ASIC investigates three lenders over alleged hardship breaches

The corporate watchdog has revealed it is formally investigating three lenders over alleged breaches of hardship lending obligations as more Australians struggle to pay their bills amid rising inflation and interest rates.

Australian Securities and Investments Commission deputy chair Sarah Court told budget estimates on Tuesday that how financial institutions dealt with hardship remained an enforcement priority for the regulator.

Ms Court said ASIC was conducting a suite of measures in relation to hardship obligations including monitoring how financial institutions met their obligations under the national credit code.

“We have three matters under formal investigation at present,” Ms Court said before confirming the matters related to financial hardship.

ASIC last month revealed hardship notices had jumped 54 per cent for home loans between the end of 2022 and 2023. About 250,000 notices were received between July 2022 and 31 December 2023.

The report also found that one in three lenders dropped out of the hardship process due to complex assessment processes and poor communication.

ASIC has filed civil proceedings in the Federal Court against Westpac claiming that the big four banks failed to respond to customer hardship notices within the time period required by law.

On Tuesday, Ms Court told budget estimates that the case concerned deficiencies within Westpac’s online hardship notice system that caused multiple customers not to receive a response.

“Our allegations are that the failure of Westpac systems led to some significantly detrimental results for particularly vulnerable consumers,” she said.

Last year, the Federal Court fined Membo Finance $6 million after finding the company breached consumers by failing to act efficiently, honestly and fairly when dealing with customers in dire financial straits.

“Financial hardship and financial institutions deal with applications for hardship is one of our enforcement priorities for this calendar year,” said Ms Court on Tuesday.

“We are doing a suite of enforcement investigations... [and] we’re also doing a suite of other work in relation to monitoring and surveillance the way financial institutions implement those obligations.”