ASIC writes to CEOs of lenders urging them to support customers in hardship

The regulator has written to large lenders, warning they must supporting customers battling higher interest rates and cost-of-living pressures.

ASIC Chair Joe Longo. Picture: NCA NewsWire / Ian Currie

Australia’s corporate watchdog has taken the unusual step of writing to the CEOs of 30 large lenders urging them to fulfil their obligations to support their customers’ as they battle higher interest rates and cost-of-living pressures.

The fastest increase in interest rates and inflation in decades is leaving many Australians facing financial difficulties, with a record 1.5m at risk of mortgage stress and a 28 per cent increase in calls to the National Debt Hotline this year.

“Delinquencies and hardship application volumes are also starting to increase, although from relatively low levels,” ASIC commissioner Danielle Press writes in the letter to the lenders, including CBA, NAB, Westpac and ANZ.

“It is in this context that it is critically important that you prioritise ensuring that your organisation has appropriate arrangements to respond to and support consumers experiencing financial hardship.”

She said the regulator had seen “inconsistencies” on some lenders‘ approach to hardship and expected banks to be consistent in their approach.

“We expect that you will take action to ensure your organisation meets its obligations and operates consistently with the expectations outlined,” the letter says.

“Our work will consider, among other things, the extent to which lenders have acted to operate consistently with these expectations.”

ASIC is increasing its focus on hardship and ensuring lenders support customers experiencing financial stress. It will start collecting application-level data from the lenders and will start a review of 10 lenders “to understand their approach to financial hardship.”

The regulator will publish the results and insights from its review in the first half of 2024.

The letter, addressed to bosses at the big four banks, regional lenders, buy now pay later lenders and subprime bank lenders, says they are expected to proactively communicate how and when customers can seek assistance.

They must also genuinely consider their circumstances to develop sustainable solutions where possible and communicate regularly with customers throughout and at the end of the assistance period.

Australia’s banks have repeatedly said mortgage stress among their consumer base is rising only modestly and the portions that are behind their loan repayments are still hovering around historically low levels.

Overdue mortgage rates are higher in the so-called non-bank lending sector.

A report by S&P Global Ratings this week said that while most borrowers appear to be managing the confluence of financial pressures, mortgage arrears would continue rising for months to come and would not peak until next year, when the total impact of 12 interest rate rises hit home.