up a pattern rather than a one-off, the next call is to your licensee’s compliance team — not to start fixing historical records, but to agree how the current process should capture what the old one missed.

What to watch next

Three things over the next two quarters. First, whether AFCA’s next quarterly update shows the home loan line from paid representatives continuing to climb — one year does not make a trend, and 410 is still a small number against 7,014. Second, whether AFCA tightens its rules on paid representatives; it consulted in 2025 on requiring them to use specified lodgement channels, and the direction of travel has been toward more conduct expectations, not fewer. Third, your own IDR data: most firms with RG 271 obligations report it to ASIC, which means the regulator can see your complaint profile whether or not you are looking at it.

The strategic point

It is tempting to read a rise in complaints as an attack on the channel, and some of the commentary will go that way. That reading is not supported by this data — home loan complaints are overwhelmingly lodged against lenders, and nothing in the review establishes that brokers did anything wrong.

The sharper reading is commercial. An industry with a standing cost base, a practised understanding of AFCA, and a product line that just ran dry has found its next category. It will work from documents. For most brokers the exposure is not a bad recommendation sitting in the back book — it is a perfectly sound recommendation that was never properly written down. Leo Gagic, chief executive of the FBAA, made a related point in MPA’s coverage, noting that “as AFCA itself notes, many complaints stem from communication, service quality and process-related issues”.

That is the useful news in a record complaints year. The things that make a file defensible — clear reasons, visible alternatives, disclosed costs, dated conversations — are the same things that make a client feel properly advised. You are not building a legal shield. You are writing down the advice you already gave.

Sources and method. AFCA’s Annual Review 2025–26 was released in late October 2026. AFCA’s own website could not be retrieved directly for this article, so review figures are taken from trade reporting and cross-checked where possible: overall and banking/finance figures from The Adviser (26 October 2026) and Australian Broker (23 October 2026); paid-representative figures from Mortgage Professional Australia (27 October 2026), which reported them from the review and which is the only outlet consulted that published that breakdown. Statements about AFCA’s definition of a paid representative, its Engagement Charter expectations, Rule C.2.2(g), the IDR-first requirement, the treatment of representatives’ fees, AFCA’s complaint fee stages and the maximum IDR timeframes under RG 271 are taken from AFCA’s own published guidance pages. The credit licensing requirement for debt management services is from ASIC’s 2021 media release 21-094MR. The statement that RG 271’s standards are enforceable is from ASIC’s RG 271 page. No figure in this article has been reconstructed from memory.