Financial Rights Legal Centre has welcomed ASIC’s open letter to 30 of Australia’s largest lenders calling on them to appropriately support customers experiencing financial hardship.
Financial Rights – which helps run the National Debt Helpline in NSW - has seen an increase in callers to our service facing financial hardship.
The National Debt Helpline experienced a 28% increase in calls to the National Debt Hotline in 2023 compared to this time last year. It also saw a 22% increase in visits to the NDH website.
“Since the beginning of this crisis, callers to our service have doing all they can to make ends meet including cutting the expenses when and where they can,” said Financial Rights CEO Karen Cox. “But with continued interest rate increases and inflation pressures, the cost of living crisis is really beginning to bite.”
“Calls about mortgages have predominated since the final quarter of 2022. In May and June 2023, calls about credit cards, personal loans and buy now pay later products also started to rise, suggesting that people have been using credit to meet rising living costs in the short term, but are now feeling the consequences as the repayments stack up. We are also hearing from people with investment properties and people with a regular salary more frequently – neither are the usual cohort who contact the NDH.”
ASIC’s letter of expectation to 30 lenders including ANZ, CBA, Latitude, MoneyMe and Zip highlights need for lenders to proactively communicate to their customers about when and how they can seek hardship assistance and the options available to them.
“While it is always important to encourage those experiencing the cost of living crisis to reach out to their bank and seek help, it is incumbent upon lenders themselves to be take the initiative and speak directly to their customers. These lenders are well-placed to do so and have a shared interest in ensuring their customers get through these difficult times.”
“Many people experiencing financial hardship remain hesitant to ask for hardship assistance from their bank because they believe it will have a negative impact upon their credit score. This is a huge barrier and needs to be addressed urgently by lenders.”
“Banks need to clearly explain to their customers that it is missing a payment or falling into arrears which harms their ability to seek credit in the future – more so than asking for and obtaining hardship assistance. While hardship assistance will be included on a credit report, this information is not kept as long as information about late or missed payments and does not affect a person’s credit score. Banks need to improve their messaging here if they want to encourage more people to obtain the assistance they need.”
“People who are struggling to pay their mortgages will usually be struggling with other commitments such as council rates and strata levies. The consequences of not paying these bills can be just as bad as not paying your mortgage and you do not have the same right to hardship assistance. It is really important to talk to your home mortgage lender and seek hardship support, rather than getting behind on your rates and strata levies.”
Free, independent advice is available from the National Debt Helpline on 1800 007 007.
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About Financial Rights
Financial Rights is a community legal centre that specialises in helping consumers understand and enforce their financial rights, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals about a broad range of financial issues. Financial Rights operates the National Debt Helpline, which helps NSW consumers experiencing financial difficulties. We also operate the Mob Strong Debt Help services which assist Aboriginal and Torres Strait Islander Peoples with credit, debt and insurance matters.