Understanding and supporting vulnerable customers, particularly those experiencing financial hardship, is both a regulatory requirement and a fundamental expectation of good conduct. Vulnerability can arise from a range of life circumstances including job loss, illness, family violence, low income, disability or sudden financial shocks. A vulnerable customer is generally understood to be someone who, because of their personal situation, is especially susceptible to harm if appropriate care and support are not provided.
With ongoing cost of living pressures, recent research from ASIC’s Moneysmart initiative shows that nearly 5.8 million Australians have struggled to make loan or debt repayments. Many of these individuals do not seek financial hardship assistance, often due to shame, fear or confusion about available support.
Supporting vulnerable customers is not only ethical, for financial services, utilities and essential service providers, it is central to meeting regulatory expectations and delivering fair customer outcomes.
Why Vulnerable Customers Require a Different Approach
The Human Impact of Financial Hardship
Financial hardship affects people in different ways. Many Australians delay asking for help when they first experience financial stress, even when early intervention could improve outcomes. ASIC research shows that 30 percent of Australians would rather sell assets or take on additional work than seek hardship support.
Emotional barriers such as embarrassment, anxiety and fear of judgment often prevent customers from engaging. When organisations fail to recognise these barriers, customers can spiral further into distress, arrears and disengagement.
Early identification and proactive support can significantly reduce harm, improve recovery outcomes and strengthen long term customer relationships.
Vulnerability Is Situational, Not Permanent
Vulnerability is not limited to specific demographics. ASIC has made it clear that vulnerability can be temporary, intermittent or ongoing. It may arise from life events such as bereavement, illness, job loss or family violence, or from personal characteristics including language barriers, disability or limited financial literacy (ASIC expectations).
This means organisations must move beyond static definitions and instead develop flexible, customer-centred responses that adapt to individual circumstances.
Regulatory Expectations in the Australian Market
Australia’s regulatory environment increasingly focuses on how organisations identify and support vulnerable customers, particularly those in financial hardship. Most industry codes for ASIC regulated entities include obligations requiring staff to take extra care and provide additional support, as well as elevating inclusivity and accessibility for customers experiencing vulnerability.
ASIC’s Focus on Financial Hardship
ASIC’s recent hardship reviews have identified widespread weaknesses in how hardship is assessed and managed. In particular, ASIC has found that a significant proportion of customers who receive hardship assistance fall back into arrears soon after, highlighting that generic or short-term solutions are often ineffective (Australian FinTech analysis).
ASIC expects organisations to embed vulnerability awareness into systems, training and decision making, rather than treating hardship as an exception process.
Broader Industry Obligations
Regulatory expectations extend beyond banking and finance.
The Telecommunications (Financial Hardship) Industry Standard requires providers to proactively identify customers in hardship, promote accessible assistance options and prioritise essential connectivity, as outlined by the Department of Infrastructure.
Similarly, the Australian Energy Regulator continues to report persistent levels of energy debt, with retailers expected to offer payment plans, hardship programs and tailored support in line with national energy laws (Australian Energy Regulator).
These developments reflect a broader regulatory shift. Supporting vulnerable customers is now a core compliance obligation across essential service sectors.
Lessons from Recent Enforcement Actions
Recent enforcement actions demonstrate the consequences of failing to adequately support vulnerable customers.
Several major banks have faced significant penalties for failing to respond to hardship notices, delaying assistance and applying inappropriate collection practices to customers experiencing serious personal and financial stress.
Outside the financial sector, enforcement actions against telecommunications providers for unconscionable conduct involving vulnerable customers highlight that regulators are taking a cross-industry approach.
These cases reinforce a clear message. Poor treatment of vulnerable customers is no longer tolerated and can result in severe financial, legal and reputational consequences.
Best Practice Strategies for Supporting Vulnerable Customers
Organisations that perform well in this area go beyond minimum compliance and focus on practical, customer-focused strategies.
Proactive Identification
Effective organisations use a combination of data insights, customer interactions and staff judgment to identify vulnerability early. This includes recognising missed payments, changes in behaviour or language indicating distress.
Tailored Hardship Solutions
One size fits all hardship arrangements are no longer sufficient. Customers require solutions that reflect their individual circumstances, capacity and recovery prospects.
Clear and Empathetic Communication
Customers experiencing hardship are often overwhelmed. Clear, respectful and empathetic communication helps reduce anxiety and improves engagement with support options.
Staff Capability and Culture
Training is critical. Staff must be equipped to recognise vulnerability, respond appropriately and escalate issues when required. This capability must be reinforced through ongoing compliance training, leadership commitment and clear governance.
Ongoing Review and Improvement
Hardship outcomes should be monitored and reviewed regularly. Complaint data, customer feedback and regulatory guidance should inform continuous improvement.
Useful Resources and Further Reading
For additional guidance and current insights, the following resources are valuable:
- ASIC Moneysmart guidance on financial hardship and vulnerability
- ASIC speeches and reports on expectations for protecting vulnerable customers
- Banking Code of Practice Customer Vulnerability Guideline
- Customer Owned Banking Code Compliance Committee report on Vulnerability
- Australian Energy Regulator reports on energy debt and hardship
- Telecommunications Financial Hardship Industry Standard resources
Building Capability Through Targeted Training
Protecting vulnerable customers requires strong governance, skilled staff and well designed processes. Training plays a critical role in embedding these capabilities across your organisation.
To support this, consider:
Protecting Customers Who May Be Experiencing Vulnerability Course (Australia)
A practical foundation course for frontline staff, compliance teams and leaders. It builds confidence in recognising vulnerability, responding to financial hardship and delivering fair, compliant customer outcomes.
Protecting Vulnerable Customers – Advanced Strategies Course (Australia)
Designed for leaders and experienced practitioners, this course focuses on advanced identification techniques, complex vulnerability scenarios and aligning practices with evolving regulatory expectations.
Both courses are designed for the Australian regulatory environment and support organisations in strengthening compliance while improving real customer outcomes.
Equip your team with the knowledge and confidence to meet regulatory obligations.
Contact us to discuss vital tailored eLearning for your team.
