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The corporate watchdog has put the banking industry on notice over its hardship support for customers after filing a lawsuit against National Australia Bank (ASX: NAB) over alleged failures to respond to 345 customers when they reached out for help.
In a Federal Court filing today, the Australian Securities and Investments Commission (ASIC) alleges that between 2018 and 2023 NAB and its subsidiary AFSH Nominees (AFSH) did not respond to these hardship applications within the 21-day timeframe required by law.
The move follows legal action brought by ASIC against Westpac in September last year for financial hardship misconduct. In that case, Westpac customers are even alleged to have endured debt collection activities by the bank while waiting for the bank to respond to their hardship notices.
“We allege NAB unlawfully failed to respond to their customers’ appeal for help when they needed them most,” says ASIC chair Joe Longo.
“These customers included people who were domestic violence victims, battling serious medical conditions, dealing with business closures or job loss. NAB’s failures likely compounded the already challenging situation for these people.
“Amidst rising cost-of-living pressures, we have seen an increased number of customers reach out to their lenders for relief, and we have seen first-hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship.”
The Australian Financial Complaints Authority reported an 18 per cent spike in the number of complaints to 5,715 that it received in FY24 regarding financial difficulty. The authority says many of these complaints related to “poor treatment or ineffective communication” during the hardship process.
ASIC says compliance with financial hardship obligations by the banking sector has been an “enforcement priority” over the past year.
“Earlier this year, we put the lending industry on notice on the release of our hardship report,” says Longo.
“We will not hesitate to take decisive action when banks and lenders fail to comply with their obligations.”
ASIC’s hardship report highlights failures by lenders to identify customers in financial stress, including the use of “cookie-cutter” approaches to dealing with hardship requests, as well as “onerous assessment and approval processes”.
ASIC says it is engaging with lenders to ensure that they act on the findings outlined in the report and prioritise improving their approach to supporting customers experiencing financial hardship.
Reviewed lenders have also been asked to prepare an action plan outlining how they will respond to the issues raised.
ASIC is seeking declarations, pecuniary penalties and adverse publicity orders against NAB and AFSH following the legal action filed today.
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