OCEANIA: Banks and lenders in Australia have been accused of not “doing enough to support customers experiencing financial hardship” in a new ASIC report. Australia’s integrated corporate, markets, financial services and consumer credit regulator (ASIC) found that “lenders ignored hardship notices, effectively abandoning customers who needed their support.”
Under Australian law, if you are struggling to pay your mortgage, you have the right to ask your lender to enter a financial hardship arrangement. The lender is required to respond to your request and be reasonable about making a repayment arrangement.
In late 2023 ASIC reviewed 10 large home lenders to understand how they support customers experiencing financial hardship. The regulator also collected data from 30 lenders (20 of these being home lenders) about the hardship notices they received between July 2022 and December 2023.
In the last quarter of 2023, there was a 54% increase in the number of hardship notices related to home loans compared with the same period in 2022. The top reasons for notices were overcommitment, reduced income, medical reasons, unemployment, and separation, ASIC said.
The report found that lenders often adopted standardized approaches without taking into account that each customer’s situation is unique and that solutions need to be tailored accordingly. ASIC also observed that lenders didn’t make it easy for customers to give a hardship notice; assessment processes were often difficult for customers; lenders didn’t communicate effectively with customers; vulnerable customers often weren’t well supported.
“Of concern, 35% of customers dropped out of the process on at least one occasion after giving a hardship notice – this was often because of unnecessary barriers hindering customers from obtaining assistance” the report “Hardship, hard to get help: Lenders fall short in financial hardship support” said.
In general, banks performed better than non-banks, and larger banks better than smaller banks. However, ASIC identified gaps in the support provided by all lenders.
“Too many Australians in financial hardship are finding it hard to get help from their lenders and it’s time for meaningful improvement,” ASIC Chair Joe Longo said. The regulator has asked lenders to prepare an action plan outlining how they intend to respond to the issues. In addition, ASIC said it will commence a campaign to increase customers’ awareness of what financial hardship is and how to access assistance.
