National Australia Bank (NAB) failed 345 of its customers at their most vulnerable when they applied for hardship support from the bank, according to documents filed by ASIC in the Federal Court today.
ASIC alleges that between 2018 and 2023, NAB and its subsidiary AFSH Nominees Pty Ltd (AFSH) did not respond to 345 hardship applications within the 21-day timeframe required by law.
ASIC Chair Joe Longo said, ‘We allege NAB unlawfully failed to respond to their customers’ appeal for help when they needed them most.
'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.
‘Compliance with financial hardship obligations is an enforcement priority for ASIC in 2024. Earlier this year, we put the lending industry on notice on the release of our hardship report.
‘We will not hesitate to take decisive action when banks and lenders fail to comply with their obligations.’
ASIC is seeking declarations, pecuniary penalties and adverse publicity orders against NAB and AFSH.
Today’s announcement follows ASIC’s action against Westpac in September 2023 (23-242MR) for financial hardship misconduct.
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Background
Under section 72 of the National Credit Code, if a consumer notifies their lender that they are or will be unable to meet their credit obligations, lenders must consider varying the customer’s credit contract and advise them of the decision within specified timeframes.
Variations to the credit contract can include payment deferrals, reduced payment arrangements, interest-only periods, term extensions, capitalisation of arrears or interest-rate reductions.
Improving consumer outcomes is a key priority and in August 2023, ASIC issued an open letter to the CEOs of all lenders (23-235MR) advising of focus on financial hardship and expectations of lenders. ASIC then undertook a data collection involving 30 large lenders, and a review of 10 large home lenders to understand their approach to financial hardship.
ASIC reviewed the lenders’ policies and procedures, looked at case studies and conducted hypothetical customer exercises to understand differences in lenders’ approach to hardship. On 20 May 2024, ASIC published a report outlining its findings, Report 783 Hardship, hard to get help: Lenders fall short in financial hardship support (REP 783).
The report highlights failures of lenders to identify customers in financial stress, use of ‘cookie-cutter’ approaches to dealing with hardship requests, as well as onerous assessment and approval processes.
ASIC is engaging with lenders to ensure 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’s Moneysmart website has information for consumers on what to do if you are experiencing financial hardship. If you're unhappy with either the service received, or with your lender’s decision, you can make a complaint. If you have multiple debts, or would like help applying for financial hardship, contact the National Debt Helpline on 1800 007 007 to talk to a financial counsellor for free.
For the 2023/2024 financial year 5,715 complaints were filed with AFCA regarding financial difficulty. This was an increase of 18% on the prior year (AFCA Annual Review). AFCA observed that “Too many of these complaints relate to poor treatment or ineffective communication during the hardship process. Urgent improvements are needed.”
