ASIC proceedings
The Australian Securities and Investment Commission (ASIC) has commenced legal proceedings against National Australia Bank (NAB). ASIC alleges that NAB (and one of its Australian subsidiaries) failed to properly assist customers experiencing financial hardship in breach of obligations under the National Credit Code because between 2020 and 2023, NAB reportedly did not respond within the 21-day timeframe required (or at all) to 345 hardship applications. ASIC is seeking declarations, pecuniary penalties and adverse publicity orders, emphasising banks' responsibility to act promptly and fairly towards vulnerable customers.
ASIC’s official press release can be found here.
Relevance in New Zealand
While this type of response is not what we expect in New Zealand (and feels potentially disproportionate), these proceedings are an important reminder to banks and other lenders in New Zealand of their own obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in relation to customer hardship. Like the equivalent regime in Australia, the hardship regime in the CCCFA also has a prescriptive statutory process and timeframes. In New Zealand, the obligation to comply with the lender responsibility principles – i.e. to act with ‘care, diligence and skill’ also applies in the hardship context.
Consequences for creditors of failing to comply with the hardship requirements under the CCCFA can be severe:
- In some situations, a borrower may apply to a court for an order to change the consumer credit contract. As well as being able to give effect to a requested change, the court has a broad jurisdiction to make any other order it thinks fit.
- If the failure to comply amounts to a breach of the responsible lending obligations, a breach can result in statutory damages or pecuniary penalties.
- Currently there is also a due diligence duty on directors and senior managers to ensure lenders comply with their obligations under the CCCFA. Directors and senior managers can be personally liable (including for statutory damages) for failing to comply with their due diligence obligations. The Government has recently announced that this requirement will be removed.
As yet there has not been significant enforcement action in New Zealand directly in relation to breaches of the CCCFA hardship regime. However, given the current economic climate in New Zealand, including high interest rates and increasing numbers of customers rolling off fixed term loans, we expect that banks and other lenders will be seeing increasing numbers of hardship applications. Systems and processes for dealing with applications need to be operating effectively to ensure compliance. This is important, not only for customers experiencing hardship but also for banks and other lenders to protect against regulatory risk.
Our team has extensive experience assisting banks and other lenders with all matters relating to CCCFA compliance, including on developing robust and compliant systems and processes. Please get in touch with the team if you have any questions on the above or if you’d like to discuss further.
This article was co-authored by Tomas Roche, a Solicitor in our Banking and Financial Services team.
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