Financial Counselling Australia’s latest Rate the Banks report reveals that how you’re treated if you’re in financial hardship depends very much on who your lender is
The big four banks are doing a reasonably good job of living up to their commitments, though there is certainly room for improvement
Non-bank lenders along with debt collection agencies have a lot of work to do toward honouring their hardship support duties
Banks have obligations when it comes to helping customers in financial difficulty, and debt collectors have restrictions on how and when they can recover funds. The rules are in place to inject a degree of humanity into the otherwise strictly transactional world of money and lending. These hardship provisions are a lifeline when your world starts to come undone financially, but only if the lender honours them.
The good news is that the banks with the biggest market share – Commonwealth Bank, NAB, ANZ and Westpac – are doing a reasonably good job of living up to their commitments, though there is certainly room for improvement. Smaller banks are doing significantly less well, with Macquarie Bank falling particularly short.
Then comes the ever-expanding world of non-bank lenders along with the debt collection agencies that collect debt for lenders or buy it at a discount and go after the borrowers on their own. Both of these sub-sectors have a lot of work to do toward honouring their hardship support duties.
Fair treatment a shot in the dark
The above findings from Financial Counselling Australia’s (FCA) latest Rate the Banks report reveal that how you’re treated if you can’t make a payment depends very much on who your lender is, and also which staff member you end up dealing with.
If hardships provisions were working properly across the sector, FCA points out, every lender and staff member would be meeting the same minimum standards.
The report – the sixth since 2013 – was prepared in partnership with the Consumer Policy Research Centre (CPRC) and state and territory financial counselling groups. It’s based on a national survey of 201 financial counsellors, who deal with the harms inflicted by hardship support failures every working day.
Financial counsellors see first-hand what good and bad hardship support does to people’s lives
FCA CEO Dr Domenique Meyrick
The FCA’s bank and lender ratings go from 0 to 10 and are based on how well lenders meet FCA’s 10 Principles of Good Hardship Practice, which include making support easy to access, communicating with financially stressed customers clearly and respectfully, and proactively offering assistance to customers who show signs of struggling.
“Financial counsellors see first-hand what good and bad hardship support does to people’s lives. Done right, it stops a crisis in its tracks. Done badly, it tips people over the edge,” says FCA CEO Dr Domenique Meyrick.
“Right now, whether you get real support in a crisis comes down to which lender you happen to owe. That’s not fair and it has to change.”
CPRC CEO Erin Turner points out that the non-bank lender sector – made up of around 600 lenders – fared considerably worse in the counsellor survey than mainstream deposit-taking banks. The lender Prospa – which tantalisingly advertises “no credit check to apply” – received the lowest rating at 2.5 out of 10. The sector as a whole had an average rating of 4.4.
The sector “ranked last on every single principle – and performed particularly poorly on proactive outreach, harm prevention, and support for people affected by gambling harm, scams or prison”, Turner says.
The results are especially concerning given that the customer base of these types of lenders is largely made up of vulnerable consumers who have few other borrowing options.
By the time a debt collector comes into the picture, the hardship scenario has gone critical. But some debt collectors make an effort to avoid rubbing salt in the wound.
The debt collector PRA Australia had a particularly poor showing in the FCA rankings, with 35% of counsellors rating its practices as “poor”.
The debt collector Credit Corp, by contrast, fared comparatively well, with 76% of counsellors rating its practices as “good”. It shows that even debt collectors can treat people like fellow human beings rather than just faceless collection targets.
Overall, the debt collection sector had an FCA rating of 5.4.
Three highest rated debt collectors
Credit Corp – 7.6
Francom – 6.6
Baycorp – 6.0
Three lowest rated debt collectors
Pioneer Credit – 4.8
Charter Mercantile – 4.7
PRA Australia – 4.6
The big four banks were rated ‘good’ but far from perfect for their hardship practices.
Smaller bank ratings mediocre
While the big four banks collectively have the most customers, smaller banks are often subsidiaries of the big four and presumably have access to similar hardship training resources. Yet their ratings suggest that dealing appropriately and respectfully with hardship cases is not embedded in the overall culture. The average FCA rating for the smaller bank sector was 5.6.
Three highest rated smaller banks
St George Bank – 6.8
Bankwest – 6.4
Bendigo and Adelaide Bank – 6.1
Three lowest rated smaller banks
Suncorp Bank – 5.7
Citibank – 4.8
Macquarie Bank – 4.4
Big four banks rated 7 out of 10
The big four banks had an average rating of seven on FCA’s 0-to-10 scale, with Westpac and CBA faring better in the ratings than they did in the previous 2023 report and ANZ going backward (NAB’s rating was about the same).
Most financial counsellors rated the big banks’ responses to hardship cases as “good”, though there was a sector-wide institutional failure in helping scam victims and proactively identifying distressed customers. None of the banks consistently delivered best practice hardship support in line with FCA’s ten principles.
Big four bank ratings
Westpac – 7.6
CBA – 7.4
NAB – 6.7
ANZ – 6.3
First Nations support lacking across the sector
In February this year, we reported on the disproportionate impact that hardship failures have on First Nations people, many of whom resort to easy-to-access non-bank options such as payday and buy now, pay later lenders.
The FCA report indicates that lenders across the board are continuing to fail Australia’s original inhabitants.
People in hardship should not have to fight to be seen, heard and supported yet too many still do
FCA CEO Dr Domenique Meyrick
“As our community faces sustained cost of living pressures, we’re calling on all banks, lenders and debt collectors to identify hardship earlier, prevent harm before it escalates, and embed consistent, trauma-informed support across every team,” Meyrick says.
“People in hardship should not have to fight to be seen, heard and supported yet too many still do.”
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Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
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