ASIC says back-up is there when you need to ask your bank for hardship support

Peter had been a loyal customer of his bank for more than two decades, but when he hit hard times and asked for help, he was let down.

Struggling to make ends meet, Peter asked for a deferral of repayments on his line of credit. But after being bounced from person to person — forced to repeat his story every time — his application was denied due to “insufficient information”.

With experiences like this, it’s no wonder that more than one in three people who ask their lender for hardship support drop out of the process at least once.

A new review from the Australian Securities and Investments Commission has uncovered too many customers like Peter left out in the cold by their lender.

The National Credit Code places a legal obligation on banks and lenders to consider how they can extend customers a lifeline when they ask for help in difficult times. That can involve measures such as deferring repayments, reducing the interest rate or extending the term of a loan.

However, too often lenders are falling short — whether it is missing clear requests for help, applying a cookie-cutter approach to complex cases or putting process before people.

In one case from our report, an elderly customer with medical issues was denied support because he couldn’t fill out the online application. It took many months and many phone calls before the lender’s hardship team agreed to take his details over the phone. In the meantime, the collections team kept calling.

In another case, a survivor of family violence asked for her hardship support to be extended — as she was entitled to do — but was instead told to come back after she had been to court.

The last thing somebody trying to escape a violent situation needs is to be blocked by bureaucracy. Yet that is what we have found is happening too often.

As the corporate regulator, we have put lenders on notice to step up and stop looking the other way when customers reach out for support.

We even helped one customer to obtain $6000 in compensation, after it took him six months and six phone calls to get hardship support from his lender.

We’re also working to bust some of the myths that banks and lenders have used to deny their customers the assistance they are entitled to seek under law.

Hardship assistance is not tied to particular life events, like losing your job or getting a divorce. A person can request it whenever they can’t meet repayments, for example due to a rise in living expenses.

Finally, hardship assistance isn’t limited to temporary events — lenders need to consider providing assistance even in longer-term financial difficulty.

In some cases, your lender may not be able to help. In these situations, they need to communicate clearly with you why they can’t and what your options are. And if you’re not happy, you’ve got the right to complain.

While the process can be daunting, it is definitely worth asking. Most hardship notices are approved and result in some assistance.

To jumpstart the hardship process, head to the ASIC Moneysmart website, where you’ll find hardship advice as well as tools to help calculate what repayments you can afford. Next, contact your bank.

You can use the Australian Banking Association’s financial assistance hub to find your bank’s contact details and learn what hardship options are available to you.

You can also contact the National Debt Helpline on 1800 007 007 and talk to a financial counsellor to help with the process of applying for hardship. This is a free and confidential service.

In Peter’s case, he was eventually offered no interest on his credit facility for four months, after his case was escalated.

Asking for help is the first and most important step to getting back on track.

Alan Kirkland is a commissioner at the Australian Securities and Investments Commission