A third of complaints lodged related to home loans
The Australian Financial Complaints Authority (AFCA) has reported a 25% increase in complaints related to financial difficulty in 2023, with a notable portion of these grievances linked to the handling of hardship assistance requests by lenders.
Among the 5,396 complaints lodged, one third were specifically about home loans, highlighting concerns over lenders’ practices in addressing financial hardship.
“We are concerned about the increase in complaints about financial hardship and about the practices of some lenders,” said David Locke (pictured above), chief ombudsman and chief executive of AFCA. “We urge all lenders to identify hardship early and to ensure they provide genuine consideration to a customer’s request for hardship assistance.”
Despite some lenders having prepared for an uptick in hardship claims by investing in specialised teams and improving processes, Locke pointed out that the growing number of complaints indicates that more efforts are necessary.
A troubling trend observed by AFCA is that over half of the complaints related to lenders’ lack of response to hardship assistance requests, a problem especially prevalent among smaller lending institutions and Buy Now Pay Later services.
“These are not complaints about what the lender’s decision was, but consumers saying there was no response at all,” Locke said. “Failure to respond to such a request is a breach of the lender’s obligations, and there is no excuse for this.”
The use of generic responses without considering individual customer circumstances further exacerbates the issue, according to AFCA.
“Care needs to be taken with automated processes,” Locke said. “Lenders are required to give genuine consideration to hardship requests.”
Under Australian financial regulations, banks are mandated to collaborate with customers to devise a sustainable solution to their financial woes, considering their unique situations.
Natalie Cameron (pictured upper right), lead ombudsman for banking and finance at AFCA, highlighted additional concerns, including lenders issuing default notices to consumers who had negotiated repayment plans, obstructing financial counsellors from assisting consumers, and pursuing debt recovery despite ongoing AFCA deliberations.
“Vulnerable complainants are not always identified or given the care required,” Cameron said. “Sometimes they are simply not in a position to navigate the process and provide the required information in the requested format.”
The Australian Securities and Investments Commission has also been reviewing hardship applications and last year urged lenders to enhance support for their customers.
AFCA advised borrowers facing financial challenges to promptly seek hardship assistance from their lenders to prevent the accumulation of overdue payments.
“Act quickly so as many options as possible remain open to you,” Cameron said. “We’d also encourage people to seek help from a free financial counsellor sooner rather than later.
“Borrowers who are not happy with the response to a hardship request can make an internal complaint to their lender to have the decision reviewed. The bank generally has 30 days to respond to a complaint.
“If they remain unhappy after the complaint has been considered by the lender, or the complaint hasn’t been considered in time, they can access AFCA’s free and impartial dispute resolution service.”
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