30 October 2023
Ross Greenwood: Well, one industry that does have an effective ombudsman scheme is banking, the Australian Financial Complaints Authority, but as rates rise and pressure on households and businesses, managing customers and their debts is again back on the bank’s radar. Today, the Australian Banking Association launched a campaign called ‘Don’t tough it out on your own’. Its chief executive Anna Bligh joins me now. Anna always good to chat to you. Is this the banks getting ahead of the real pressure that’s coming, as at the edges there are people who are feeling the pinch right now. But if there are more interest rate rises, which are predicted by many economists, that’s going to be almost tipping many people over the edge.
Anna Bligh: Good to be here. And look, I think that’s a good way of describing it. If you look at the data, at the moment defaults are still very low. The number of customers who are in a formal hardship plan are still very low. Both of these are below where they were before COVID started. But that isn’t where banks think people might be in three, six, ten months’ time. So whether or not we see another interest rate rise, it’s also rates being higher for longer. So most people can stretch this month, and then mum and dad might help out the next month, and then they stretch a bit and they cut back. And then at some point, the risk is that the elastic band breaks. So this is very much about getting ahead of it, and trying to make people feel comfortable about talking to their bank if they’ve got even the slightest worry. Because if they don’t get in early to their bank, if they wait till things have piled up, it’s much harder for the bank to help.
Ross Greenwood: But as the Royal Commission sort of showed, it’s all very well to be giving loans out in good times. That’s one side of the business. It’s managing those loans when things go bad. And it might be a farmer, it might be a small business person, it might be a household that’s lost a job or gone through a divorce. And then it is really, if you like, one of those things where part of banking is also occasionally making hard decisions for businesses or for people when they cannot pay their loans back.
Anna Bligh: Look that’s right. But the banks have actually learned a lot, particularly through COVID. What they saw with all of those mass deferrals that they had, was by just sort of looking through the event and looking at a customer’s previous behaviour for 17-20 years, they got a lot more confidence that when Australians go through a bad patch, as soon as they can start paying again, they do. And now that they’ve seen all of that at such large scale. Look, I think this is one of those areas, Ross where the commercial interest of the bank is perfectly aligned with the interest of the customer. The best thing for the bank is that the customer stays in the house pays off the loan. And the best thing for the customer is that they own their own home and have that asset into their retirement. Banks don’t want to be large scale landlords, they’re not very good at it.
Ross Greenwood: And they certainly don’t want to be selling properties right?
Anna Bligh: No exactly. So unfortunately, that is sometimes the best thing for the customer. But it is an option of absolute last resort after you’ve tried every other tool you’ve got in the toolkit. So there’s lots of practical things they can do.
Ross Greenwood: Is this really in many ways, a practical example of the learnings from the Royal Commission? In terms of behaviour of banks, in terms of the way in which they treat customers. It’s a little bit, if you like, Jobkeeper. Far better to keep the person in their job, even if you’ve supported them, because ultimately, they’re going to continue to pay taxes to the government, which is why we’re in surplus now.
Anna Bligh: Absolutely. I think it’s fair enough to say this is one of the learnings out of the Royal Commission. And then it was reinforced through COVID, where even in the best of economic times, as you said, people get in trouble, they lose a job, their relationship breaks down, they have a problem with their health. So banks have got very experienced teams. It’s just when you’ve got to do it at scale, there’s a question mark about how much can you support people without threatening the stability of the bank? What they found was they could do it at very large scale in COVID, and people came back to paying as soon as they reasonably could. And while we’re not anywhere near that scale in the interest rate environment, this is about getting the message out there. I don’t think Australians are very good at talking about money. I think they’re often very worried that if they call their bank, it’ll have bad consequences. And it’s really getting that message out. Your bank can help you. But it’s easier for them to do that and better for you if you can get in early.
Ross Greenwood: So in other words, if people head here to the Australian Banking Association’s website, and then go to your Financial Assistance Hub, that’s the first point of call if people are feeling a bit tough about all this stuff as well.
Anna Bligh: Absolutely. That will give them the phone number for the hardship team in their bank. So they don’t have to go through 25 levels. This is the person who can help you with the tools in the toolkit
Ross Greenwood: That is fantastic Anna Bligh, always good to chat to you and many thanks for your time on the program today.
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