Lenders have improved their financial hardship practices – but there is still quite a lot of work to be done.
This was one of ASIC’s key findings in its recently released Report 815 Hardship, not as hard to get help, done as a follow up to its 2024 review of hardship practices. ASIC’s report captures its ongoing concerns about the quality and consistency of hardship support provided to customers facing financial distress. While some lenders have corrected their policies, improved the training they provide staff, and reduced the burden in providing documents, ASIC continues to see a rigid approach applied which fails to consider individual customer needs and falls short of the standard.
A refresher on ASIC’s 2024 investigation
ASIC’s 2024 investigation into lender practices was an extensive review into how Australia’s large lenders support customers who are experiencing financial hardship. ASIC found that lenders were not making it easy for customers to give a hardship notice, that assessment processes were difficult for customers, that lenders were not communicating effectively with customers, and that vulnerable customers were not well supported.
We unpacked these findings and considered ASIC’s recommendations in depth for lenders to improve their hardship processes by bringing the focus back to customers in our previous article.
ASIC’s latest observations
ASIC’s new report 815, released 12 months after its initial review, includes a number of observations following a reassessment of lender practices.
- ASIC believes that lenders are now making it easier for customers to give hardship notices, finding that the increase in the number of hardship notices has been in part due to lenders getting better at identifying hardship situations.
- A number of lenders have increased the amount of hardship information available online, corrected their policies and training materials to remove references to hardship being short term or due to specific life events.
- The hardship assessment processes are becoming easier, and lenders are communicating more effectively with customers. Lenders are aiming to contact customers before their hardship arrangements expire, and at least two more lenders are proactively checking in to ask if their customers need an extension to repay an instalment.
- There is better efficiency and flexibility in how information is collected because lenders are no longer requiring customers to complete lengthy forms. The information requested by a lender is now more tailored to individual circumstances.
- Even though there have been some significant improvements since last year’s report, ASIC is still concerned about the quality of lenders’ responses to hardship and has identified that some lenders are still using the same blanket rule approach to assess the financial circumstances of their customers when they should be taking a tailored approach.
What does this mean for you? ASIC’s message is clear.
With cost-of-living pressures persisting, ASIC is urging lenders to adopt a proactive, customer-focused mindset, and to embed continuous improvement into their hardship practices. Since the release of their initial report, ASIC has taken enforcement action against Australia’s major institutions such as the NAB and ANZ for repeated failures in hardship practices.
ASIC’s release of this report is an opportunity for lenders to be reminded of their hardship obligations and to review their current practices in line with ASIC’s guidance and expectations. In particular, lenders should consider what strategies they are implementing to respond to the following recommendations from ASIC’s latest findings:
- Integrate hardship processes across all areas of the business.
- Simplify the process for customers to make hardship claims and for staff to identify hardship.
- Have policies, systems and processes to ensure that a range of different hardship claims can be made by customers through a variety of different communication channels.
- Offer flexible assistance arrangements tailored to the customer’s specific hardship situation.
- Improve communication and flexibility when handling hardship claims.
Additionally, lenders should take the opportunity to seek an independent review of their hardship practices and customer hardship interactions to identify areas for improvement.
For more information, please contact Jaime Lumsden or Nicholas Pavouris.
