Complaining about hardship, defaults and debt collection: internal disputes and AFCA

If a lender refuses a reasonable hardship request, lists a default you dispute, or a collector mistreats you, complain first to the business through its internal dispute resolution (IDR) process, then — if you are unhappy with the answer or it takes too long — to the Australian Financial Complaints Authority (AFCA), which is free for consumers (1800 931 678, afca.org.au). Under ASIC's Regulatory Guide 271, businesses must generally respond to complaints within 30 calendar days, but credit complaints about hardship requests, default notices or requests to postpone enforcement must be answered within 21 calendar days. Lodging an AFCA complaint generally means the business should not pursue debt recovery while AFCA deals with it, which can buy time to reach a fair outcome.

This guide is part of debt help mistakes to avoid. It is general information only.

What AFCA can deal with in a debt situation

Problem	Example	Possible outcomes
Hardship refused	Lender says no without reasons or ignores a s 72 notice	Hardship arrangement, fee or interest waiver, pause on recovery
Irresponsible lending	Loan or limit increase you could never afford	Reduction or waiver of interest and fees, sometimes part of the debt
Incorrect default listing	Default listed without proper notice, or the amount is wrong	Correction or removal of the listing
Debt collection conduct	Harassment by a member collector or debt buyer	Apology, compensation, changes to collection
Joint debts and guarantees	Guarantee not properly explained; family violence or coercion	Release from part or all of the liability in some cases
Debt management firm	Misleading advice by a licensed firm	Refund of fees, compensation

AFCA can only deal with members: credit licensees, banks, insurers, many collectors and debt buyers, and licensed debt management firms. Complaints about bankruptcy trustees or debt agreement administrators acting in that role usually go to AFSA instead.

Step 1: internal dispute resolution

Contact the business and say clearly that you are making a complaint.
Describe the problem, what you want, and attach evidence (hardship notice, budget, letters).
Ask for a reference number.
Note the deadline: 21 days for hardship, default-notice and postponement complaints about credit; 30 days for most others.

Sample wording (adapt): "I am making a complaint. On [date] I gave you a hardship notice under section 72 of the National Credit Code. You have not responded / you refused without adequate reasons. I ask you to agree to [proposal] and to pause collection while my complaint is considered. Please respond within the timeframe in ASIC Regulatory Guide 271."

Step 2: AFCA

If you are unhappy with the IDR response, or the deadline passes without one, lodge with AFCA online or by phone.

Stage	What happens
Registration	AFCA checks the business is a member and refers the complaint back to it if it has not had a chance to respond
Negotiation	AFCA encourages both sides to settle; many complaints are resolved here
Case management	AFCA may give a preliminary view
Decision	An ombudsman or panel decides; if you accept, it binds the business

AFCA's time limits for lodging depend on the type of complaint; for many complaints it is within 2 years of receiving the business's IDR response. For credit hardship and default issues, lodge as soon as possible. Check AFCA's rules for your case.

Worked example: a hardship refusal

Illustrative example: Ben, a Darwin apprentice, gives his car financier a written hardship notice on 2 September asking for 3 months of reduced payments after an injury. On 27 September he receives a default notice instead, with no response to his notice. On 28 September he complains in writing. The financier must answer a hardship and default-notice complaint within 21 days, by about 19 October. It does not reply. On 20 October Ben lodges with AFCA, which contacts the financier. The financier agrees to the reduced payments and withdraws the default notice. Ben's credit report shows financial hardship information for those months instead of missed payments.

Other complaint paths

Issue	Where to go
Debt agreement administrator or trustee conduct	AFSA
Unlicensed credit or debt management activity	ASIC
Debt collection by a business that is not an AFCA member	ACCC, or your state fair trading agency
Credit reporting errors not fixed by the credit reporting body	AFCA if the body is a member, or the OAIC
Energy and water hardship	Your state energy and water ombudsman
Telco hardship	Telecommunications Industry Ombudsman
Centrelink debt	Services Australia review, then the Administrative Review Tribunal

Tips for a strong complaint

Keep it factual and short; attach a timeline.
Ask for a specific outcome.
Keep copies of everything, including call logs.
Ask a financial counsellor or community legal centre to help or lodge for you.
Do not stop paying secured debts while a complaint is open unless advised.

Frequently asked questions

Does it cost anything to complain to AFCA?

No. AFCA is free for consumers. Businesses pay for AFCA's service.

Will lodging with AFCA stop a default being listed?

AFCA members are generally expected not to take recovery action, including some credit reporting steps, while a complaint is with AFCA. Tell AFCA quickly if the business continues.

Can AFCA reduce my debt?

In some cases, such as irresponsible lending or serious misconduct, AFCA can decide that interest, fees or part of the debt should be waived. In many hardship cases the outcome is a fair repayment arrangement rather than a reduction.

Sources

Australian Financial Complaints Authority — lodging a complaint, rules, 1800 931 678
ASIC — Regulatory Guide 271 Internal dispute resolution
Australian Financial Security Authority — complaints about trustees and administrators
Office of the Australian Information Commissioner — credit reporting complaints
Telecommunications Industry Ombudsman — telco hardship complaints