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The corporate regulator has commenced proceedings against a big four bank.
The Australian Securities and Investments Commission (ASIC) has launched proceedings against National Australia Bank (NAB), alleging the major lender “failed 345 of its customers at their most vulnerable”.
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In documents filed in the Federal Court on Monday, the corporate regulator alleged that NAB and its subsidiary AFSH Nominees Pty Ltd (AFSH) did not respond to 345 hardship inquiries within the 21-day time frame required by law. These allegations apply to a period between 2018 and 2023.
ASIC chair Joe Longo said: “These customers included people who were domestic violence victims, battling serious medical conditions, dealing with business closures or job loss. NAB’s failures likely compounded the already challenging situation for these people.
“Amid rising cost of living pressures, we have seen an increased number of customers reach out to their lenders for relief, and we have seen first-hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship.”
Under section 72 of the National Credit Code, if a consumer notifies a lender they are – or will be – unable to meet obligations, their lender must consider varying the credit contract and advise them of the decision within specific time frames. Typical variations included payment deferrals, reduced payment arrangements, and interest-only periods.
ASIC is reportedly seeking declarations, pecuniary penalties, and adverse publicity orders against NAB and AFSH.
“Compliance with financial hardship obligations is an enforcement priority for ASIC in 2024. Earlier this year, we put the lending industry on notice on the release of our hardship report,” Longo said.
“We will not hesitate to take decisive action when banks and lenders fail to comply with their obligations.”
In an ASX statement, Sharon Cook, NAB Group executive, customer & corporate services, responded to the proceedings and said the lender disclosed the issue to the corporate regulator in October 2023.
“We’re sorry that this happened when a number of our customers were in difficult situations and needed us to be there for them,” Cook said.
“We are focused on ensuring these customers receive the support they need.
“Following ASIC’s report into hardship practices across the industry, we have also been working on a new approach to supporting customers in financial difficulty. This includes consulting with consumer advocates.”
Focus on lenders
NAB isn’t the first major lender to fall under the regulator’s spotlight for issues related to financial hardship.
Last year, ASIC announced it had commenced civil proceedings against Westpac for allegedly failing to process 229 hardship applications within the required time frame.
At the time, ASIC deputy chair Sarah Court said: “Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances.
“ASIC has taken this action to highlight the importance of lenders responding to hardship notices within the required time frame to reduce harm to their customers. Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances.”
Hardship on the rise
These allegations come after the Australian Financial Complaints Authority (AFCA) released its annual review for the financial year ending June 2024, where the body said the rise in complaints related to financial hardship was a “significant issue of concern”.
“Complaints in this area were up 18 per cent over the past year, with a substantial portion relating to home loans,” AFCA’s report said.
“Many complaints were about failures by lenders to properly respond to, or adequately address, hardship requests. This was more pronounced among smaller lenders and buy now, pay later (BNPL) providers, though there were also issues among larger lenders where, for instance, automated processes can fail to account for individual circumstances.
“We also observed troubling practices such as issuing default notices to consumers who had reached new repayment arrangements.
“We welcome the steps some lenders have taken, such as investing in specialist hardship teams and improving processes, but the increased number of complaints suggests further work is needed.”
[Related: AFCA complaints hit new record in FY24]
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