The majority of lenders in the Australian consumer credit market are not giving their customers appropriate hardship support, according to Financial Counselling Australia’s latest Rank the Banks report.
The report is based on a survey of more than 400 financial counsellors about the hardship practices of banks, other credit providers and debt collection companies.
It is the second report in as many months to focus on lenders’ poor performance dealing with hardship cases. 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 big banks set the benchmark in the Rank the Bank survey, with scores between 6.7 and 7 out of 10. Commonwealth Bank and Westpac both scored 7. CBA’s score was up from 5.9 in 2019, while Westpac score was unchanged.
ANZ scored 6.9, compared with 7.1 in 2019, and NAB scored 6.7 (down from 7.3 in 2019).
When the first Rank the Banks survey was done in 2013, the big banks scored between 4.4 and 6.2.
When it looked at client outcomes, the survey found that in most cases arrangements offered by major banks were fair, reasonable and appropriate for clients.
The report concluded that the major banks “generally have appropriate processes” but the others have to improve their approach to dealing with customers in hardship.
Other banks “underperformed”, with an average score of 5. Westpac subsidiaries scored well – BankSA at 6.2 and St George Bank 6.1. Among the low scorers were Citibank (4.2) and ING (4.4).
Non-bank lenders had an average score of just 4. The “high” scorers were Cash Converters (5), Wallet Wizard (5) and Liberty (4.9). The low scorers included Bluestone (2.9), Swoosh (2.8) and Cigno (3).
“These very low results are cause for deep concern. Customers of non-major banks and non-bank lenders are not receiving appropriate hardship support,” the report said.
Among debt collectors, Credit Corp was an outlier with a score of 8 – the highest rating for any creditor in the survey. Panthera scored 6.5 and the others in the group scored between 4.1 and 5.3.
A new question in the latest survey related to the acceptance by creditors of financial counselling third-party authorities. “The rejection of third-party authorities by creditors is a perennial issue for financial counsellors and means the counsellor cannot represent their client,” the report said.
The survey found problems everywhere, except among the major banks. Lenders most frequently named for rejecting a financial counsellor’s third-party authority included Bendigo and Adelaide Bank, Citibank, Bankwest, Cigno, Toyota Finance and Latitude.
Among other issues explored in the survey, counsellors with large numbers of Aboriginal and Torres Strait Islander clients gave lower scores than others, and counsellors in rural and remote areas also gave lower scores.
Support for people in prison was rated “poor” by around one-third of counsellors. Support for victims of scams was also rated “poor” by around a third of counsellors.
On the positive side, support for victims of domestic violence was rated highly, with only a small proportion rating it “poor”.
The Rank the Bank survey follows the release of a Banking Code Compliance Committee compliance report in December, which said there had been a 39 per cent increase in breaches of Part 9 of the Banking Code of Practice, which covers obligations to support customers facing financial difficulty, 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.”
He also said the BCCC suspected there was under-reporting of breaches.