ASIC prosecutes National Australia Bank over alleged 400,000 days failure to reply to loan hardship pleas

The financial services watchdog has accused National Australia Bank of breaching credit laws by repeatedly failing to respond to the pleas of vulnerable customers.

Unveiling a Federal Court prosecution of NAB, the Australian Securities and Investments Commission has pointed to 345 alleged cases of failure to answer hardship pleas from home loan, credit card and personal loan customers within a 21-day deadline

And ASIC says the big four bank failed to even give a lawful response to 320 of these official hardship pleas filed from June 2018 to October 2023 — meaning the bank failed to answer pleas for an alleged total of more than 400,000 days.

ASIC chair Joe Longo claimed NAB unlawfully failed to respond to “their customers’ appeal for help when they needed them most”., including people hurt by significant medical conditions, domestic violence and the COVID-19 pandemic.

“The person seeking assistance may need some variation to their contract, their lending arrangements,” Mr Longo said. “Every situation is different, which is what makes this area really important for consumers.

“We have seen first hand the impact on lives and livelihoods when lenders fail to appropriately support customers experiencing financial hardship.

“Banks and lenders must have the right arrangements in place to respond to requests for assistance from customers experiencing financial hardship and to work constructively with them to find a sustainable solution. “

The latest Federal Court action comes on top of ASIC suing Westpac in September 2023 for financial hardship misconduct, alleging it failed to respond to at least 435 notices within the 21 days set down by the National Credit Code. That case is due for a hearing in May next year.

The regulator released a detailed report in May this year claiming banks had inadequate focus on hardship polices, processes and practices.

Unveiling the NAB action on Monday, ASIC enforcement boss Alan Kirkland said the hardship probe indicated banks were taking “a cookie cutter approach to dealing with people’s hardship requests, as well as an onerous assessment and approvals process”.

“Many lenders aren’t taking their customers unique circumstances into account,” Mr Kirkland said.

“Banks and lenders need to put their customers front and centre and prioritise their approach to supporting customers facing hardship.”

NAB executive Sharon Cook apologised for the bank’s failings “when a number of our customers were in difficult situations and needed us to be there for them”.

“We are focused on ensuring these customers receive the support they need.,” she said.

“Following ASIC’s report into hardship practices across the industry, we have also been working on a new approach to supporting customers in financial difficulty. This includes consulting with consumer advocates.”

In the main part of its Federal Court claim, ASIC highlighted four alleged failings from July 2019 to July 2022 — all of which alleged breaches of the 21-day deadline and a failure to honour its ongoing obligation to respond.

This last case involved a mortgage customer who had run out of sick leave after being hit by COVID-19, whose self-employed husband was forced to lock down for five weeks and no income had been coming into their five-person household for two months.

“We are trying to catch up but it is proving very difficult when we are so far behind on our mortgage and all other bills,” the person said in a hardship plea not answered by Westpac.

ASIC also highlighted the pleas in January 2020 of a personal loan customer who had reported leaving a long-term domestic relationship, was down to one income and unable to make payment. Despite being told to contact the bank’s financial hardship team, she allegedly did not receive a response.

The July 2019 case involved a home loan customer who pleaded hardship after their employer shut and did not pay outstanding wages or redundancy entitlements.

An ignored November 2019 case involved a person whose reported “physical and mental health” issues after having quit their job due to bullying.