ASIC warns of legal action after hardship review finds bank and non-bank failures

The corporate regulator is warning of action against a bevy of home lenders after a review of their handling of hardship cases.

Australian Securities & Investments Commission chairman Joe Longo, right. Picture: Jane Dempster

The Australian Securities & Investments Commission is weighing up taking further legal action against a bevy of home lenders, as the corporate regulator says it expects to see a lift in standards from banks and non-banks in the wake of a review.

Speaking on Monday, ASIC chair Joe Longo said the regulator was set to hand 10 banks and non-banks a list of demands after they were subject to a probe over their handling of hardship cases.

ASIC found lenders were making accessing hardship arrangements extremely difficult, with the regulator saying the true numbers of people who could be accessing assistance was likely to be far higher than the reported number.

Mr Longo said ASIC would soon hand the 10 lenders a series of recommendations to improve their hardship handling, saying the banks and non-banks “will be required to come up with plans to meet gaps we’ve identified”.

“We will be monitoring how they comply with that,” he said. “We will take action where the circumstances warrant it, but what’s really going to have an impact here is real-time improvement.”

But Mr Longo said ASIC was also undertaking several investigations into other lenders, with the regulator actively considering lodging further legal action over hardship handling after taking ­action against Westpac.

In papers lodged with the Federal Court, ASIC alleged Westpac was deficient in its hardship notice processing between at least 2015 and 2022.

ASIC’s latest review looked at hardship handling from Westpac, NAB, ING, CBA, BOQ, Macquarie and Bendigo Bank.

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

Mr Longo said ASIC’s review found the bigger banks were often better at responding to hardship matters than smaller operators, but said all the banks were better at dealing with troubled borrowers than the non-bank lenders.

“There are consistent themes across the whole cohort. There are some banks doing better than others,” he said.

Australian Banking Association chief executive Anna Bligh said ASIC’s report found banks were doing a better job than their non-bank rivals in handling hardship. “There’s always room for improvements and banks will be taking this report and seeing how they can improve their practice,” she said.

Non-bank lender Pepper Money said it had already started an uplift of its hardship handling arrangements prior to ASIC’s review, saying it started revising its systems in March 2020. A Pepper Money spokeswoman said the lender was seeking to “refine our hardship processes and make them more accessible for customers who need assistance”.

She said Pepper Money would review ASIC’s recommendations “with a view to consider how we can further integrate these into our hardship processes”.

Fellow non-bank lender Liberty Financial said it had “worked with ASIC during the review process”, with a spokeswoman saying the lender was looking forward “to receiving their feedback and learning in what ways we can improve our service”. She added: “We know Australians are doing it tough in the current environment and that as a lender we have an ­important role to play helping any of our customers who experience financial hardship.”

Bendigo Bank said it offered customers facing hardship a “range of support”, with a spokeswoman saying the bank wanted “our customers to stay in their homes”.

Markets prepare for a further worsening of borrowers falling behind on their home loans.

Data from S&P Global Ratings shows an increase in home loan arrears in March, with 1 per cent of all prime loans tracked by the agency now non-paying. The agency said most of the increase in arrears was in early stages, with borrowers only a month or two behind on their loans.