The Federal Court has ordered National Australia Bank (NAB) and its subsidiary, AFSH Nominees Pty Ltd (AFSH), to pay a pecuniary penalty of $15.5 million for failing to respond to customers facing hardship.
The Court found that between 2018 and 2023, NAB and AFSH failed to respond to 345 hardship applications within the 21-day timeframe required by law. As a result, those consumers remained unaware of the outcome of their hardship applications.
ASIC Deputy Chair Sarah Court said, ‘This decision highlights the seriousness of the failures of NAB and AFSH to support their customers experiencing financial hardship.
‘These failures likely made an already challenging time in people’s lives far worse.
‘This penalty sends an important message to other financial institutions – customers should be at the centre of what you do.’
In handing down her decision, Justice Neskovcin found that the provisions of the National Credit Code breached by NAB and AFSH provide ‘…an important formal mechanism to protect consumers who may be experiencing hardship…’ and that impacts to customers ‘…may have been avoided if NAB had provided the affected NAB customers and AFSH customers with the required notices in response to their hardship notices within the prescribed timeframes’.
Further, her Honour stated, ‘The total number of admitted contraventions of s 72(4) is high, indicating the significant scope – and thereby the seriousness – of the contravening conduct.’
NAB and AFSH are also required to publish an adverse publicity notice on their respective websites and to provide a copy of the notice to each customer affected by the conduct. NAB and AFSH have agreed to pay ASIC’s costs.
In May 2024, ASIC put the lending industry on notice with the release of its hardship report which found that lenders were not doing enough to support their customers experiencing financial hardship.
‘The hardship regime exists to help customers who are experiencing financial difficulty, often caused by significant life events such as serious illness, sudden unemployment and domestic violence’.
‘ASIC will not hesitate to take action when banks and lenders fail to comply with their obligations, ‘ Ms Court said.
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Statement of Agreed Facts and Admissions (PDF 974 KB)
Supplementary Statement of Agreed Facts on relief (PDF 759 KB)
Background
Under section 72 of the National Credit Code, if a consumer notifies their lender that they are or will be unable to meet their credit obligations, lenders must consider varying the customer’s credit contract and advise them of the decision within specified timeframes.
Variations to the credit contract can include a range of measures such as payment deferrals, reduced payment arrangements, interest-only periods, term extensions, capitalisation of arrears or interest-rate reductions.
NAB and AFSH admitted that it failed to respond to 345 customers within the time required by the credit legislation, and that it did not respond to those customers until after ASIC commenced the proceeding. The failure arose from NAB staff incorrectly using a “reject” button in its system, meaning that the customer did not receive any communication from NAB or AFSH in response to their hardship application.
Improving consumer outcomes is a key priority for ASIC and in August 2023, ASIC issued an open letter to the CEOs of all lenders (23-235MR) advising of ASIC’s focus on financial hardship and expectations of lenders. ASIC then collected data from 30 large lenders, and reviewed 10 large home lenders to understand their approach to financial hardship.
ASIC reviewed the lenders’ policies and procedures, looked at case studies and conducted hypothetical customer exercises to understand differences in lenders’ approach to hardship. On 20 May 2024, ASIC published a report outlining its findings, Report 783 Hardship, hard to get help: Lenders fall short in financial hardship support (REP 783).
ASIC’s Moneysmart website has information for consumers on what to do if you are experiencing financial hardship. If you're unhappy with either the service received, or with your lender’s decision, you can make a complaint. If you have multiple debts, or would like help applying for financial hardship, contact the National Debt Helpline on 1800 007 007 to talk to a financial counsellor for free.