Lenders may need to review their credit policies after an ASIC study of handling hardship cases found that overcommitment was the leading cause of hardship.
The ASIC report, Hardship, hard to get help: Lenders fall short in financial hardship support is overall a scathing review of the approach to handling hardship cases on the part of the ten largest bank and non-bank lenders.
The report found 40 per cent of customers who received hardship assistance through reduction or deferral of payments, fell into arrears right after the assistance period ended.
Reduced income was the second most common cause of hardship, followed by medical reasons, unemployment and separation.
ASIC commissioner Alan Kirkland said “lenders were not putting customers front and centre in their approach to financial hardship.
“Many lenders aren’t taking their customers’ unique situations into account, instead providing a standardised ‘one-size-fits all approach’, which is not meeting customers’ needs,” Kirkland said.
“The lack of support and in some cases, failure to respond when customers flagged they were struggling, is unacceptable and greatly adds to the distress of customers already struggling with heightened levels of stress and anxiety.”
With monetary policy near the peak of its tightening phase and unemployment on the rise, it is no surprise the number of hardship cases across the ten lenders analysed in this report are rising, and rising fast.
In the December 2023 quarter there were 52,826 hardship notices at these lenders, ASIC said.
One year earlier there were 34,396 hardship notices in the same quarter.
During the period from July 2022 to December 2023 there were 250,000 hardship notices in relation to 144,000 accounts, of which 202,000 notices related to owner-occupied mortgages.