The Australian Financial Complaints Authority has added its voice to a growing chorus of concern about the way lenders are handling customer requests for hardship assistance, saying there is evidence that lenders are failing to respond to requests.
AFCA reported that complaints involving financial difficulty, including disputes over hardship assistance, rose 25 per cent last year.
AFCA chief executive David Locke said more than half of those financial difficulty complaints were about a lender’s failure to respond to a request for hardship assistance. These complaints were skewed towards smaller lenders and buy now pay later providers.
Locke said: “These are not complaints about what the lender’s decision was, but consumers saying there was no response at all. Failure to respond to such a request is a breach of the lender’s obligations and there is no excuse for it.
“We acknowledge the investments some have made in specialist hardship teams and better processes. But the rise in complaints tells us there is still work to do.”
Locke said AFCA was also seeing complaints where lenders are providing standardised responses that indicate lenders have not considered the customer’s individual circumstances.
“Lenders are required to give genuine consideration to hardship requests,” Locke said.
Other issues include lenders issuing default notices to consumers who had agreed to repayment arrangements, lenders placing unnecessary barriers to financial counsellors assisting consumers, and debt recovery action being taken when a matter is before AFCA.
AFCA’s comments follow the release of Financial Counselling Australia’s Rank the Banks report in January, which revealed that the majority of lenders in the Australian consumer credit market are not giving their customers appropriate hardship support.
The FCA surveyed more than 400 financial counsellors, asking them about the hardship practices of banks, other credit providers and debt collection companies.
The report concluded that the major banks “generally have appropriate processes” but smaller banks and non-bank lenders “underperformed” and have to improve their approach to dealing with customers in hardship.
“Customers of non-major banks and non-bank lenders are not receiving appropriate hardship support. These results are a cause for deep concern,” the report said.
And in December, the Banking Code Compliance Committee released a report detailing an “alarming” rise in breaches of Part 9 of the Banking Code of Practice, which covers obligations to support customers facing financial difficulty.
The BCCC said there was a 39 per cent increase in breaches of Part 9 of the Banking Code of Practice over six months. Breaches included failing to respond to financial hardship requests, persisting with debt collection activities despite hardship arrangements being in place and neglecting to follow through on agreed arrangements.
BCCC chair Ian Govey said: “Banks have had ample time to anticipate the surge in financial hardship requests and implement measures to manage them effectively. We expect the industry to prioritise improvements in staff training, systems and procedures to better support people in need during these challenging times.”