Corporate watchdog ASIC issues warning as households struggle to pay bills

The nation’s corporate watchdog has warned lenders they are required by law to offer assistance to Australians facing financial hardship as the number of people struggling to pay their bills soars amid a cost of living crisis.

Complaints involving financial difficulty, including disputes over hardship assistance, have jumped 25 per cent to 5396, according to the Australian Financial Complaints Authority, with a third relating to home loan repayments.

Australian Securities and Investments Commission commissioner Alan Kirkland said Australians from all walks of living, including dual-income households, were increasingly finding themselves in financial strife.

Mr Kirkland said he had been devastated by stories of struggling Australians and told The Nightly that lenders were required by law to offer financial hardship assistance.

“What we heard is that a range of Australians from all walks of life are turning to financial counsellors for help,” he said.

“These include people who may not meet the stereotype of people in hardship — people in paid work, small business owners and dual-income households. “

Mr Kirkland and ASIC chair Joe Longo have been meeting with financial counsellors from the Consumer Action Law Centre’s national debt hotline, including listening into some calls with the consent of callers.

Mr Kirkland said lenders were required to respond to people who said they couldn’t meet repayments but said their services were missing the mark in some circumstances.

“Ensuring that lenders respond appropriately to Australians facing financial hardship is a high priority for ASIC,” he said.

“That is why ASIC wrote to lenders last year to remind them of their obligations to customers facing hardship and announced we would be reviewing how lenders support their customers facing financial hardship.”

About half of all complaints concerning financial difficulty made to the financial services ombudsman related to a lender’s response to requests for hardship assistance, particular with smaller lenders and Buy Now Pay Later providers.

Australian Financial Complaints Authority chief executive officer David Locke said the complaints largely related to lenders failing to respond instead of any decisions.

“We are concerned about the increase in complaints about financial hardship and about the practices of some lenders,” he said.

“We urge all lenders to identify hardship early and to ensure they provide genuine consideration to a customer’s request for hardship assistance.”

Calls to Financial Counselling Australia’s national helpline jumped by 20 per cent to 129,328 in the 2022-23 financial year while calls in Victoria alone soared 25 per cent to 30,000.

Consumer Action Law Centre policy and campaign director Tania Clarke said there had been a dramatic increase in people calling due to mortgage stress as well as rising utility and grocery costs.

“We’re seeing an increase in the Buy Now Pay Later debt as people are trying to fill the gap between their income [and] what they need to pay for just in terms of the basics,” she said.

The Reserve Bank of Australia has left the cash rate at 4.35 per cent since November while last year the national inflation rate was 4.1 per cent, higher than the target rate of between two and three per cent.

AMP chief economist Shane Oliver said mortgage rates had doubled for some homeowners while wages hadn’t risen to match the increasing cost of essentials.

“It’s the sort of thing [rising complaints] you would expect to see in this environment,” he said.

“Wages haven’t kept up with rising costs, particularly for essentials like rent, insurance, food [and] electricity.”

An updated inflation figure is due to be released later this month.

Minutes of the RBA board’s March meeting, released on Tuesday, did not commit to or rule out any interest rate hikes and indicated housing arrears remain low despite some households struggling to service debts and pay for essential expenses.

“Strong conditions in the labour market and the large savings buffers accumulated during the pandemic were helping households adapt to challenging economic conditions and restrictive monetary policy,” said the minutes.