Australia regulator sues NAB for ignoring hardship application deadlines

8:08 pm Sunday, November 17th, 2024

(Reuters) -Australia’s corporate watchdog on Monday launched civil penalty proceedings against National Australia Bank, the country’s second-largest lender, for failing to respond to hundreds of financial hardship applications within the legally mandated time frame.

Shares in NAB slipped as much as 1.9% to A$38.98 in early trade, largely in-line with a 1.2% fall in the broader financial sub-index.

The Australian Securities and Investments Commission (ASIC) claims that NAB and its unit AFSH Nominees failed to meet the legal 21-day deadline for responding to 345 hardship applications over a five-year period from 2018 to 2023.

Among those affected by NAB’s delayed responses were individuals facing severe personal challenges, such as survivors of domestic abuse, those struggling with grave health issues, and people coping with unemployment or the closure of their businesses, ASIC said.

“NAB’s failures likely compounded the already challenging situation for these people,” ASIC Chair Joe Longo said.

Under Section 72 of Australia’s National Credit Code, an individual with overdue payments can request a change to the terms of their credit contract on the grounds of financial hardship, and creditors are expected to provide a response in writing within 21 days of being informed.

“NAB and AFSH Nominees are now considering the detail of the proceedings brought by ASIC and will continue to cooperate fully with the regulator,” the Melbourne-headquartered lender said in a separate statement.

ASIC’s comprehensive review of major lenders’ financial hardship practices, completed in May 2024, revealed significant failures in identifying and supporting struggling customers.

“We will not hesitate to take decisive action when banks and lenders fail to comply with their obligations,” Longo said.

The corporate regulator is seeking declarations, pecuniary penalties and adverse publicity orders against NAB and AFSH, it said.

In a similar action last year, ASIC launched legal proceedings against Westpac Banking Corp, another major Australian lender, for alleged misconduct in handling financial hardship cases.

(Reporting by Roushni Nair in Bengaluru; Editing by Lisa Shumaker and Andrea Ricci)