ASIC prepares for action on three lenders, as housing hardship on the regulatory agenda

The corporate regulator has warned it may sue three more lenders after initially taking aim at Westpac.

ASIC’s Tim Mullaly, Joe Longo, Simone Constant, Alan Kirkland and Kate O’Rouke. Picture: Jane Dempster/The Australian

A blowout in hardship applications has set the stage for further regulatory intervention, with the corporate watchdog revealing it was considering taking at least three lenders before the courts over their lax systems.

Appearing at Senate Estimates on Tuesday, the Australian Securities & Investments Commission confirmed it was running the ruler over three more lenders over possible breaches of the National Credit Code.

ASIC chair Joe Longo said it was identifying a number of major lenders who were failing to properly respond to borrowers in distress, as a weakening economy and higher interest rates weigh on households.

Mr Longo said ASIC’s review had found home lenders “aren’t doing enough to support their customers experiencing financial hardship” and some were effectively ignoring attempts for assistance.

“Lenders need to do better to help Australians doing it tough,” he said.

Mr Longo said ASIC was preparing to provide lenders it reviewed with an action plan of improvements, this comes after the regulator completed a review of hardship policies across banks and non-banks.

ASIC’s latest review looked at hardship handling from Westpac, National Australia Bank, ING, Commonwealth Bank, Bank of Queensland, Macquarie and Bendigo Bank.

In addition, non-bank lenders Resimac, Pepper Money and ­Liberty Financial were also scrutinised.

But Mr Longo said there were matters which “may or may not go to court”.

ASIC also warned it was seeing concerning conduct from the superannuation sector, with an ongoing review of their handling of members’ death benefits and delays in payments.

ASIC commissioner Simone Constant said the regulator had completed a sweep of 22 trustees, putting trustees on notice a month ago.

Ms Constant said some super funds did better than others, but noted many failed to issue simple notices to customers or assist those from non-English language speaking backgrounds.

AFCA CEO and chief ombudsman David Locke. Picture: Supplied

The Australian Financial Complaints Authority also warned it was seeing a blowout in complaints from customers of banks and insurers, with the disputes body cautioning both were failing to respond to requests for help in a timely manner.

AFCA chair David Locke said it was concerning to see, so many complaints associated with general insurance, months after damaging floods which hit Australia’s eastern seaboard last year.

AFCA also highlighted a lift in complaints related to financial hardship from the banks.

Mr Locke said complaints had initially focused on short term credit products, associated with renters, but increasingly home mortgages were dominating claim figures.

“We’re anticipating we will see an increase in hardship in the year ahead,” he said.

AFCA also noted it was seeing more matters relating to domestic violence, amid a surge in complaints over banks and lenders failing to respond to hardship applications.

AFCA highlighted one bank which fully automated its hardship processing system, putting the application in English.

The disputes body noted this made it difficult for people in distress to speak with staff at the bank, with the application requiring significant documentation and English language skills.

The Australian Prudential Regulation Authority, appearing later in the day, said it was monitoring risks to the financial system, including bank’s lending practices and the affordability of home insurance.

APRA chair John Lonsdale said APRA was “focused on ensuring lending practices are prudent and banks remain resilient” noting the regulator was looking at “targeted changes to the prudential framework for authorised deposit-taking institutions”.

This comes as banks continue to tinker with refinancing thresholds, as borrowers seek to manoeuvre after rolling off ultra-cheap fixed term pandemic loans.

Although APRA maintained its three per cent serviceability buffer for new loans, in its December update, the regulator made allowance for banks to apply exceptions for some borrowers who would be capped by the rule.