Lenders need to do better on financial hardship assistance: ASIC

The Australian Securities and Investment Commission (ASIC) has lambasted lenders for making financial assistance support hard to access.

In its Hardship, hard to get help: Lenders fall short in financial hardship support report, ASIC outlined findings from a review of 10 large home lenders after concerns were raised relating to delays in providing assistance.

ASIC said the review found that lenders should be doing more to support Australians who are struggling to meet their repayments.

The report said that some home loan lenders have made accessing financial assistance so difficult that 35 per cent of lender customers dropped out of the application process at least once.

Further, the report said that 40 per cent of customers who obtained hardship assistance through reduction or deferral of payments fell into arrears right after the assistance period ended.

The data said that the number of hardship notices increased from 45,925 during the July to September quarter of 2023 to 52,826 in the October to December quarter of 2023. The December quarter also marked an increase of 54 per cent in hardship notices when compared to the same period in 2022.

The top reasons for notices were overcommitment, reduced income, medical reasons, unemployment, and separation, ASIC said.

ASIC chair Joe Longo said: “In the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support.

“For people who reach out to their lender to signal they need support, this can be devastating. Too many Australians in financial hardship are finding it hard to get help from their lenders and it’s time for meaningful improvement.”

Longo further said that the regulator has “spelt out in a letter to the CEOs of lenders” that they must meet their obligations to customers experiencing financial hardship.

“This report highlights lenders must improve the way they deal with customers experiencing hardship. What we have seen is simply not good enough – struggling customers deserve the right support in their time of need,” Longo said.

“ASIC has made this a priority focus area, and where appropriate, we will not hesitate to take enforcement action to protect consumers.”

Additionally, ASIC’s report has placed a spotlight on failures of lenders to identify customers under financial stress and opting to use “cookie-cutter” approaches when dealing with hardship requests.

ASIC commissioner Alan Kirkland said that lenders were not “putting customers front and centre” in their approach to financial hardship.

“The lack of support and in some cases, failure to respond when customers flagged they were struggling, is unacceptable and greatly adds to the distress of customers already struggling with heightened levels of stress and anxiety,” Kirkland said.

“We encourage people worried about making repayments to contact their lender and if not happy with the response, to lodge a complaint with them.”

On the back of this research, ASIC has said that it expects all lenders to act on the findings and work towards prioritising their approach in supporting customers under financial hardship and that the reviewed lenders will be asked to prepare action plans outlining how they will respond to the issues at hand.

[RELATED: Lenders way of construction insolvencies: Brokerage]