Major Australian lenders are not doing enough to support mortgage customers in financial hardship, and in some cases they are ignoring requests for assistance altogether, the corporate regulator has found.
In a major report to be released on Monday, the Australian Securities and Investments Commission (Asic) found that more than one-in-three customers dropped out of a hardship application, a process designed to vary repayments while a borrower gets back on their feet, because of unnecessary barriers.
Asic documented the case of one mortgage customer who was experiencing family violence and wanted to defer loan repayments so that she could move into an apartment with her daughter.
The woman, in distress, was put on hold by her lender for one hour, before the call dropped out. She tried a second time but had a similar experience, and an online application for hardship failed to lodge due to issues with the lender’s portal.
It took five weeks for her to receive a loan deferral.
In a different case, one long-term customer needed assistance with his home loan because he was in casual employment, but was unwell and had missed work.
Rather than being assisted via hardship arrangements, he was repeatedly transferred to the lender’s collections team. On one occasion, the customer was told to visit a branch, but when he got there, he was told he needed to call.
The Asic chair, Joe Longo, said some home loan customers were being abandoned.
“For people who reach out to their lender to signal they need support, this can be devastating,” Longo said.
“Too many Australians in financial hardship are finding it hard to get help from their lenders and it’s time for meaningful improvement.”
Asic reviewed the practices of 10 large home lenders, including all of the major banks, for its report after reminding them that they needed to meet their obligations to customers experiencing hardship.
The number of households in hardship has increased significantly due to the interest rate hiking cycle that started in mid-2022, coupled with fast-rising living costs.
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In the last quarter of 2023, the number of home loan hardship notices increased more than 50% compared with the same period a year earlier, according to the regulator.
There has also been a sharp spike in financial abuse, which can lead to severe hardship, including homelessness, according to frontline services grappling with a surge in cases.
Under the national credit code, lenders must consider varying a contract if a customer tells them they are unable to meet their repayment obligations.
The regulator said the “root cause” of many of the problems was that lenders focused more on financial risk and operational efficiency than customer experience and circumstance.
“Many lenders aren’t taking their customers’ unique situations into account, instead providing a standardised ‘one-size-fits-all approach’, which is not meeting customers’ needs,” the Asic commissioner, Alan Kirkland, said.
“The 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.”