ASIC chair Joe Longo said improving how banks dealt with customers in hardship was a priority for the watchdog and it would take enforcement action if appropriate.

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“Too many Australians in financial hardship are finding it hard to get help from their lenders, and it’s time for meaningful improvement,” Longo said.

“What we have seen is simply not good enough – struggling customers deserve the right support in their time of need.”

The review covered Commonwealth Bank, Westpac, National Australia Bank, Macquarie Bank, Bendigo and Adelaide Bank, Bank of Queensland, ING and non-bank lenders Pepper Money, Resimac and Liberty Financial.

The regulator said the practices of the lenders it reviewed “varied significantly” but in general, banks performed better than non-banks – and larger banks better than smaller banks.

In the latest round of profit results, banks said the number of customers falling behind on their repayments was increasing but remained low by historical standards.

Australian Banking Association chief executive Anna Bligh said banks would consider the report’s findings and work with ASIC “on any further ways to support customers”.

“Every single week banks help thousands of Australians in financial trouble with a range of practical tools including restructuring loans to lower repayments, moving people to interest-only arrangements or potentially deferring payments for a period,” Bligh said.

“Customers who are feeling the pinch financially should take heart from the fact that the report finds that 94 per cent of all completed applications for assistance are approved.”

Bligh noted the industry had been running a campaign urging customers facing financial stress to contact their bank.

The association has urged customers in trouble to contact their lender. It has said the average rate of mortgage arrears had jumped to 1.3 per cent, though this was still lower than pre-COVID levels of 1.5 per cent.

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