ASIC sues NAB over handling of financial hardship cases

The financial regulator is suing National Australia Bank for failing 345 customers “at their most vulnerable” when they were applying for financial hardship.

The Australian Securities and Investment Commission has filed the suit in the Federal Court alleging NAB and its subsidiary AFSH Nominees, a provider of white-label home loans under the brand Advantedge, did not respond to 345 hardship applications within the 21-day timeframe required by law between 2018 and 2023.

‘These customers included people who were domestic violence victims, battling serious medical conditions, dealing with business closures or job loss. NAB’s failures likely compounded the already challenging situation for these people,” ASIC chair Joe Longo said.

‘Amidst rising cost of living pressures, we have seen an increased number of customers reach out to their lenders for relief, and we have seen first-hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship.”

The action follows ASIC’s action against Westpac in September 2023 for financial hardship misconduct.

As interest rates bite, the big four banks have seen an uptick in bad and doubtful debts, with home loans 90 days past due rising in the first half of the calendar year particularly. In recent earnings announcements, most banks declared that the growth in arrears has peaked and is plateauing.

In response to the court action, NAB apologised for the failings and said it would co-operate fully with the regulator.

“We’re sorry that this happened when a number of our customers were in difficult situations and needed us to be there for them,” NAB group executive, customer and corporate services, Sharon Cook said.

“We are focused on ensuring these customers receive the support they need.

“Following ASIC’s report into hardship practices across the industry, we have also been working on a new approach to supporting customers in financial difficulty. This includes consulting with consumer advocates.”

In August 2023, ASIC reviewed financial hardship and expectations of lenders. In May this year, it issued a report highlighting failures of lenders to identify customers in financial stress, use of ‘cookie-cutter’ approaches to dealing with hardship requests, as well as onerous assessment and approval processes.

For the 2023/2024 financial year 5715 complaints were filed with Australian Financial Complaints Authority regarding financial difficulty, an increase of 18 per cent on the prior year.

AFCA observed that “too many of these complaints relate to poor treatment or ineffective communication during the hardship process. Urgent improvements are needed”.