Penalty imposed after hundreds of hardship applications went unanswered within timeframe
The Federal Court has ordered National Australia Bank (NAB) and its subsidiary, AFSH Nominees, to pay a combined penalty of $15.5 million for failing to respond to customers’ hardship requests within the required period.
Between 2018 and 2023, NAB and AFSH did not reply to 345 hardship applications within the 21-day timeframe mandated by law, leaving affected customers without information on the status of their requests.
Under section 72 of the National Credit Code, when a consumer notifies their lender that they are, or will be, unable to meet their credit obligations, the lender is required to consider varying the customer’s credit contract and to advise the customer of its decision within a set timeframe. These contract variations can include measures such as payment deferrals, reduced payment arrangements, interest-only periods, term extensions, capitalisation of arrears, or interest-rate reductions.
NAB and AFSH admitted that they failed to respond to these customers within the time required by credit legislation, and that no response was provided until after the Australian Securities and Investments Commission (ASIC) began legal proceedings. The failure was attributed to NAB staff incorrectly using a “reject” button in the bank’s system, which resulted in customers not receiving any communication about their hardship applications.
“This decision highlights the seriousness of the failures of NAB and AFSH to support their customers experiencing financial hardship,” said Sarah Court (pictured right), ASIC deputy chair. “These failures likely made an already challenging time in people’s lives far worse. This penalty sends an important message to other financial institutions – customers should be at the centre of what you do.”
Justice Penelope Neskovcin, in her ruling, noted that the breached provisions of the National Credit Code serve as an important formal mechanism to protect consumers who may be experiencing hardship. She added that impacts to customers may have been avoided if NAB had provided the affected NAB customers and AFSH customers with the required notices in response to their hardship notices within the prescribed timeframes.
Under the court’s orders, NAB and AFSH must publish an adverse publicity notice on their websites and provide a copy to each customer affected by the breaches. The companies have also agreed to pay ASIC’s legal costs.
In May 2024, ASIC released a report on hardship practices in the lending sector, warning that lenders were not adequately supporting customers facing financial difficulty.
“The hardship regime exists to help customers who are experiencing financial difficulty, often caused by significant life events such as serious illness, sudden unemployment and domestic violence,” Court said. “ASIC will not hesitate to take action when banks and lenders fail to comply with their obligations.”
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