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The regulator has claimed Resimac adopted a one-size-fits-all approach to hardship applications that was “particularly unfair for customers experiencing vulnerability”.
The Australian Securities and Investments Commission (ASIC) has sued non-bank lender Resimac for allegedly failing to “provide appropriate care” when responding to hardship applications from home loan customers between 1 January 2022 and 15 February 2024.
The regulator alleged that Resimac’s failures in handling customers experiencing financial hardship caused thousands of home loan customers to suffer financial distress and said these shortcomings were especially unfair to vulnerable customers.
In civil penalty proceedings, ASIC alleged that Resimac imposed a ‘one size fits all’ approach to hardship applications and that it typically requested extensive standard information from vulnerable customers without considering whether all of it was relevant and necessary in light of individual circumstances and information already provided.
ASIC also claimed that when vulnerable customers did not provide the standard information, Resimac summarily rejected their hardship applications.
Resimac’s purported failings contravene its obligation as required by its credit licence and relate to a period between 1 January 2022 and 15 February 2024.
Resimac responds to civil suit
Resimac acknowledged the civil suit and said it was co-operating with the regulator and its investigation.
“Resimac acknowledges that its previous practices regarding hardship notices provided by customers could have been better and apologises that this has occurred,” the lender said in a statement.
“Since becoming aware of the issue, Resimac has enhanced its processes to give greater support to customers facing financial difficulties, in accordance with ASIC’s recommendations in ASIC Report 782 of May 2024.”
The non-bank lender also said it is developing a Financial Contribution Program for affected customers, including refunds of fees and interest.
Vulnerable customers hit hardest
Commenting on the case, ASIC deputy chair Sarah Court said: “This approach was particularly unfair for customers experiencing vulnerability, for example, related to domestic and family violence, bereavement, separation or poor health, who were least likely to be in a position to provide the required standard information.
“As ASIC’s report on hardship last year showed, failures in the approach and time taken to assess hardship applications can cause significant consumer harm, with many customers withdrawing from the process.
“Lenders and managers of consumer loans must do more to support customers in difficult financial circumstances, and not put up barriers or apply a faceless, cookie-cutter approach.
“Not only does this approach fail to treat customers with respect but we contend it is unlawful and breaches the licensee’s obligations.
“While we acknowledge that many lenders have responded to ASIC’s demand to improve their practices and frameworks for assessing hardship applications, it comes as too little, too late for many customers experiencing financial distress.”
Lenders under scrutiny
Resimac is not the first lender to fall under the regulator’s spotlight for issues related to financial hardship.
In 2023, ASIC commenced civil proceedings against Westpac for allegedly failing to process 229 hardship applications and last year it sued National Australia Bank (NAB), alleging the major lender “failed 345 of its customers at their most vulnerable”.
The latest allegations come after the Australian Financial Complaints Authority (AFCA) released its annual review for the financial year ending June 2024, where the body said the rise in complaints related to financial hardship was a “significant issue of concern”.
“Complaints in this area were up 18 per cent over the past year, with a substantial portion relating to home loans,” AFCA’s report said.
“Many complaints were about failures by lenders to properly respond to, or adequately address, hardship requests. This was more pronounced among smaller lenders and buy now, pay later (BNPL) providers, though there were also issues among larger lenders where, for instance, automated processes can fail to account for individual circumstances.”
[Related: ASIC sues major lender]
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