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Hardship support is a legal obligation for lenders to provide assistance to customers who are experiencing genuine and temporary financial hardship and are unable to meet their loan repayments.
The Australian Securities and Investments Commission (ASIC) released a report observing the impact of this initiative, highlighting that lenders need to do more to protect consumers.
In its study, the regulator found that 35 per cent of customers dropped out of the assessment process at least once, and in 40 per cent of cases where payments were reduced or deferred, customers fell into arrears right after the assistance period ended.
“We have some concerns about the overall quality of lenders’ hardship responses,” said ASIC commissioner Kate O’Rourke.
“For example, consumer groups and financial counsellors continue to tell us there are still lenders taking a cookie-cutter approach to hardship, rather than tailoring responses to the customer’s individual circumstances.”
The top five reasons for hardship notices between 1 January 2024 and 30 June 2025 were:
- Overcommitment: 99,852
- Reduced income: 77,583
- Medical: 58,803
- Unemployment: 54,771
- Separation: 27,443
Thankfully, ASIC observed a noticeable improvement in consumers’ ability to access financial hardship assistance.
There was a 58 per cent increase in the number of hardship notices relating to home loan accounts compared to the 18-month period before our reports were released.
The process itself has also become easier. Of 10 lenders analysed, three saw dropout rates decrease by over 40 per cent compared to the previous 18 months. Further, six lenders took less time to approve notices compared to the preceding 18 months.
Another two lenders saw the proportion of customers whose payments had either been reduced or deferred and who immediately fell into arrears after their hardship assistance period ended drop by over 28 per cent compared to the previous 18-month period.
This turnaround in issues has been attributed to a few key practices:
- Increased awareness.
- Updated policy and training material.
- Improvements to identifying hardship notices.
- More flexibility in how information is collected.
- No longer issuing requests for information by default.
- Proactive customer contact prior to their assistance period ending.
- Improvements made to communications at the end of a hardship arrangement.
However, some are still lacking in their financial hardship policy. ASIC urged these lenders to adopt a proactive, continuous improvement approach to supporting their customers experiencing financial hardship.
There have been plenty of high-profile breaches from lenders that ASIC has acted against, including NAB, ANZ, and Resimac.
The regulator will continue to monitor these practices: “Financial hardship assistance continues to be a key focus area for ASIC, particularly as some consumers continue to experience cost-of-living pressures,” said O’Rourke.
[Related: AFIA launches Finance Industry Code of Practice]
