A majority of financial difficulty complaints received by AFCA relate to customer hardship requests being left unanswered, according to the latest data from Australia’s financial dispute ombudsman.

As part of its latest complaints round-up, AFCA revealed that more than half of consumer financial difficulty complaints submitted to it concerned a lender’s failure to respond to a request for hardship assistance.

According to the ombudsman, these complaints – where no response was received from a business following a consumer’s direct hardship request – were particularly pronounced for smaller lenders and Buy Now Pay Later (BNPL) providers.

AFCA chief ombudsman and chief executive David Locke warned that failure to respond to such a request is a breach of the lender’s obligations, adding that “there is no excuse for this”.

Banks, under the industry code of practice, are required to respond to complaints within 30 days, and within 21 days if it involves a hardship notice, default notice or request to postpone enforcement.

However, even when a response was proffered, they were too often found to be “cookie cutter” in tone and lacking consideration for a customer’s individual circumstances, AFCA said.

“Care needs to be taken with automated processes,” Locke said. “Lenders are required to give genuine consideration to hardship requests.”

AFCA noted that, under the National Credit Code and the Banking Code of Practice, banks are required to work with customers to find a sustainable solution to financial hardship, and to do that by considering their individual circumstances.

The ombudsman, overall, recorded a 25 per cent increase in financial difficulty complaints in 2023, acknowledging that challenging economic conditions of the previous year (driven by inflation and interest rate spikes) have left many households in financial dire straits.

Of the more than 5,390 financial hardship-related complaints received, a third related to home loans.

Locke said he was particularly concerned about the increase in financial hardship complaints and the practices of some lenders.

“We urge all lenders to identify hardship early and to ensure they provide genuine consideration to a customer’s request for hardship assistance.”

He noted that while many lenders had prepared for a spike in hardship requests, including the specialist hardship teams and better processes, “the rise in complaints tells us there is still work to do”.

AFCA’s lead ombudsman, banking and finance, Natalie Cameron, also expressed concerns with lenders issuing default notices to consumers who had agreed to repayment arrangements, as well as lenders placing unnecessary barriers to financial counsellors assisting consumers, and debt recovery action being taken while a matter is still before AFCA, which is not permitted.

“Vulnerable complainants are not always identified or given the care required,” she said.

“Sometimes they are simply not in a position to navigate the process and provide the required information in the requested format.”