AFCA updates compensation limits

by Mark Rosanes11 Jan 2021

The Australian Financial Complaints Authority (AFCA) has implemented changes to its compensation limits for financial loss complaints, effective 1 January 2021.

The adjusted monetary limits include the following:

  • The maximum value of a claim for compensation AFCA can consider
  • The maximum size of a credit facility AFCA can consider a complaint about
  • The maximum amount AFCA can award a consumer or small business for complaints about banking and finance, general insurance, life insurance and investments, and advice

Claims arising from a credit facility provided to a small business or primary producer by a borrower of a small business loan, the compensation limit has increased from $1m to $1.085m per claim, while those made by a borrower of a primary producer loan rose from $2m to $2.17m per claim.

The monetary limit for claims arising from credit facility provided to a small business or primary producer by a guarantor to set aside a guarantee supported by security over other security for a small business loan has also increased from $1m to $1.085m. For a primary producer, the amount went up from $2m to $2.17m.

The credit facilities must not exceed $5.425m for these types of claims.

For claims arising from a credit facility provided to someone other than a small business or primary producer by a borrower, the compensation limit has been raised from $500,000 to $542,000 per claim.

The limit for claims arising from a credit facility provided to someone other than a small business or primary producer by a guarantor to set aside a guarantee supported by security over other security has also increased from $500,000 to $542,000 per claim.

The amount claimed by the complainant must not exceed $1.065m for both these claims.

The changes are set out in AFCA’s rules, which require the financial complaints body to update its monetary limits on 1 January 2021 and every three years thereafter. In accordance with the rules, the previous monetary limits have been adjusted based on the male total average weekly earnings for the three-year period ending 30 September 2020.

Superannuation complaints are not affected by the updated limits.