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The ombudsman service’s CEO has called for lenders to improve their customer support approaches.
The Australian Financial Complaints Authority (AFCA) has endorsed a new report released by the Australian Securities and Investment Commission (ASIC) that has urged lenders to enhance their support for financially struggling customers.
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The report – Hardship, hard to get help: Lenders fall short in financial hardship support – has outlined the various shortfalls from 10 reviewed lenders with data collected from 1 July 2022 to 31 December 2023.
ASIC said that assessment processes were often frustrating and stressful for customers, with over one-third (35 per cent) of customers abandoning the assessment process at least once, while 40 per cent of cases saw customers call into arrears immediately following a period of reduced or deferred payments.
ASIC said the quality of some hardship information “was poor” and some lenders failed to communicate with the customer in a timely manner when a payment was missed.
“This sometimes meant a customer wasn’t made aware of the availability of hardship assistance before this affected their credit report,” ASIC’s report said.
Additionally, lenders were found failing to use all available channels to inform customers that hardship assistance was available; this manifested in the exclusion of hardship information on statements or in notifications about interest rate increases.
Chief ombudsman and CEO of AFCA, David Locke, said the findings from ASIC’s report fell in line with complaints received about financial difficulty and requests for hardship assistance.
“We are concerned about rising complaints involving financial difficulty and barriers in receiving hardship assistance,” 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.”
Earlier this year, AFCA released data that said that it had received 25 per cent more complaints involving financially difficulty in 2023 than the year prior.
A third of the 5,396 complaints involving financial difficulty were related to home loans.
ASIC’s report found a 54 per cent increase in the number of hardship notices received during the December quarter of 2023 when compared to the same quarter in 2022. Between October and December 2023, a total of 52,826 hardship notices were received.
Over 80 per cent of these hardship notices were related to owner-occupier home loans (202,506 notices) during the review period, ASIC said.
AFCA said complaints where lenders have provided standardised or “cookie cutter” responses did not cater to the unique circumstances of customers, much like how ASIC said.
Furthermore, the ombudsman service has observed lenders issuing default notices to consumers who had repayment arrangements in place, as well as debt recovery action being undertaken while a complaint was still before AFCA.
The report said that the top reason for customer financial hardship was overcommitment to a loan. This was followed by reduced income, medical, unemployment, and separation reasons.
[RELATED: AFCA concerned about unresponsive lenders]
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