ASIC Targets Resimac Over Mishandling of Hardship Cases

About Resimac Group Ltd

Resimac Group Ltd (ASX: RMC) is a leading Australian non-bank financial services group, specialising in residential mortgage lending and asset finance solutions. Headquartered in Sydney, Resimac operates across Australia and New Zealand, offering a range of prime and specialist home loan products tailored to diverse borrower profiles, including self-employed individuals and those with non-standard financial histories. The company distributes its products through a national network of mortgage brokers, direct channels, and white-label partnerships with financial institutions. Resimac funds its lending activities through a robust securitisation program, supported by institutional investors and warehouse facilities, enabling competitive interest rates and funding flexibility. With a focus on digital transformation and operational efficiency, Resimac continues to invest in fintech capabilities to enhance customer experience and streamline loan origination and servicing platforms.

Regulatory Action Highlights Industry-Wide Shortcomings

The Australian Securities and Investments Commission (ASIC) has initiated civil penalty proceedings against non-bank lender Resimac alleging widespread failures in the company’s handling of financial hardship applications from vulnerable mortgage customers. Filed in the Federal Court of Victoria, the case marks a regulatory first – the first time ASIC has brought action against a credit licensee for failing to meet obligations related to hardship assessments.

According to ASIC, between 1 January 2022 and 15 February 2024, Resimac failed to act “efficiently, honestly and fairly” in breach of its obligations under section 47 of the National Consumer Credit Protection Act 2009. The allegations centre on Resimac’s use of a “one size fits all” approach to hardship applications.

Vulnerable customers including those facing domestic violence, bereavement, illness or financial separation were reportedly asked to provide excessive standardised documentation, without regard to whether it was relevant or whether similar information had already been provided.

In cases where borrowers were unable to meet these requirements, ASIC claims Resimac summarily rejected their applications without adequate assessment. These practices, ASIC argues, not only failed to meet the required standard of care but resulted in significant consumer harm, particularly among borrowers least equipped to navigate administrative barriers.

Market Context: Growing Pressure on Lenders Amid Cost-of-Living Crisis

ASIC’s lawsuit comes at a time of rising household debt and mortgage stress in Australia. According to the Reserve Bank of Australia’s (RBA) April 2024 Financial Stability Review, approximately 15% of variable-rate mortgage holders were at risk of falling into financial hardship due to rising interest rates, with the average household mortgage repayment ratio rising to 10.5% of income, its highest level since 2008.

ASIC’s 2023 thematic review of ten major lenders, including Resimac, formed the basis of its Report 783 Hardship, hard to get help, which found systemic failures across the lending sector. According to the report, nearly one in three borrowers surveyed abandoned the hardship application process due to delays or onerous documentation requirements. Resimac, in particular, was flagged for failing to tailor its response to customer circumstances.

Furthermore, ASIC’s subsequent Report 782 in May 2024 detailed new compliance expectations for credit licensees, urging them to improve internal procedures, provide staff training, and develop customer-centric solutions for hardship.

Investor Outlook and Company Response

From an investor standpoint, the proceedings present both reputational and financial risks for Resimac. While no financial penalties have yet been determined, ASIC is seeking declarations, civil penalties, adverse publicity orders, and legal costs. As ASIC has concurrent proceedings against major banks such as Westpac and NAB for hardship-related breaches, the regulator’s litigation strategy indicates heightened enforcement across both bank and non-bank lenders.

In a statement to the ASX, Resimac acknowledged that its previous practices “could have been better” and confirmed it is enhancing its hardship processes in line with ASIC’s expectations. The company announced it is developing a financial contribution program, which may include fee and interest refunds for affected customers. While these changes are positive in terms of compliance rectification, they may increase short-term operational costs and provision liabilities.

As of May 2024, Resimac’s share price has underperformed the broader financials index. Resimac shares have declined approximately 12% year-to-date, compared to a 4% decline in the ASX 200 Financials Index. The market has been pricing in slower loan growth and higher regulatory risk for non-bank lenders amid tighter economic conditions and increased borrower defaults.

Investors are also wary of the impact on future earnings. Resimac reported net profit after tax (NPAT) of $56.2 million in FY23, down 23% from FY22, largely due to margin compression and rising arrears. The ASIC lawsuit and resulting compliance costs may further weigh on earnings in FY24 and FY25.