Check against delivery

Good morning to you all.

I would like to begin by acknowledging the Gadigal people as the traditional owners and custodians of the land we are meeting on. I pay my respects to their elders past, present and emerging – and extend that respect to Aboriginal and Torres Strait Islander people here today.

It’s a pleasure to be here this morning – and, on behalf of my fellow panellists, can I first thank AFSA for bringing us together for this important conversation.

I have been invited to open this session with some reflections on what stewardship means to ASIC and how our work – together with that of our fellow regulators – promotes confidence in the credit system.

To frame that discussion, I will start by briefly outlining ASIC’s role within the credit system – and then talk about some of the work we are doing in this area.  

The examples I will draw on include our work on financial hardship, which to my mind most effectively demonstrates ASIC’s stewardship role in action. I also want to talk about some of our other work in relation to vulnerable consumers, particularly in regard to recent credit-related enforcement action.

ASIC’s role within the credit system

First to ASIC’s role in the credit system. Like each of the agencies represented on this panel, ASIC has a distinct remit – and that remit brings us each into contact with different participants in the credit system.

In ASIC’s case, the participants we most often interact with are the entities that we regulate – which includes the consumer credit sector. In that sense, our role as a steward is to affect change – at the company level – to drive good consumer outcomes.

How does ASIC affect that change? The short answer is by promoting a culture of compliance and accountability. We have a suite of regulatory resources to achieve this – up to and including enforcement action.

Our resources are, of course, finite. So we must make decisions about where to direct them to achieve the maximum impact. That means identifying and targeting what we consider to be the most significant sources of harm.

In the face of ongoing cost-of-living pressures, it’s fair to say we are having reported to us significant levels of credit and debt related harms. As such, protecting consumers – especially vulnerable consumers – from poor conduct across the sector is an enduring priority for ASIC.

Financial hardship

As you may be aware, financial hardship has been an area of sustained focus for us for some time. You are likely aware of this because one of the most effective regulatory resources we have to affect change is communication – and we have been unequivocal in our public commentary and in our engagement with lenders about the importance of the hardship obligations.

I want to share with you a high-level timeline of our financial hardship work. Not only because of its relevance to our discussion today. But also because it provides an example of stewardship in action – and the different regulatory and enforcement levers we have at our disposal to help achieve fairness and good consumer outcomes in the credit system.

In mid-2023, we began seeing evidence of increasing levels of financial distress among consumers. Through our supervisory work we also saw signs that some large lenders did not appear to be meeting their obligations to customers in financial hardship.

In August that year we wrote an open letter to lenders, communicating our expectations. We then commenced an extensive data collection exercise, collecting 900,000 hardship notices from 30 lenders, relating to half a million credit accounts across a two-year period.

We also commenced a deeper review into 10 particular home lenders. We analysed data on how notices were handled, reviewed 80 case studies and conducted site visits involving over 170 staff.

In the course of this work, we observed that lenders were not providing adequate information to their customers about hardship. Some failed to identify when a customer was giving a hardship notice – meaning that customers either didn’t receive timely assistance or didn’t receive assistance at all.

We also observed that the process was confusing and frustrating. So much so, that around one in three applicants (35%) dropped out on at least one occasion after giving a hardship notice.

We communicated these findings and our recommendations in a report released in May: ‘Hardship, hard to get help: Lenders fall short in financial hardship support’ (REP 783).

We also provided individual written feedback to each lender in our review and asked them to prepare an action plan. We are following up to ensure those actions are taken – and are considering further regulatory action in relation to some issues we identified through the review.

Coinciding with the publication of our report, ASIC’s Moneysmart website launched it’s ‘Just Ask’ campaign. The objective of this campaign was both to raise consumers' awareness about their rights in relation to hardship notifications – and to break down the emotional barriers preventing them from seeking assistance.

We are continuing to collect hardship-related data until at least June 2025 – and will further engage with lenders where we identify indicators of poor customer outcomes. 

An additional and important component of our work in relation to hardship is enforcement. In September 2023, ASIC commenced civil penalty proceedings in the Federal Court against Westpac, alleging it had failed to respond to customers’ hardship notices on multiple occasions within the time required by law.

We took court action to underline our concerns as to the seriousness of this issue for the consumers affected, and to send a broader message to the industry about our likely approach in circumstances where the issues we had identified are not rectified.

Enforcement

On that note, I want to turn in more detail to the subject of enforcement – both as a means to redress specific cases of misconduct and also, as a stewardship tool, to signal a deterrence message to industry more broadly.

ASIC publicly communicates its enforcement priorities each year. In fact, tomorrow at the ASIC Annual Forum I will be announcing our 2025 enforcement priorities.

While I can’t divulge the details now, I can say that for as long as we continue to see consumer harms in the credit sector, this will remain a focus for us.

We are particularly concerned with predatory lending practices and business models we consider are designed to circumvent consumer protections – and we have a number of court cases seeking to crack down on this type of behaviour.

In one of these cases, which commenced a fortnight ago, we allege that a lender called Oak Capital engaged in systemic unconscionable conduct by using a lending model requiring a company to be the named borrower for loans the company did not benefit from, or have any genuine interest in.

We alleged this structure was designed for the purpose of avoiding important consumer credit protections that would apply if the loans had been made to residential borrowers. Despite the purported business loan arrangements, the individuals seeking the loans provided their own homes as security – and, given their distressed financial circumstances, several of these individuals defaulted on their loans and Oak Capital repossessed their homes.

As a result of the loans being treated as unregulated, we allege Oak Capital deprived its clients of important consumer protections, including the responsible lending obligations, the right to make a hardship application and protection from being charged excessive interest.

In another recent case, ASIC was successful in proceedings against a company called Rent4Keeps for overcharging vulnerable consumers for essential household goods – with the Federal Court finding its business model breached the Credit Act.

The court found the arrangements – which were styled as ‘consumer leases’ so they would fall outside of the credit protections – were in fact credit contracts, and that the interest rate cap and other requirements under the Credit Act had been breached. By breaching its obligations, hundreds of its customers were charged well above the amount that could lawfully be charged and did not receive other important consumer protections.

What these two cases have in common, as do several others we are investigating, is a business model that we say has been designed to avoid consumer credit protections.

We have also taken recent action in relation to unlicensed lending practices by car dealerships, and in relation to debt management firms.

Finally, another significant recent enforcement outcome is the case we took against Harvey Norman and Latitude.

Last month the Federal Court found that Harvey Norman Holdings Limited and Latitude Finance Australia had engaged in misleading conduct and made false or misleading representations in relation to a national advertising campaign promoting a 60-month interest-free and no deposit payment method.

ASIC was concerned the advertisements masked the fact consumers were required to take out a credit card, such as the Latitude GO Mastercard, to purchase goods – and that many may have been unaware of the financial arrangements they were entering into. Namely, a continuing credit contract, requiring them to pay an establishment fee and/or monthly account service fees – and, in certain circumstances, other types of fees and interest.

These matters are but a small subset of the work we are doing in relation to enforcement of the consumer credit protections. Unfortunately we find there is no end of demand for our attention.

Promoting confidence in the credit system

Finally, to address the second part of the question we are here today to discuss: how does all of this promote confidence in the credit system? To answer that, it’s worth considering what erodes confidence.

When things go wrong, when consumers are harmed, when they find themselves in debt for products they’re being overcharged for – that erodes confidence at the individual level.

But what erodes confidence in the system itself is when the sector in question falls short of community expectations – and we need not look too far into the past to see examples of this.

As the lessons from recent history teach us, sustaining a culture of compliance is easier – and better for all – than the effort required to correct the course after the fact.

To that end, ASIC continues to collaborate with our peer regulators, including AFSA, APRA and the ATO, to act within our respective remits to promote confidence and good outcomes in the credit system.

Thank you and I look forward to continuing this conversation with my fellow panellists.