Case study – Best practice hardship support

Background

In 2016, a complainant secured both a home loan and an investment loan to purchase properties. However, a series of unfortunate events led to severe financial hardship. In February 2020, the complainant lost her job as a truck driver, compounded by licensing issues and post-traumatic stress disorder. Despite receiving various forms of hardship assistance from the bank – such as reduced payments, COVID-19 support, payment breaks, and referrals to financial counselling – the situation did not improve. By February 2023, the complainant had sold her home to address the home loan but struggled to meet repayments on the investment loan.

Complaint

Following the bank’s refusal to extend further hardship support, the complainant sought resolution through AFCA.

Outcome

AFCA’s investigation affirmed that the bank had fulfilled its obligations under the NCC and the Banking Code of Practice.

The bank consistently acknowledged the complainant’s hardship notices, informed her of her rights, requested necessary information, and discussed potential solutions, like selling the property, when required.
The bank’s special assistance team also offered referrals to financial counselling, followed up on overdue payments, discussed alternative options, and allowed time for property sales, aligning with the Banking Code’s standards for supporting vulnerable customers.

AFCA concluded that, despite the complainant’s continued hardship and significant arrears, varying the loan contracts was not feasible due to her substantial monthly budget deficit and unpaid council rates. Instead, AFCA granted her four months to sell the investment property.

This case underscores the importance of banks offering flexible and compassionate support to customers facing financial difficulties. The bank’s ongoing communication and exploration of options, including financial counselling referrals, played a crucial role in helping the complainant make informed decisions. By allowing time to sell the property and providing constructive advice, the bank, in collaboration with AFCA, ensured that the complainant was not placed in a worse financial situation.

Case study – Tailoring hardship support to meet individual needs

Background

Ms S and Mr D, a married couple in their 70s, held a joint home loan with a lender. Mr D, the sole income earner, ran his own business and had consistently made repayments on time. Unfortunately, Mr D was diagnosed with cancer and required six months off work for immediate treatment, including radiation and chemotherapy.

Ms S, unfamiliar with the business finances or household income, contacted the lender to request hardship assistance during Mr D’s treatment. She asked for a six-month pause in repayments, with the intention of resuming regular payments once Mr D returned to work.

Despite this, the lender insisted on completing a statement of financial position before offering any assistance. Eventually, the lender granted a three-month moratorium followed by a repayment trial, explaining it was part of their standard hardship process. This forced Mr D to return to work prematurely – before completing his treatment – so the loan repayments could resume. Both Ms S and Mr D found the hardship process too difficult and were unwilling to engage with it again.

During the repayment trial, the lender reported adverse repayment history information (RHI) on their credit files, despite the couple making full repayments under the terms of the trial.

Complaint

The complainants said the lender failed to meet its hardship obligations and did not provide the necessary extra care, despite being aware of their vulnerable circumstances.

Key issues raised by the complainants included:

• The lender placed unnecessary barriers in their path when they sought assistance and did not offer clear options for support, despite being informed of their difficult circumstances.
• The lender requested irrelevant and burdensome information, which Ms S was unable to provide on her own, and refused to consider any form of assistance until this information was supplied.
• Although Ms S had provided sufficient verbal information about their situation, the lender continued to insist on a statement of financial position, treating the process as a ‘tick box’ exercise rather than tailoring assistance to their needs.
• The lender was aware that Mr D was extremely unwell, barely able to speak due to surgery, and affected by treatment drugs, yet it insisted on speaking with him directly to obtain his statement of financial position before considering the hardship request.
• Despite knowing that Mr D would be off work for six months without pay, the lender only offered a generic three-month moratorium on repayments.

The complainants argued that these actions caused them considerable stress and hardship during an already difficult time and believed the lender did not fulfil its obligations to provide adequate hardship support or extra care.

Outcome

AFCA ruled that the lender had failed to handle the situation appropriately. The lender was required to pay each complainant the maximum compensation available at the time – $5,400 – for the extreme stress and inconvenience caused.

Furthermore, the lender had to amend the adverse RHI on their credit files to reflect that a hardship arrangement was in place during the repayment trial. AFCA acknowledged that Ms S and Mr D had complied with the trial and had been capable of affording the loan under the revised terms.

The case serves as a reminder to financial firms about the importance of properly trained staff who understand hardship obligations and the necessity of tailoring hardship support to meet individual needs, especially for vulnerable customers.