National Australia Bank Ordered to Pay $15.5 Million for Leaving Struggling Customers in Limbo

Key Takeaways

• Penalty for Delays: NAB and AFSH were fined $15.5 million for failing to respond to 345 hardship applications within the 21-day legal deadline.
• Impact on Customers: The delays left customers, many facing illness, unemployment, or domestic violence, without timely answers or relief.
• Court’s View: Justice Neskovcin called the breaches serious and avoidable, stressing the importance of the National Credit Code’s hardship provisions.
• ASIC’s Stance: ASIC Deputy Chair Sarah Court warned the industry that customers must be at the centre of operations and that non-compliance will face enforcement action.
• Further Obligations: NAB and AFSH must publish an adverse publicity notice, inform affected customers directly, and cover ASIC’s legal costs.

Deep Dive

A Federal Court in Australia has recently ordered National Australia Bank (NAB) and its subsidiary, AFSH Nominees Pty Ltd (AFSH), to pay a combined $15.5 million in penalties after failing to meet legal obligations to customers facing financial hardship.

Between 2018 and 2023, the court found, NAB and AFSH failed to respond to 345 hardship applications within the 21-day timeframe required by the National Credit Code. This left customers, many already dealing with serious illness, sudden unemployment, or domestic violence, without timely answers that could have eased their financial strain.

ASIC Deputy Chair Sarah Court said the case underscored the importance of putting customer welfare at the forefront, “These failures likely made an already challenging time in people’s lives far worse. This penalty sends an important message to other financial institutions – customers should be at the centre of what you do.”

Justice Neskovcin described the breached provisions as “an important formal mechanism to protect consumers who may be experiencing hardship,” noting that the harm could have been avoided if NAB and AFSH had provided the required responses on time. She also highlighted the “significant scope, and thereby the seriousness, of the contravening conduct, ”with a high number of admitted breaches of section 72(4) of the Code."

In addition to paying the penalty, NAB and AFSH must publish an adverse publicity notice on their websites and send it directly to affected customers. They have also agreed to cover ASIC’s legal costs.

The ruling follows ASIC’s May 2024 industry-wide hardship review, which found lenders were falling short in supporting struggling customers. At the time, ASIC warned the lending sector it would not hesitate to take enforcement action against institutions that failed to comply with hardship obligations.

“The hardship regime exists to help customers who are experiencing financial difficulty,” Ms Court reiterated. “ASIC will not hesitate to take action when banks and lenders fail to comply with their obligations.”

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