22 May 2024

Home lenders make life difficult for struggling customers who ask for help

| Ian Bushnell
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aerial view of new houses

Many home lenders are not doing the right thing by their customers when they need help. Photo: ACT Government.

Home lenders say to call them if you can’t make a mortgage payment, but a new report shows many are turning a deaf ear to those cries for help.

The corporate watchdog’s review of 10 big home lenders found they had made accessing financial assistance so difficult that more than one in three (35%) Australians dropped out of the application process at least once.

The ASIC report also found that 40 per cent of customers who received hardship assistance through reduction or deferral of payments fell into arrears right after the assistance period ended.

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Hardship, hard to get help: Lenders fall short in financial hardship support said lenders made it difficult to ask for hardship assistance, didn’t communicate well and vulnerable customers were often not well supported.

This was illustrated by a number of case studies.

It took six hardship notices over six months, many phone calls, and miscommunications before Sumit was finally referred to the hardship team and received a three-month hardship arrangement.

Both Amy and Mirrah were in family violence situations and needed to leave the family home,

Amy had to repeat her story each time she called, her complicated online application was not dealt with and it took her five weeks before she received a hardship arrangement.

Mirrah wanted further assistance until she underwent court proceedings to get her property sold to pay off the mortgage, but she was told to call back after the hearing, meaning she missed a payment. A failure to stop a direct debit also cleaned out her living expenses. She, too, had to repeat herself continually.

One lender failed to meet a customer’s requests for how the lender should communicate with them in a family violence situation.

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ASIC Chair Joseph Longo warned ASIC would not hesitate to take enforcement action to protect consumers. Photo: ASIC.

ASIC Chair Joe Longo said too many Australians in financial hardship were finding it hard to get help from their lenders and it was time for meaningful improvement.

“In the worst cases, lenders ignored hardship notices, effectively abandoning customers who needed their support,” he said.

“For people who reach out to their lender to signal they need support, this can be devastating.”

ASIC wrote a letter to lender CEOs last year stating that they needed to meet their obligations to customers experiencing financial hardship.

“What we have seen is simply not good enough – struggling customers deserve the right support in their time of need,” Mr Longo said.

He warned that ASIC would not hesitate to take enforcement action to protect consumers.

The report found lenders failed to identify customers in financial stress, used ‘cookie-cutter’ approaches to dealing with hardship requests, as well as onerous assessment and approval processes.

ASIC is also concerned lenders have inadequate arrangements for supporting vulnerable Australians, including those experiencing family violence.

ASIC Commissioner Alan Kirkland, whose remit includes support for vulnerable consumers, said many lenders were not taking their customers’ unique situations into account and were instead providing a standardised ‘one-size-fits all approach’.

“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,” Mr Kirkland said.

“We encourage people worried about making repayments to contact their lender and, if not happy with the response, to lodge a complaint with them.”

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Seven of the 10 large home lenders reviewed in 2023 had improvement programs in place to manage financial hardship, but the report shows that much more work is required.

ASIC said it expected all lenders to act on the findings and prioritise improving their approach to supporting customers experiencing financial hardship.

Reviewed lenders would be asked to prepare an action plan outlining how they would respond to the issues raised.

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Incidental Tourist11:25 am 28 May 24

There were always few borrowers who cannot pay mortgage by different reasons. For a long time those who defaulted on their mortgage had to sell. Even when they sold often they pocketed some profit and walked away with some cash. Of course forced selling is unfortunate but less regulated banks allowed more people to own home. Today we have financial regulations on top of bank regulations protecting rights of few marginal borrowers at the expense of a larger home ownership. Is more regulation doing more bad than good to community? Many more people do not even have a chance to own their home now than those few who are still forced to sell. Perhaps we have to accept forced home selling as an unfortunate but unavoidable reality. It is like car accidents – as long as we choose to drive there is an intrinsic risk to it. So is mortgage. If people make a decision to borrow then they must accept risk of defaulting on it.

Does ASIC name names? We should know which banks are the worst offenders. The secrecy simply protects them.

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