Australian banks ignore thousands of customers’ hardship requests | Banking

Banks are blatantly ignoring or giving “illegal” responses to the increasing number of hardship requests from distressed customers despite regulatory sanctions.

Nearly 2,900 customers complained that their banks were not responding to their requests for help in 2024-25, according to new data from the Australian Financial Complaints Authority (Afca).

Afca’s chief ombudsman for banking and finance, Natalie Cameron, said non-response had risen for four consecutive years despite lenders being legally obliged to consider distress requests.

“Despite ongoing regulatory scrutiny and targeted efforts, people’s claims for hardship relief are still not being met,” Cameron said.

Afca found that large banks’ automated systems for distress requests produced “illegal” responses and failed to take into account individual customers’ circumstances, while smaller lenders lacked even these systems.

“We need to see a shift towards more tailored, empathetic responses that recognize the complexity of people’s circumstances and offer real help when it’s needed most,” Cameron said.

Domenique Meyrick, managing director of Financial Consultancy Australia, said customer support teams may lack training, licensing or support from the rest of the bank, leaving customers stranded.

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“There is no excuse for not responding when someone reaches out [for] “Help me,” said Meyrick. “This is unorthodox in a bad way.”

Failing to respond to requests for compassionate changes to repayment plans could fracture customers’ strained relationships with lenders and force them to take on extra, higher-risk debt to avoid default, Meyrick said.

“Not only does this increase stress and damage trust, but it can also lead to a further deterioration of people’s financial situation in a very tangible way,” Meyrick said.

“Everyone realized that this was really important, so there was an increase in bad behavior like unresponsiveness or lack of response [being] At the time, it’s not believable.

Banks are under pressure due to actions by corporate regulators, annual warnings from Afca’s reports and campaigns by financial advisers.

ANZ paid a penalty of $40 million and NAB paid $15.5 million for inadequate distress support processes. The Australian Securities and Investments Commission (Asic) also took action in the courts against Westpac.

Lenders have increased the speed and completion rate of assessment processes by working to make it easier for customers to provide distress reports and be assessed for support throughout 2024-25, Asic reported in September.

However, Asic found that cost of living pressures, along with increased access to hardship claims, were also leading to an increase in hardship claims, with Victoria recording the highest figure nationally.

Data from Afca’s annual review, shared exclusively with Guardian Australia before publication on October 22, showed rising complaints about mortgage repayment struggles were offset by calls for help being rejected, with complaints about financial difficulties falling to 4,764.

The Ombudsman received more than 100,000 customer complaints about financial institutions in 2024-25.

Financial adviser Claire Tacon, of the national debt helpline, said borrowers seeking leniency from lenders were entitled to a response and should contact Afca if they were met with silence.

“It’s really disappointing that people come to us after trying to resolve their issues with banks, talk to the distress department there, but come back with no help and not knowing what their rights are,” Tacon said.

“Aca will contact the bank [then] it is often resolved, but it happens later than it should and follows a lot of stress and anxiety for the client.”

A home loan customer who was a long-term customer of his bank experienced periods of distress again in 2022 and 2023. He alerted his bank, but the bank issued a notice of default and initiated enforcement action in April.

In 2025, Afca found that the bank had no right to take this action before responding to financial distress claims and demanded that the bank pay damages of $2,250 and refund the foreclosure costs and default interest rates it collected from the borrower.