ASIC warns lenders about financial hardship measures

Letters sent to 30 lenders reminding them of obligations

ASIC warns lenders about financial hardship measures


By Ryan Johnson

ASIC has penned an open letter to lenders calling on them to support customers experiencing financial hardship.

The letter was sent to 30 banks, credit unions, buy now pay later businesses, and non-bank lenders, including major banks ANZ, CBA, NAB, and Westpac, as a warning of their obligations to borrowers.

“The economic environment has shifted over the last year, placing significant financial pressure on everyday Australians,” said ASIC commissioner Danielle Press (pictured above).

“ASIC reminds lenders that they must have the right arrangements in place to respond to requests for assistance from customers experiencing financial hardship and to work constructively with them to find a sustainable solution.”

The letter said the regulator “is aware of increasing evidence” suggesting that some consumer cohorts are experiencing financial distress and hardship due to increasing cost of living pressures.

For example, there has been a 28% increase in calls to the National Debt Hotline in 2023 compared to this time last year, and ASIC said surveys indicate that a growing number of consumers are reporting very high levels of financial stress.

This coincided with a Roy Morgan study that show 1.5 million Australians are now at risk of mortgage stress.

Delinquencies and hardship application volumes are also starting to increase, although from relatively low levels.

The letter said when viewed in this context, it is critically important that lenders have appropriate arrangements to respond to and support consumers experiencing financial hardship.

In the letter, ASIC sets out expectations of lenders to meet their obligations.

These included proactively communicating how and when customers can seek assistance, genuinely considering customer circumstances to develop sustainable solutions where possible and communicating regularly with customers throughout and at the end of the assistance period.

“ASIC expects all lenders to seriously consider the expectations outlined in our letter, and to take the necessary action to ensure they fulfil their obligations in supporting their customers,” added Press.

In an interview with ABC journalist Peter Ryan, Press indicated the letter was a “shot across the bow” for lenders.

“This is really a warning to banks that they need to ensure that they are acting in the right way. What we have seen is some inconsistency within the banks and I think that is what is concerning us around some of these hardship arrangements…” Press said.

 “It needs to be consistent as to who you talk to at a bank and it shouldn’t matter whether you ring a branch or the head office or the branch manager, you should get the same response.”

Looking ahead, ASIC said financial hardship will be an area of increased focus over the next 12 months including data collection from 30 large lenders about hardship applications.

Additionally, ASIC is undertaking a review of 10 large home lenders to understand their approach to financial hardship. These home lenders were amongst the lenders ASIC has written to. ASIC expects to release findings from this review in early to mid-2024.

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