Banks address their poor performance in dealing with hardship

The banking industry has been under pressure for some time to do more for customers in financial hardship. Yesterday, the Australian Bankers Association responded with the release of a package of measures that will encourage banks to do more to promote consumer awareness of hardship assistance, to simplify processes for financial counsellors, and to raise the standard of staff training.

Banks have not performed well in dealing with requests for financial hardship assistance. The Credit Ombudsman Service said, in its 2011/12 annual report, that lenders were failing to give proper consideration to applications from borrowers in financial hardship.

The Ombudsman said disputes over hardship applications were the biggest issue it faced in the cases it handled in 2011/12, making up 34 per cent of complaints. A common complaint was that the lender failed to respond to an application for a debt payment variation.

Financial Counselling Australia's latest Rank the Bank survey, which reports on the experience of financial counsellors dealing with banks on financial hardship matters, found they were inconsistent in handling of the issue - even those banks that polled well.

The Rank the Bank report, which was published last month, said: "There can be a lot of variability both within and between banks."   

Community awareness of financial hardship assistance is low. In January, when the ABA released its updated Code of Banking Practice, the group's chief executive, Steven Munchenberg, conceded that only 25 per cent of people know their bank is obliged to provide hardship assistance.

The new Code of Banking Practice, which takes effect next year, includes stronger financial hardship provisions. It puts the onus on banks to be more alert to customers in financial difficulty and to respond promptly to requests for assistance. Banks are encouraged to contact customers they believe are struggling, rather than wait for the customer to contact them.

Code signatories must give a commitment not to combine accounts (taking money from one account to pay debt in another) or assign debt when they are dealing with a customer in difficulty.

Measures in the package released yesterday include a revamp of the consumer website www.doingittough.info, which provides information about the assistance banks provide for customers in temporary financial difficulty.

Banks have agreed to display information about hardship assistance in branches, and the ABA has prepared a new consumer fact sheet. Banks will put a new button on their websites' home pages that asks: are you experiencing financial difficulty?

Banks have also agreed to include new hardship training packages in their existing employee training programs.