Banking Hardship Response Failures Worsen Despite Regulatory Pressure
Australian banks are reportedly failing to adequately respond to a growing number of financial hardship requests from struggling customers, according to exclusive data from the country’s financial watchdog. Sources indicate that automated systems have generated generic responses that fail to account for individual circumstances, while some institutions allegedly provide no response at all.
Complaint Statistics Reveal Systemic Issues
Nearly 2,900 customers complained their bank had failed to respond to pleas for assistance in 2024-25, according to new data from the Australian Financial Complaints Authority (AFCA). Analysts suggest non-responses have risen for four consecutive years, despite lenders being legally obliged to consider hardship requests.
“People’s requests for hardship assistance are still not being met … despite sustained regulatory scrutiny and targeted efforts,” AFCA’s lead ombudsman for banking and finance Natalie Cameron stated in the report. The situation in Australia reflects broader challenges in financial customer service systems worldwide.
Automated Systems Creating “Cookie Cutter” Responses
Big banks’ automated systems for hardship requests had generated what sources described as “cookie cutter” responses that failed to account for individual customers’ circumstances. Meanwhile, smaller lenders reportedly lacked even basic response systems, according to the AFCA findings.
“We need to see a shift toward more tailored, empathetic responses that recognise the complexity of people’s circumstances and offer genuine help when it’s needed most,” Cameron emphasized. The report comes amid broader industry developments in customer service technology.
Consequences for Vulnerable Customers
Financial Counselling Australia’s chief executive Domenique Meyrick suggested that customer assistance teams could lack training, licensing or support from the rest of the bank, leaving customers to fall through the cracks. “There is no excuse for there being no response when someone reaches out [for] help,” Meyrick stated. “This is off the charts in terms of bad.”
Failing to respond to requests for compassionate changes to repayment plans could break pressured customers’ relationships with their lenders, forcing them to turn to extra, higher-risk borrowing to avoid defaulting, the report indicates. This situation mirrors related innovations in consumer protection emerging globally.
Regulatory Action and Penalties
Banks have been under increasing pressure amid actions from the corporate regulator, annual warnings from AFCA’s reports and campaigns from financial counsellors. ANZ has reportedly paid a $40m penalty and NAB has paid $15.5m over poor hardship support processes. The Australian Securities and Investment Commission (ASIC) has also brought proceedings against Westpac, which remain before the courts.
Despite these penalties, the problem appears to be worsening. “Everybody has been on notice that this really matters, so seeing a rise in poor behaviour like no response or not [being] timely, it beggars belief,” Meyrick added. These banking challenges coincide with recent technology advancements in other sectors.
Increased Hardship Applications Amid Economic Pressures
Lenders have worked to make it easier for customers to provide hardship notices and be assessed for support over 2024-25, increasing the speed and completion rate of assessment processes, ASIC reported in September. However, improved access to hardship applications combined with cost-of-living pressures have resulted in a surge in hardship notices, with Victoria recording the highest number nationally.
The data from AFCA’s annual review, shared exclusively with Guardian Australia before its release on 22 October, showed rising complaints regarding home loan repayment struggles were offset by declining rejections of calls for help. The evolution of these financial systems reflects market trends in automated customer service.
Customer Advocacy and Resolution Pathways
A financial counsellor with the national debt helpline, Claire Tacon, said borrowers who asked their lender for lenience were entitled to a response and should contact AFCA if they were met with silence. “It’s really disappointing that people are coming to us after trying to resolve their issue with the banks, speaking to the hardship department there, but coming away not being assisted and not knowing what their rights are,” Tacon stated.
The ombudsman received more than 100,000 customer complaints about financial institutions in 2024-25. “AFCA will contact the bank [then] usually it is resolved, but it’s later than it should have been, and it’s after a lot of stress and worry for the customer,” Tacon explained. These customer service challenges parallel industry developments in other sectors.
Case Study Highlights Systemic Failure
One home loan borrower, a long term client of her bank, experienced periods of hardship in 2022 and again in 2023. She alerted her bank but the bank issued a default notice and began enforcement action that April. In 2025, AFCA found the bank had no right to take that action before responding to the financial hardship requests, requiring the bank to pay $2,250 in compensation and refund any enforcement costs and default rates of interest it had charged the borrower.
The situation reflects historical patterns in financial services similar to those documented in the era of Joseph Banks, where institutional responses often failed to account for individual circumstances. Meanwhile, other sectors are experiencing their own challenges, as seen in market trends affecting various industries.
The report concludes that despite regulatory pressure and substantial penalties, Australian banks continue to struggle with implementing effective, compassionate response systems for customers experiencing financial hardship. The ongoing situation highlights the tension between automated efficiency and personalized customer care in modern financial services.
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