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A recent report by ASIC has implications for all credit
providers.
ASIC has issued Report 783 – Hardship, hard to get help:
Lenders fall short in financial hardship support
("Report 783") after conducting a review
of ten (10) home lenders to understand how credit licensees are
supporting customers experiencing financial hardship. ASIC
identified that the root cause for licensees adopting poor
practices was their focus on financial risk and operational
efficiency instead of customer experience and outcomes. Despite the
report only reviewing ten (10) home lenders, the findings of Report
783 are relevant and applicable to all credit providers.
Expectations of Lenders
Compliance with the financial hardship requirements remains an
enforcement priority for ASIC for 2025. It is important that
lenders ensure their systems and processes are sufficient to
appropriately respond to hardship notices and work to implement
some of the good practices mentioned below.
Lenders should consider taking the following action:
ensure customers are aware of the availability of hardship
assistance;
allocate a person or team responsible for hardship assistance
and dealing with customers who request this;
liaise with customers to develop tailored solutions rather than
applying a generic or standardised approach;
identify and support customers experiencing financial hardship
or vulnerability e.g. refer customers to support services;
respond to hardship notices in a timely manner;
ensure hardship assessment processes are easy and efficient for
the customer;
ensure updates are provided to customers on the progress of
their hardship notice;
monitor compliance with legislative timeframes including dates
of information requests and customer outcomes;
keep open lines of communication with the customer during and
at the end of the hardship assistance period;
communicate to the customer clearly regarding the outcome of
the hardship notice, including providing specific and detailed
information where the application has been denied; and
provide new and refreshed training to staff in handling
hardship notices and vulnerable customers.
Key Findings
Report 783 outlines four (4) key findings which have been
summarised in the table below. We have also included some examples
of good and poor practices:
Finding 1: Accessibility of hardship
assistance
Examples of good practices observed:
making it easy for a customer to give a hardship notice,
including when and how to request hardship assistance;
expanding financial hardship solutions to support the
individual needs of customers e.g. introducing interest only
periods and loan term extensions;
communicating in a timely manner after customers have missed
payments; and
including hardship information on a variety of communications,
including statements or in notifications about interest rate
increases.
Examples of poor practices observed:
failing to identify when a customer was giving a hardship
notice;
not being proactive in informing customers about financial
hardship;
providing inadequate information about hardship
assistance;
lack of understanding policies and training material on
hardship notices i.e. focus on hardship being short-term and
resulting from a specific event; and
customer-facing staff failing to refer customers to the
hardship team.
Finding 2: Simple processes for assessing
hardship
Examples of good practices observed:
accepting hardship applications over the phone;
introducing streamlined assessment processes to limit the
amount of supporting documentation required from the customer;
and
following up customers after requesting information.
Examples of poor practices observed:
failure to tailor the hardship assistance to the customer;
customers being required to explain their hardship to multiple
representatives of the lender;
lenders issuing onerous requests for documents that were
irrelevant to the hardship notice; and
lenders providing short-term assistance (up to three
months)
Finding 3: Communicating effectively with
customers
Examples of good practices observed:
explaining the impact of hardship assistance on a
customer's credit report and what is needed from the
customer;
introducing app notifications to update the customer on the
status of their hardship notice;
consistent communication during and at the end of the hardship
assistance period; and
providing multiple contact attempts using different contact
channels at the end of the hardship assistance period to ensure the
customer understood what was required of them at all stages of the
hardship assistance.
Examples of poor practices observed:
providing broad and ambiguous reasons for declining
hardship;
providing inconsistent information about the impact of hardship
on credit reporting; and
inconsistent communication during and at the end of the
hardship assistance period.
Finding 4: Supporting vulnerable
customers
Examples of good practices observed:
providing training to staff in relation to identifying customer
vulnerability in a timely manner; and
providing additional support to vulnerable customers e.g.
referring customers to support services.
Examples of poor practices observed:
requiring that vulnerable customers continuously explain their
circumstances, despite this being distressing; and
failing to act in accordance with the vulnerable customer's
requests regarding their preferred communication channels.
Background
Section 72 of the National Credit Code enables customers to
advise their lender of their inability to meet their obligations
under a credit contract. Credit licensees must, therefore, consider
whether to vary the customer's credit contract and assist the
customer in meeting their obligations. This may include a reduction
in payments, deferral of payments or an extension on the term of
the loan.