NAB and its subsidiary AFSH Nominees have been ordered to pay a $15.5 million penalty for dropping the ball on their responses to customer hardship applications.
The Federal Court handed down the order on Wednesday, finding the two entities failed to respond to 345 hardship applications within 21 days, as required by law.
The breaches occurred during 2018 and 2023, taking in the COVID period when some Australians faced unprecedented financial difficulty as a result of job insecurity and broader economic conditions.
Corporate watchdog ASIC, which brought the legal action, said the penalty sends an important message to other financial institutions that customers should be at the centre of what they do.
"The [court] decision highlights the seriousness of the failures of NAB and AFSH to support their customers experiencing financial hardship," ASIC deputy chair Sarah Court said.
"These failure likely made an already challenging time in people's lives far worse."
What is a hardship application?
Under Australian law, borrowers experiencing financial hardship can apply to their lenders for consideration to see them through periods of difficulty.
Lenders are legally required to provide dedicated services and work with people in financial hardship, including responding to requests within 21 days.
In handing down her decision, Justice Penelope Neskovcin said such applications are an important formal mechanism to protect consumers who may be experiencing hardship.
She said impacts to customers may have been avoided if NAB had provided affected customers with the required notices within the prescribed timeframes.
NAB responds
In a letter to consumer advocate organisations in response to the court ruling, NAB conceded its customers deserved better, particularly during their most challenging financial moments.
It outlined the changes NAB has since made to better supporting its customers in financial hardship, including:
- the hiring of 70 additional staff to support customers in financial hardship
- increasing hardship options available to customers in a bid to ensure they access a solution specific to their situation
- providing staff training to recognise financial hardship indicators and to better support customers
- establishment of NAB Care, a team providing personalised support to customers with specific needs, including financial abuse, unemployment challenges, or repeat scams.
The letter, signed by the bank's executive customer services Jocelyn Turner, said as a result of the actions, more customers are now being referred and receiving hardship support through NAB.
Lenders on notice
In May 2024, ASIC released a report, finding lenders were not doing enough to support customers experiencing financial hardship.
At the time, ASIC chair Joe Longo said in the worst-case scenarios of its review, lenders were simply ignoring hardship requests.
It also found at least 35% of people applying for hardship dropped out of the process at least once because of "unnecessary barriers" preventing customers getting the assistance they needed.
ASIC's report found 80% of hardship requests related to owner occupier home loans, with overcommitment being the most common reason for hardship, followed by reduced income.
See also: What to do if you lose your job and have a mortgage
See also: What happens if you default on your mortgage?
Considerable penalty
NAB and AFSH will pay a combined penalty of $15.5 with both entities also required to pay ASIC's court costs and publish an adverse publicity notice on their respective websites.
They have also been ordered to provide a copy of the notice to each customer affected by their conduct.
ASIC said it will not hesitate to take action when banks and lenders fail to comply with their obligations.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
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