The Banking Code Compliance Committee has warned banks that they need to have their financial hardship processes in order, in anticipation of an increase in customers having difficulty making repayments.
In its latest review of compliance with the Banking Code of Practice, the BCCC reported a significant reduction in breaches related to banks’ obligations to customers experiencing financial difficulty during the first six months to 2022.
But it said incidents involving delays in responding to applications, failure to document and communicate outcomes, and ongoing collection activities when customers are in hardship arrangements were a cause for concern.
The BCCC said: “It is imperative that banks meet their obligations to customers experiencing financial difficulty. This includes communicating in a clear and timely manner so the customers can make informed decisions about their options.
“Breaches of obligations for financial difficulty and debt collection can have significant effects on customers and may have long term implications.”
Part 9 of the Code covers banks’ obligations to customers experiencing financial difficulty. The obligations relate to timeframes for dealing with requests for financial hardship assistance, communications with customers and a commitment to work with customers.
The BCCC saw a number of incidents that involved delays in responding to customers experiencing financial difficulty.
One major bank failed to respond to 1068 hardship requests from customers and another failed to respond to 247 requests within the required timeframe. These failings were caused by a range of issues, including deficiencies in processes, human error and insufficient training.
Another bank failed to promptly acknowledge 54 hardship requests or inquiries. This failure resulted in financial impact of A$112,000.
The BCCC found instances where banks failed to issue written hardship request outcomes.
One bank charged arrears fees to 10,437 home loan accounts that had hardship arrangements.
It also found some banks continued collection activities while customers’ hardship applications were being processed. One bank issued default notices to 42 customers who were on hardship arrangements and another failed to record agreed hardship arrangements for 122 customers.
In these instances, most of the breaches were identified through customer complaints.
The BCCC said: “We expect banks to implement proactive measures to detect and prevent these breaches.”