The Australian Securities and Investments Commission (ASIC) has written to the nation’s largest lenders to underscore the importance of their obligations amid the cost-of-living crisis.

The corporate regulator revealed on Wednesday that it contacted bank bosses after significant numbers of Australian households are in financial stress due to inflation and higher interest rates.

A review will examine how well companies are meeting the requirements to support customers in financial hardship.

ASIC commissioner Danielle Press said lenders must appropriately support customers who are doing it tough under Australian consumer protections.

Millions under stress

“The economic environment has shifted over the last year, placing significant financial pressure on everyday Australians,” Ms Press said on Wednesday.

“ASIC reminds lenders that they must have the right arrangements in place to respond to requests for assistance from customers experiencing financial hardship, and to work constructively with them to find a sustainable solution.”

The letter, which was sent to all four of the major banks and 26 other major lenders – including AMP, ING, Zip and Macquarie Group – outlines obligations to Australian consumers.

They include:

• “Proactive” communication with customers about their right to seek help from a lender
• Considering the circumstances of those customers when they do seek assistance
• Maintaining regular communication with customers when they’re moving out of hardship.

Mortgage stress has reached the highest levels in more than a decade, according to Roy Morgan, with more than a million households currently “at risk” of defaulting on their loans.

Higher rates have added more than $1200 to monthly repayments on a typical $500,000, 25-year home loan, while essential energy and grocery bills have also increased sharply.

Lenders’ obligations

But what many Australians don’t know is that banks and other lenders are required to provide assistance to customers doing it tough, including varying loan conditions if repayments are unaffordable.

Lenders must “make it easy” for customers to seek hardship assistance, ASIC says, and they are also required to “genuinely consider” requests for help when they’re made, not ignore them.

“Where possible, work with them to develop a sustainable solution to their financial hardship,” ASIC wrote in its letter to lenders on Wednesday.

“You should tailor solutions for consumers where a standardised ‘one-size-fits-all’ approach may not meet a particular consumer need.

“For example, if a consumer has had their loan repayments deferred, you should ensure that how a consumer will catch up on missed repayments is manageable and offer alternatives.

“Include details of how the assistance will affect the consumer’s loan and repayments over the short and long term – including the effect of capitalising interest – and alternative options, where applicable,” ASIC said.

These obligations are drawn from the National Credit Code, which requires lenders to vary contracts if customers notify them that they’re unable to meet repayments.

Australians experiencing financial hardship are advised to visit ASIC’s Moneysmart website for additional advice about how to contact a lender and ask for help.

Alternatively, the National Debt Helpline, which offers free appointments with financial counsellors, can be reached on 1800 007 007.