INDUSTRY NEWSNationalReal Estate News

Lenders must do more for borrowers in hardship

Lenders are not doing enough to help borrowers who are in financial difficulty and want to access a bank’s hardship provisions.

According to a report from the Australian Securities & Investments Commission (ASIC), one in three (35 per cent) Australians dropped out of the financial assistance application process across 10 of the large home lenders at least once in the final quarter of 2023.

At the same time, mortgage hardship notices were 54 per cent higher than the same period a year earlier.

The report also found 40 per cent of customers who received hardship assistance through a reduction or deferral of payments, fell into arrears right after the assistance period ended. 

Lenders also didn’t communicate effectively, with most giving “cookie cutter” responses to borrowers while vulnerable customers often weren’t well supported.

ASIC Chair Joe Longo said that as increasing numbers of Australians struggle with cost of living pressures banks need to step up.

“In the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support,” Mr Longo said.

“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.”

He said ASIC spelt out in a letter to the CEOs of lenders last year that they need to meet their obligations to customers experiencing financial hardship.

“This report highlights lenders must improve the way they deal with customers experiencing hardship,” he said.

“What we have seen is simply not good enough – struggling customers deserve the right support in their time of need.

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

The Australian Financial Complaints Authority (AFCA) recently released data showing it had received 25 per cent more complaints involving financial difficulty in 2023 than a year earlier. 

This category includes disputes over requests for hardship assistance, with one-third of the 5396 complaints involving financial difficulty, related to home loans.

AFCA Chief Ombudsman and Chief Executive Officer David Locke said the ASIC report was in line with what they have been seeing with requests for hardship assistance.

“We are concerned about rising complaints involving financial difficulty and barriers in receiving hardship assistance,” Mr Locke said.

“As challenging economic conditions continue, we urge all lenders to engage with customers to ensure they receive genuine, individual consideration in response to their requests for help.”

He said the AFCA has seen complaints where lenders have provided a standardised, or “cookie cutter”, response that did not consider the customer’s individual circumstances.

Other issues included lenders issuing default notices to consumers who had repayment arrangements and debt recovery action being taken while a complaint was still before the AFCA, which is not permitted.

They also said there were concerns that complainants experiencing vulnerability are not always identified or given the care required.

Show More

Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.