Key points
- In ASIC’s experience, when customers are not front and centre, poor outcomes often follow.
- Internal auditors can play an important role by identifying issues before they result in consumer harm – and potential ASIC enforcement action.
- For financial services firms, putting the customer front and centre is in many respects enshrined in law.
Good morning, everyone.
I would like to begin by acknowledging the traditional owners and custodians of the land on which we meet today, the Gadigal people of the Eora nation. I pay my respects to their elders past and present – and extend that respect to Aboriginal and Torres Strait Islander people here today.
It’s a pleasure to join you – and I want to thank the Institute of Internal Auditors Australia for including ASIC in this event.
I’ve been invited to speak to you about ‘putting the customer first’ and I’m delighted to do so. Because the financial wellbeing of Australians is core to what we do.
Today’s ASIC is determinedly focused on how we protect consumers and investors and pursue those involved in creating significant consumer harm.
You can see this in our enforcement posture, along with the regulatory problems we are looking to solve. It’s also reflected across our five strategic priorities – and in particular the first of these: ‘to improve consumer outcomes’. There’s a reason why it comes first.
Today I am going to speak about four areas of ASIC’s work, that demonstrate our commitment to improving consumer outcomes.
They are our work on:
- Financial hardship
- Credit and debt
- Better banking outcomes, and
- Dispute resolution.
Putting customers first
Before I begin, it’s worthwhile making the point that, for businesses, putting the customer first is not a discretionary ‘nice to do’. And, for financial services firms, it is in many respects enshrined in law.
The design and distribution obligations are perhaps the most powerful example of this. These effectively place enforceable obligations on issuers to keep the customer front and centre throughout each stage of a financial product’s lifecycle.
Right from the start – at the product design stage – issuers must consider customers’ objectives, needs and financial situations. They must then follow through by ensuring – on an ongoing basis – that those products are not being marketed or sold to customers for whom they are unsuitable.
So, core to these obligations is the idea that product design and distribution can’t be a ‘set and forget’ process. It requires ongoing vigilance. As you will know, all of this requires a long sequence of internal processes and practices.
In many ways, putting the customer first – and improving consumer outcomes – comes down to the behind-the-scenes work of professionals like you.
After all, your work is often centred around the ‘Three Lines’ model of controls assurance, risk management, and internal audit.[1]
You are in a position to see – from the inside – where there are governance, accountability, and risk and compliance shortcomings before they result in harm to consumers – and potential ASIC enforcement action.
Financial hardship
So, turning to the first area I wanted to highlight, financial hardship.
You may be familiar with ASIC’s major report on the hardship practices of lenders[2], which we published in May 2024.
For those of you who don’t work in credit, this work examined the compliance of lenders, that provide consumer credit, with their obligation to consider varying a credit contract where a borrower indicates that they are, or will be, unable to meet their obligations.
While our report outlined a range of concerns, I’d like to call out one of those concerns in particular – because it speaks to the harms that can occur when customers are not front and centre. That was the use of so-called ‘cookie-cutter’ approaches in dealing with hardship notices.
We know the causes of hardship are many and varied. So standardised approaches – that don’t take customers’ unique situations into account – will at best be inadequate and at worst in breach of lenders’ obligations under credit law.
To be clear, here again, putting the customer first is not an optional extra. It’s the law. Lenders have a legally binding obligation to respond quickly and appropriately to requests for hardship assistance.
To demonstrate the importance that ASIC places on this obligation, we have to date taken action against Westpac, National Australia Bank, home-loan manager Resimac and ANZ in relation to their responses to hardship notices.
In August, the Federal Court ordered NAB and its subsidiary, AFSH Nominees, to pay a penalty of $15.5 million for failing to respond to customers’ hardship notices within the time required by law[3].
In our action against Resimac, we allege that it imposed a ‘one-size-fits-all’ approach to hardship applications, requiring customers to provide extensive standard information without considering whether it was relevant or necessary to that customer’s individual circumstances[4].
And most recently ASIC and ANZ asked the Federal Court to impose a $40 million penalty against ANZ for hardship-related failures – as part of a record $240 million package of penalties for a range of misconduct across the bank[5] .
In this matter, ANZ failed to respond to hundreds of customer hardship notices, and in some cases, took more than two years to respond to customers.
Alongside this enforcement action, ASIC is closely monitoring lenders’ responses to our report[6] and it’s fair to say that many lenders are making it easier for customers to give a hardship notice – thanks in part to improved staff training and awareness. The assessment process is also becoming easier, with fewer customers dropping out and approval timeframes reduced.
Importantly, lenders are communicating more effectively with customers, especially in the critical period immediately before and after the end of their hardship arrangement.
We do however still have concerns about the overall quality of some lenders’ hardship responses, and the degree of progress that some have made in improving their practices.
As a result, ASIC’s focus on financial hardship continues.
Credit and debt
Turning now to other areas of credit and debt.
As Australia’s consumer credit regulator, ASIC’s role is to ensure that important protections, enshrined in law, are universally applied – and universally enjoyed.
But, based on our work, we have observed that isn’t the case – and that’s why ongoing work to examine compliance with consumer credit law continues to be a key part of our work to improve consumer outcomes.
The key protections provided by consumer credit laws require lenders to act fairly and responsibly – and not put customers at foreseeable risk of financial hardship. Importantly lenders must consider customers’ circumstances, needs and objectives in their decision-making.
Besides our work on financial hardship, we are taking a keen interest in the conduct of businesses involved in debt management, credit repair and debt collection.
It’s in those parts of the credit system that, by definition, we are likely to find some of the most vulnerable consumers. But – just as in every other part of the credit system – there are important consumer protections that apply.
Earlier this year, we commenced a surveillance of licensees engaged in debt management and credit repair. These include businesses that offer to correct consumers credit reports, ‘repair’ their credit scores or negotiate with creditors on their behalf.
We are reviewing instances where debt management firms may have failed their customers – including by not meeting the terms of their agreements, charging high fees for no or limited services, or not communicating adequately with them.
In the coming months, we intend to commence a separate surveillance of the debt collection sector.
I highlight this work because the laws governing debt collection conduct apply not only to debt collectors; they also apply to creditors.
Lenders should take care to ensure they and any third parties they engage in this process uphold the consumer protections these laws provide.
ASIC has been actively engaging with consumer advocates to better understand current issues and potential consumer harms in this area. Our surveillance will include credit providers, as well as debt buyers and contingent collectors – and we have begun approaching entities we plan to include in our review.
Misconduct in debt management and collection is an ASIC enforcement priority. We have taken a number of actions against entities where we allege consumer harm – and will take further action, if we find examples of serious misconduct in our review.
Better banking outcomes
Turning now to outcomes for disadvantaged consumers in the banking sector.
Last year we released our first ‘better banking’ review.[7] This examined the harm experienced by people on low incomes who find themselves trapped in transaction accounts with high fees.
Our initial work focused in particular on regional and remote locations with significant First Nations populations. The data we gathered from banks as part of this work showed that banks had kept at least two million low-income Australians in high-fee accounts.
As a result, the four banks included in the initial review, paid more than $33 million in refunds to more than 150,000 customers.
But clearly there was much more to be done, and so we followed up this year with a larger, broader review of the banking sector, including 21 banks, with a broader focus on low-income Australians nationwide[8].
What we found is that bank-fee harm is a widespread problem.
The participating banks in this latest review have committed to refunding a further $60 million to more than 770,000 customers.
This amounts to $93 million in refunds promised to customers since ASIC began this work.
Ninety-three million dollars is a good outcome – but in many ways it’s beside the point. It should not have come to this.
This was a known problem.
It had been scrutinised and criticised during the Royal Commission into Financial Services.
The banks had included provisions on low-fee accounts in their own code since 2013.
In our view, banks were in a position to identify customers on low incomes who were eligible for low-fee accounts – and the data that banks provided to us as part of our review validated that view.
If banks had reviewed and improved their processes and focused on customers’ needs and circumstances – as is required under the design and distribution obligations – it would not have come to this.
Again, as with financial hardship, inflexible and insensitive practices – such as requiring people living in remote locations to attend a bank branch in order to provide proof of eligibility for a low-fee account – had created barriers to appropriate products.
We have been clear about what banks can to do put things right for customers who have experienced unfair fees, and to prevent other people on low incomes from experiencing harm in the future.
We are pleased to see the banks taking action. But we expect continued improvement.
And we will consider enforcement action if we believe they are not fulfilling their obligations to customers.
Dispute resolution
Finally, to dispute resolution – which plays a very important role in improving consumer outcomes.
It not only provides an avenue for individual consumers to have their complaints heard and addressed. It also helps us to identify patterns that might point to systemic issues that require ASIC’s attention, before they cause more widespread harm.
As you know, financial firms are required to report internal dispute resolution – or IDR – data to ASIC. We first published aggregated IDR data last year – and are now moving to publish firm-level data as part of our commitment to improving consumer outcomes.
This move is informed by observing the work of the Australian Financial Complaints Authority, which has been publishing identifiable data for some years. This data has helped ASIC to identify and act on a range of emerging issues across the financial sector, such as:
- The spike in general insurance claims-handling complaints after the 2022 floods
- The increase in scam complaints in recent years, and
- Complaints about delays in super death benefit claims that instigated our work in this area.
It’s also our view that increased transparency and comparability will enable more informed choices by consumers, and drive businesses to improve their practices and performance.
High-quality IDR practices should not be merely seen as a compliance requirement. Building a culture that values complaints, and sees them as a key opportunity to improve consumer outcomes, should be an objective of any financial firm.
Conclusion
In closing, as you can see, there’s a common thread that runs through the areas I have spoken about today: when customers are not front and centre, poor outcomes and harms often follow.
ASIC acknowledges that most businesses want to do the right thing by their customers. We understand most businesses don’t set out to intentionally cause consumer harm.
But we also know that whatever the intent, when an issue comes to ASIC’s attention it was usually known internally a lot earlier.
During the course of our investigations, we frequently find signs of unheeded warnings. These red flags come in various forms and from various sources. It can be a customer complaint, a concern raised by an employee, or information in a report to management or the board. Each is a missed opportunity.
I hope that these reflections resonate with many of you in your roles as internal auditors, because a key part of what you do is identifying those issues before we do.
Putting the customer first doesn’t happen by accident. It relies on good processes and practices, good data and most of all a culture that values the truth, no matter how difficult it may be to hear.
As a regulator, we value the work that you do to ensure not only that processes and practices are being adhered to – but, more importantly, that they are achieving the objective of improving consumer outcomes.
[1] https://www.iia.org.au/about/the-profession
[2] REP 783 Hardship, hard to get help: Lenders fall short in financial hardship support | ASIC
[3] 25-165MR NAB and AFSH penalised $15.5 million for failing customers facing financial hardship | ASIC
[4] 25-081MR ASIC sues home loan manager Resimac alleging failures to customers facing financial hardship | ASIC
[5] 25-201MR ANZ admits widespread misconduct and agrees to pay $240 million in penalties | ASIC
[6] 25-216MR ASIC urges ongoing customer focus following welcome improvements in hardship support | ASIC
[7] REP 785 Better banking for Indigenous consumers | ASIC
[8] REP 811 Better and beyond: Expanding better banking outcomes to more low-income Australians | ASIC
