More than one out of every three customers submitting a hardship request to their lender has dropped out of the process at least once, according to a just-released ASIC survey, due in many cases to customers feeling that they faced “unnecessary barriers” to assistance.
The corporate and financial services regulator, which captured data from 10 leading Australian lenders, found that several maintain complex, confusing and frustrating hardship application and escalation processes. These onerous hardship processes, in many cases, led to an increase in customers’ already heightened levels of stress, anxiety and distress, ASIC found.
The study found that many lenders have put up unreasonable and unexpected barriers to assistance, provided vulnerable customers with a “cookie-cutter” servicing, or simply ignored hardship requests entirely.
For instance, some lenders, according to ASIC, insisted on customers completing onerous application forms or had requested documents from customers of questionable relevance. Others demanded customers explain their circumstances multiple times and to different customer service representatives, despite the often distressing circumstances behind their hardship request, including family violence.
Indeed, it was found that certain lenders did not have a single person or team responsible for the end-to-end hardship customer journey.
“This sometimes resulted in poor hand-offs between different teams and contributed to poor customer experiences,” ASIC wrote in its report.
A generic ‘tick-a-box’ or ‘one-size-fits-all’ approach was also identified among a number of lenders, rather than a more personalised solution tailored to individual circumstances.
“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,” said ASIC commissioner Alan Kirkland, commenting on the results of the survey.
Systems limitations also meant that key data points on customer experience were not adequately captured by lenders, leading to a failure by some to “monitor their compliance with legislative timeframes (e.g. dates of information requests) or customer outcomes”.
Some lenders also failed to follow up with customers after requesting information, leading to circumstances where customers were declined their hardship request simply because they were unaware that the lender was awaiting further information.
In some of the most egregious cases identified, lenders ignored hardship notices entirely or failed to identify when a hardship notice was given to them by a customer.
“This meant that customers didn’t receive timely assistance, or didn’t receive assistance at all,” the regulator wrote in its report.
ASIC noted, however, that practices among the lenders varied widely.
Better lenders, for instance, emphasised a more personalised approach and timely speed to decision, accepting most applications over the phone and, in some cases, providing a decision on the spot.
However, it was found that most lenders did not have specific performance measures relating to a hardship function.
“If they did, measures focused on financial risk or didn’t cover customer experience and outcomes.”
Over the course of 2023, ASIC received more than 187,000 hardship notices. The regulator recorded a 54 per cent uptick in hardship notices since 2022 – up from more than 34,000 in the last quarter of 2022 to more than 52,000 over the same period of 2023.
Upwards of 80 per cent of hardship notices are related to owner-occupier home loans, with the median home loan balance for customers requesting hardship around $312,000.
The most common reason for a hardship application was due to customers having overcommitted to their loans, while reduced income, medical issues, unemployment and separation rounded out the top five reasons for a requesting hardship.
“For people who reach out to their lender to signal they need support, this can be devastating. Too many Australians in financial hardship are finding it hard to get help from their lenders and it’s time for meaningful improvement,” said ASIC chair Joe Longo.
“ASIC spelt out in a letter to the CEOs of lenders last year that they need to meet their obligations to customers experiencing financial hardship.
“This report highlights lenders must improve the way they deal with customers experiencing hardship. What we have seen is simply not good enough – struggling customers deserve the right support in their time of need.
“ASIC has made this a priority focus area, and where appropriate, we will not hesitate to take enforcement action to protect consumers,” Longo added.
Longo, speaking at the AI Regulators Symposium this evening, suggested more artificial intelligence technologies could be adopted in the hardship request process to capture and expedite the process.
The 10 lenders examined by ASIC included Bank of Queensland, Bendigo & Adelaide Bank, the Commonwealth Bank of Australia, ING Bank (Australia), Macquarie Bank (and Macquarie Securitisation Limited), National Australia Bank, Pepper Money, Resimac, Liberty Financial and Westpac Banking Corporation.
The survey process involved ASIC collecting more than 206,000 records from the 10 lenders of hardship notices, service rep call analysis, and site visits to each lender.
