National Australia Bank (NAB) and its subsidiary, Advantedge Financial Services Holdings (AFSH), have been ordered to pay a $15.5 million fine after a Federal Court found them guilty of failing to respond to 345 hardship applications within the legally mandated 21-day period. This decision, delivered on Wednesday, underscores a significant breach of the National Credit Code, affecting hundreds of consumers between 2018 and 2023.
The court’s ruling revealed that many consumers were left in the dark for months regarding the outcomes of their hardship applications. Justice Penny Neskovcin highlighted the gravity of the situation, noting that customers sought assistance during times of medical emergencies, family violence, natural disasters, redundancy, and business failures.
Impact on Consumers and Legal Findings
Justice Neskovcin found that NAB and AFSH’s failure to comply with the National Credit Code had adverse effects on consumers, which could have been mitigated had the banks issued the required notices. The provisions of the code are designed to protect consumers facing financial difficulties by ensuring timely responses to their hardship applications.
According to ASIC Deputy Chair Sarah Court, the ruling “highlights the seriousness of the failures of NAB and AFSH to support their customers experiencing financial hardship.” She emphasized that these failures likely exacerbated already challenging situations for affected individuals.
“This penalty sends an important message to other financial institutions – customers should be at the center of what you do,” she stated.
Response and Remediation Efforts
In response to the court’s decision, NAB and AFSH are required to publish an adverse publicity notice on their websites and inform affected customers of the court’s order. The notice will detail the incorrect use of internal systems by NAB staff, which led to the oversight. The bank has since identified the causes and taken corrective measures.
NAB has initiated a remediation program, providing responses to all affected hardship notices and making remediation payments. The bank has also corrected repayment history information for some customers. Furthermore, NAB has agreed to cover ASIC’s legal costs.
Steps Taken to Improve Customer Support
NAB Executive of Customer Services, Jocelyn Turner, acknowledged the bank’s shortcomings in a communication to consumer advocates.
“Our customers deserved better from us, particularly during their most challenging financial moments,” she admitted. “We have taken our response extremely seriously and have been working alongside ASIC to improve our approach to helping customers experiencing financial difficulty.”
Turner outlined several measures the bank has implemented to enhance customer support, including the establishment of a ‘Care’ team, hiring 70 additional staff members, increasing hardship options, and training employees to recognize indicators of financial distress.
Broader Implications and Future Outlook
The fine against NAB comes in the wake of a report released by ASIC in May last year, which criticized lenders for inadequate support to customers facing financial hardship. The report stressed the importance of the hardship regime in assisting customers during significant life events like serious illness, sudden unemployment, and domestic violence.
ASIC has made it clear that it will not hesitate to take action against financial institutions that fail to meet their obligations under the National Credit Code. The majority of hardship applications involved home and credit card loans, highlighting the critical need for timely and supportive responses from lenders.
Looking ahead, NAB plans to integrate all Advantedge home loans into its main loans department by 2026, as the subsidiary will cease accepting new home loan applications from September 30. This strategic move aims to streamline operations and improve customer service.
The case against NAB serves as a cautionary tale for the banking industry, emphasizing the necessity of placing customer welfare at the forefront of financial services. As financial institutions navigate the complexities of customer support, the lessons from this case will likely influence future regulatory and operational strategies.
