ASIC sues NAB for ‘failing’ customers facing financial hardship

The corporate regulator has vowed to take more lenders to court for failing customers in financial distress after revealing it was suing National Australia Bank over allegations it ignored more than 300 vulnerable customers during their time of need.

The Australian Securities and Investments Commission (ASIC) is taking NAB and subsidiary Advantedge Financial Services to the Federal Court, claiming that between 2018 and 2023 the bank did not respond to 345 customers, including domestic violence victims, the chronically ill and those forced into lengthy isolation during the pandemic within 21 days as required by law.

ASIC is suing NAB in the Federal Court. Credit: Natalie Boog

“When people reach out for hardship assistance, the financial hardship is often not the only thing that’s going on in their lives,” ASIC Commissioner Alan Kirkland said.

“It’s really important that lenders recognise the vulnerabilities that people have and respond appropriately. And that’s why it’s particularly important that lenders respond in a timely way to help people to deal with the financial stress that they’re experiencing so they can then focus on some of the other things that might be happening in their lives.”

In documents filed with the Federal Court, ASIC detailed the circumstances of the 345 customers who were affected by NAB’s failure to respond to their applications seeking assistance.

It quoted one person who said they had just left a long-term violent relationship, had no support and could no longer afford repayments.

In another case, one person said their family of five all contracted COVID-19 and the self-employed husband – who was the last person infected – was forced to isolate for more than five weeks as a result of close contact quarantine rules.

One customer requested relief because they needed to be relocated to temporary accommodation, and pay those associated expenses, after a flooding disaster in 2021.

Kirkland said it was not yet clear whether the affected customers’ claims had been appropriately handled.

In a statement to the Australian Securities Exchange, NAB customer and corporate services group executive Sharon Cook apologised to customers.

“We’re sorry that this happened when a number of our customers were in difficult situations and needed us to be there for them,” Cook said.

“We are focused on ensuring these customers receive the support they need. 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. This includes consulting with consumer advocates.”

NAB self-reported the matter to ASIC in October 2023, a month after the regulator announced it had launched Federal Court proceedings against Westpac for similar failures.

In that case, ASIC has alleged that between 2015 and 2022, Westpac did not respond to 229 customer requests for a hardship application within the required 21 days.

ASIC has put the broader financial lending industry on notice after its report this year found customers in financial distress were being let down by a “cookie-cutter approach” to dealing with hardship requests, and onerous processes.

That review looked at the way Westpac, NAB, ING, Commonwealth Bank, Bank of Queensland, Macquarie and Bendigo Bank, as well as non-bank lenders Resimac, Pepper Money and Liberty Financial, handled hardship applications.

Kirkland said the banking and lending sector more broadly must improve their customer service, and that the regulator was pursuing those issues in a range of ways, “including through directly with lenders about how we think their practices need to improve, but also to enforcement action”.

Consumer Action Law Centre chief executive Stephanie Tonkin said the ASIC review, which uncovered a “bare minimum approach” some lenders were taking in response to hardship applications, must prompt the entire sector to improve standards amid a cost-of-living crisis pushing further people into financial difficulty.

“We operate the national debt helpline and what we see on the frontlines is that before people are reaching out to their bank, they’re making sure they’re doing everything they can to make ends meet,” Tonkin said.

“They’re skipping meals, taking out extra loans, in some instances high-interest loans to afford medicine. By the time someone reaches out to a lender, it’s a very big step and a challenging step. For many people, to learn that their calls for help were just left unanswered is really disappointing.”

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