ASIC sues National Australia Bank for allegedly failing customers in hardship

The corporate regulator has put banks on notice over financial hardship, launching court action alleging National Australia Bank took years in responding to borrowers in crisis.

Customers at the centre of the lawsuit include people who were domestic violence victims, or battling serious medical conditions, or dealing with business closures or job loss.

The corporate regulator has put banks on notice over financial hardship, launching court action against National Australia Bank alleging the bank took years responding to borrowers facing crisis amid the high cost of living.

In court action on Monday, the Australian Securities & Investments Commission alleged NAB failed to respond to at least 345 customers seeking assistance from the lender over several years, breaching the bank’s requirements to fairly deal with customers in strife.

This included customers fleeing family violence, suffering medical emergencies, or locked in their homes during the Covid-19 pandemic who reached out to NAB seeking pauses on payments for home and business loans.

ASIC alleges NAB and its subsidiary AFSH Nominees failed these customers, saying its second set of court action over hardship handling should be a wake-up call to the industry.

ASIC chair Joe Longo said the case against NAB, coming soon after a recent case against Westpac, was a “sign of the times”, with the financial sector grappling with a surge in hardship cases amid tougher economic conditions.

“The economic environment has shifted in the past couple of years, placing significant financial pressure on everyday Australians. There are an increasing number of customers reaching out for relief,” Mr Longo said.

He said NAB, which self-reported the breaches one month after ASIC charged rival Westpac with similar breaches, had breached the duties it owed customers when they needed help most.

“NAB’s failures likely compounded the already challenging situation for these people,” he said.

NAB was required to respond to customers within 21 days, with ASIC alleging the bank instead took more than 2000 days to ­acknowledge hardship requests from some borrowers.

One NAB borrower, who was diagnosed with Mixed Dust Coal Workers Pneumoconiosis, reached out to the bank in November 2022 seeking help for their credit card. They said they had used all their long service, sick and annual leave before being terminated.

“We now have no money in savings and redraw left to Band-Aid our financial commitments,” the borrower said in their application. “Our businesses aren’t currently earning the income that mining did and even though we are getting better at our businesses we are still not at a point to meet our commitments and just need time to build.”

NAB did not respond for 694 days.

Another NAB customer who reached out for hardship help in January 2020 said they had been directed to make a hardship application by the bank’s staff after leaving a long-term domestic violence relationship.

“I have a large number of bills and cannot pay them,” they wrote.

NAB did not respond for 1756 days.

Financial Counselling Australia co-CEO Peter Gartlan said the case studies in ASIC’s case against NAB were “very concerning”.

“We know how tough it is to survive in the current climate. Banks have a legal and moral responsibility to respond,” he said.

NAB Group CEO Andrew Irvine.

ASIC sued Westpac in September last year, claiming the bank failed to process hardship notices for at least 229 customers between 2015 and 2022 within the required time frame.

Banks are required, under the Australian Credit Code, to respond to a hardship notice from customers within 21 days, detailing how the bank will respond.

“We have seen an increased number of customers reach out to their lenders for relief, and we have seen first-hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship,” Mr Longo said.

ASIC is seeking financial penalties and an adverse publicity order against NAB. In a market update, NAB said it “acknowledges the civil penalty proceedings” and said the bank had self-reported the issue to the regulator.

NAB said Customer and Corporate Services group executive Sharon Cook disclosed the hardship failures to ASIC in October last year, one month after Westpac was hit with court papers over the same issue.

“We’re sorry that this happened when a number of our customers were in difficult situations and needed us to be there for them,” Ms Cook said. “We are focused on ensuring these customers receive the support they need.”

NAB said it would consider the details of the financial regulator’s case against it.

“Following ASIC’s report into hardship practices across the industry, we have also been working on a new approach to supporting customers in financial difficulty,” Ms Cook said.

“This includes consulting with consumer advocates.”

NAB said in November it had seen a 26 per cent increase in calls from customers seeking assistance in the 2024 financial year – to hit more than 14,500 – and highlighted its efforts to improve hardship identification, support and communications.

The filings against NAB come after ASIC wrapped up a review of Australia’s 10 biggest lenders, saying in May that they made it hard to ­access hardship relief and often provided late and limited responses to customers in distress.

ASIC warned in June it was considering further legal action against three lenders over breaches to hardship policies.

The regulator’s May review looked at hardship handling by banks Westpac, NAB, ING, Commonwealth Bank, Bank of Queensland, Macquarie and Bendigo Bank. In addition, non-bank lenders Resimac, Pepper Money and ­Liberty Financial were also scrutinised.

Originally published as ASIC sues National Australia Bank for allegedly failing customers in hardship