While banks report that the proportion of customers behind on their repayments is still lower than it was before the COVID-19 pandemic,the regulator is urging banks to lift their game in how they deal with struggling borrowers.
Under the law,lenders must consider whether to give short-term help to customers who ask for assistance because they can’t afford to meet repayments. The help can include measures such as a temporary deferral of repayments,an interest-only period,or an extension of the term of the loan.
ASIC reviewed the hardship arrangements of 10 bank and non-bank lenders and found the industry was generally making it too hard for borrowers to obtain help. More than 35 per cent of customers were dropping out of the application process at least once.
ASIC’s report,to be published on Monday,said experiences were mixed between lenders but in the worst cases some lenders had ignored requests for help,“effectively abandoning customers who needed their support”.
The assessment looked at the lenders’ internal policies,analysed data and examined eight customer case studies from each lender. It said some lenders failed to identify that a customer was experiencing hardship,which meant floundering borrowers were not always quickly referred to hardship teams to discuss their options.
ASIC also said that sometimes lenders did not take extra care with vulnerable customers. It cited an example of a borrower who was experiencing family violence and sought to defer her home loan payments,so she could move into an apartment. ASIC said it was five weeks before the lender approved a three-month deferral of loan repayments. It did not name the lender.