Thousands Left in Financial Limbo as Banks Default on Compassion
Australia’s banking sector is facing mounting criticism as new data reveals systemic failures in responding to customer hardship requests, leaving vulnerable borrowers without crucial financial support during challenging economic times. The Australian Financial Complaints Authority (Afca) has documented nearly 2,900 complaints from customers whose banks failed to respond to assistance pleas in 2024-25, marking the fourth consecutive year of worsening non-response rates.
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Automated Systems Generate Inadequate Responses
According to Afca’s lead ombudsman for banking and finance, Natalie Cameron, major banks’ reliance on automated systems has created a crisis of “cookie cutter” responses that fail to account for individual circumstances. Meanwhile, smaller lenders often lack even basic hardship assessment systems. “People’s requests for hardship assistance are still not being met despite sustained regulatory scrutiny and targeted efforts,” Cameron emphasized, calling for more tailored, empathetic responses that recognize the complexity of people’s financial situations.
The situation reflects broader industry developments where technological solutions sometimes undermine rather than enhance customer service. Financial institutions are struggling to balance efficiency with genuine customer care, particularly during periods of economic stress.
Human Cost of Institutional Failure
Financial Counselling Australia CEO Domenique Meyrick described the non-response rates as “off the charts in terms of bad,” noting that customer assistance teams often lack proper training, licensing, or institutional support. “There is no excuse for there being no response when someone reaches out for help,” Meyrick stated, highlighting how these failures can force customers toward higher-risk borrowing options to avoid defaulting.
The consequences extend beyond immediate financial stress. “Not only is it exacerbating the stress and damaging trust – it can actually lead, in a very tangible way, to people’s financial situation becoming worse,” Meyrick explained. This breakdown in the lender-borrower relationship mirrors challenges seen in other sectors where recent technology implementations have sometimes created distance between service providers and those they serve.
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Regulatory Actions and Penalties
The corporate regulator has taken significant enforcement action, with ANZ paying a $40 million penalty and NAB paying $15.5 million over poor hardship support processes. The Australian Securities and Investment Commission (Asic) has also brought proceedings against Westpac, which remain before the courts. These penalties underscore the seriousness of the systemic failures and the regulatory commitment to addressing them.
Despite these actions, the problem persists, suggesting deeper structural issues within banking operations. As financial institutions work to streamline hardship applications, they must also consider how market turbulence and policy shifts affect their capacity to deliver meaningful customer support during difficult economic periods.
Surge in Hardship Notices
Asic reported in September that improved access to hardship applications, combined with cost-of-living pressures, has resulted in a significant surge in hardship notices. Victoria recorded the highest number nationally, indicating particular regional challenges. While lenders have worked to make hardship notices easier to submit and assessment processes faster, the volume of requests appears to be overwhelming existing systems.
This surge coincides with other related innovations in customer service technology across industries, though the banking sector appears to be struggling with implementation that maintains human oversight and compassion.
Consumers’ Rights and Recourse
National Debt Helpline financial counsellor Claire Tacon emphasized that borrowers requesting lenience are entitled to a response and should contact Afca if 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 said.
While Afca intervention typically resolves these cases, Tacon noted that “it’s later than it should have been, and it’s after a lot of stress and worry for the customer.” The situation highlights how market trends in customer service responsiveness affect consumer trust across multiple sectors.
Case Study: Systemic Failure in Action
One home loan borrower, a long-term client of her bank, experienced periods of hardship in 2022 and again in 2023. Despite alerting her bank to her situation, the institution issued a default notice and began enforcement action in April 2023. 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 interest charged.
This case exemplifies how technological systems must be balanced with human judgment, much like how recent technology in other fields requires careful implementation to serve rather than undermine user needs.
Path Forward: Empathy and Efficiency
The banking industry faces a critical juncture where it must reconcile automated efficiency with genuine customer care. As Cameron stressed, institutions need “a shift toward more tailored, empathetic responses that recognise the complexity of people’s circumstances and offer genuine help when it’s needed most.” With more than 100,000 customer complaints about financial institutions recorded in 2024-25 alone, the urgency for meaningful reform has never been clearer.
The combination of regulatory pressure, public scrutiny, and genuine consumer suffering creates an imperative for Australian banks to fundamentally rethink their approach to customer hardship—before more vulnerable Australians pay the price for institutional failure.
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