Some home loan lenders have made accessing financial assistance so difficult that more than one in three (35%) Australians dropped out of the application process at least once, according to a new ob体育 report.
The report, Hardship, hard to get help: Lenders fall short in financial hardship support (REP 783) outlines findings from ob体育鈥檚 review of 10 large home lenders. The review found they should be doing more to support Australians who were struggling to meet their repayments.
The report also found 40% of customers who received hardship assistance through reduction or deferral of payments, fell into arrears right after the assistance period ended.
As increasing numbers of Australians struggle with cost of living pressures, ob体育 Chair Joe Longo said, 鈥淚n the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support鈥� and were not meeting community expectations.
鈥淔or 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鈥檚 time for meaningful improvement,鈥� Chair Longo said.
鈥渙b体育 spelt out in a letter to the CEOs of lenders last year that they need to meet their obligations to customers experiencing financial hardship.
鈥淭his report highlights lenders must improve the way they deal with customers experiencing hardship. What we have seen is simply not good enough 鈥� struggling customers deserve the right support in their time of need.
鈥渙b体育 has made this a priority focus area, and where appropriate, we will not hesitate to take enforcement action to protect consumers,鈥� the Chair said.
The report highlights failures of lenders to identify customers in financial stress, use of 鈥榗ookie-cutter鈥� approaches to dealing with hardship requests, as well as onerous assessment and approval processes.
ob体育 is also concerned lenders have inadequate arrangements for supporting vulnerable Australians including those experiencing family violence.
ob体育 Commissioner Alan Kirkland, whose remit includes support for vulnerable consumers, said lenders were not 鈥減utting customers front and centre鈥� in their approach to financial hardship.
鈥淢any lenders aren鈥檛 taking their customers鈥� unique situations into account, instead providing a standardised 鈥榦ne-size-fits all approach鈥�, which is not meeting customers鈥� needs,鈥� Commissioner Kirkland said.
鈥淭he 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.
鈥淲e encourage people worried about making repayments to contact their lender and if not happy with the response, to lodge a complaint with them.鈥�
From the 10 large home lenders reviewed in 2023, seven had improvement programs in place to manage financial hardship however, as ob体育鈥檚 report highlights, much more work is required. Lenders acknowledged that further work is required to support their customers in hardship.
ob体育 expects all lenders to act on the findings outlined in this report and prioritise improving their approach to supporting customers experiencing financial hardship. Reviewed lenders will be asked to prepare an action plan outlining how they will respond to the issues raised.
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鈥檚 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.
In August 2023, ob体育 issued an open letter to the CEOs of all lenders advising of focus on financial hardship and expectations of lenders. ob体育 then undertook a data collection involving 30 large lenders, and a review of 10 large home lenders to understand their approach to financial hardship.
ob体育 reviewed the lenders鈥� policies and procedures, looked at case studies and conducted hypothetical customer exercises to understand differences in lenders鈥� approach to hardship. The findings from this review are summarised in Report 783 Hardship, hard to get help: Lenders fall short in financial hardship support (REP 783).
The lenders in ob体育鈥檚 review are:
- Bank of Queensland Limited
- Bendigo & Adelaide Bank Limited
- Commonwealth Bank of Australia
- ING Bank (Australia) Limited
- Macquarie Bank Limited (and Macquarie Securitisation Limited)
- National Australia Bank Limited
- Pepper Money Limited
- Resimac Limited (and related entities)
- Secure Funding Pty Limited (trading as Liberty Financial)
- Westpac Banking Corporation.
ob体育 advises consumers experiencing financial hardship to talk to their lender as soon as possible and request assistance. If they are unhappy with the service received or their lender鈥檚 decision, they should 聽to their lender in the first instance. If they are still not happy with the lender鈥檚 response, they can contact the .
If they have multiple debts or need help applying for financial hardship, they should call the National Debt Helpline on 1800 007 007 to talk to a for free. Further information is available on Moneysmart at .
Downloads
- Hardship, hard to get help: Lenders fall short in financial hardship support (REP 783)
- Hardship, hard to get help: Findings and actions to support customers in financial hardship (REP 782)
- (622 KB PDF)
Hardship infographic - text version
Hardship, hard to get help
Lenders fall short in financial hardship support
Background
More consumers are experiencing difficulty in making home loans repayments
54% increase in the number of hardship notices from customers in the last quarter of 2023 compared with the same period in 2022
Lenders have an important role in supporting customers who experience financial hardship
The financial hardship process is a critical protection for customers. It gives them an opportunity to work constructively with their lender
ob体育 reviewed 10 large lenders to understand how they support customers experiencing financial hardship.
Key findings
Lenders aren鈥檛 doing enough to support home loan customers experiencing financial hardship.
- Lenders didn鈥檛 make it easy for customers to give a hardship notice
- Assessment processes were often difficult for customers
- Lenders didn鈥檛 communicate effectively with customers
- Vulnerable customers often weren鈥檛 supported
- 35% of customers dropped out of the assessment process at least once
- 40% of customers who received assistance fell into arrears right after the assistance period ended
Overall, there was inadequate focus on customers.
Lenders are making improvements
Seven of the ten lenders reviewed had programs underway to improve their approach to financial hardship.
Actions for lenders
ob体育 expects lenders to:
- review the full report
- self-assess against the findings from the review
Actions for lenders
- improve their approach to supporting customers experiencing financial hardship.
ob体育鈥檚 response
ob体育 will:
- provide individual feedback to all lenders in the review
- ask lenders to prepare an action plan of how they will
- respond to the issues raised
- prioritise investigation of non-compliance with financial
- hardship obligations and take enforcement action if warranted
- continue collecting hardship-related data from lenders for the next 12 months
- start a consumer awareness campaign on financial hardship.