The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against National Australia Bank (NAB) and its subsidiary AFSH Nominees Pty Ltd (AFSH) for allegedly failing to respond to 345 hardship applications within the 21-day timeframe required by law.

The alleged failures occurred between 2018 and 2023, affecting customers including domestic violence victims, those with serious medical conditions, and those dealing with business closures or job loss.

ASIC Chair Joe Longo said: "'We allege NAB unlawfully failed to respond to their customers' appeal for help when they needed them most.'"

The customers affected by the alleged failures included victims of domestic violence, those with serious medical conditions, and those dealing with business closures or job loss. ASIC is seeking declarations, pecuniary penalties, and adverse publicity orders against NAB and AFSH.

This lawsuit follows ASIC's action against Westpac in September 2023 for similar misconduct. Under section 72 of the National Credit Code, lenders must consider varying the customer's credit contract and advise them of the decision within specified timeframes if a consumer notifies them of financial hardship.

In August 2023, ASIC issued an open letter to the CEOs of all lenders advising of focus on financial hardship and expectations of lenders. ASIC conducted a review of lenders' approach to financial hardship, which resulted in a report published on 20 May 2024. The report highlighted failures of lenders to identify customers in financial stress and criticised their 'cookie-cutter' approaches to dealing with hardship requests.

For the 2023/2024 financial year, 5,715 complaints were filed with the Australian Financial Complaints Authority (AFCA) regarding financial difficulty, an increase of 18% on the prior year.

NAB Group Executive, Customer & Corporate Services, Sharon Cook acknowledged the civil penalty proceedings commenced against it and AFSH Nominees Pty Ltd by ASIC in the Federal Court on 15 November.

"We're sorry that this happened when a number of our customers were in difficult situations and needed us to be there for them," Cook said. "We are focussed on ensuring these customers receive the support they need.

"Following ASIC's report into hardship practices across the industry, we have also been working on a new approach to supporting customers in financial difficulty. This includes consulting with consumer advocates."

NAB and AFSH Nominees are now considering the details of the proceedings brought by ASIC and will continue to fully cooperate with the regulator.