Articles

From Recovery to Support: What The New Hardship Standard Actually Asks of Collections

By Sam Adair, Sales Director, Recoveriescorp

For years, the test of a good hardship program in collections was whether you had one. That test is gone. The question regulators now ask is much harder to answer: can you prove it works?

We have hardship conversations every day, across financial services, energy, government and insurance receivables, so we see what that single shift means inside an operation. It has changed this industry more than any rule change in memory. Hardship is no longer an operational add-on to collections, rather it has become a core part of consumer protection, compliance and accountability and operations built for the old test are now being measured against the new one.

Regulators no longer ask whether collections offers hardship support

The Australian Securities and Investments Commission has led much of this. Its 2024 review of hardship practices found widespread failures in how lenders supported customers in difficulty, and its follow-up work in 2025 noted improvement while calling out the problem we still see most often: generic, one-size-fits-all responses that ignore the person in front of you.

The expectation has moved from whether assistance is offered to how well it is delivered. How quickly, how accessible, how fairly. And it is enforced. ASIC has acted against organisations for failing to respond to hardship notices, and for continuing to collect while an assessment was still underway. Mishandled hardship now sits in the same category as any other conduct failure, and carries the same potential consequences.

Energy is showing where every sector is heading

The most concrete structural changes have come from the energy sector, and Victoria in particular. The Essential Services Commission has reformed the Energy Retail Code of Practice so that retailers must:

• move customers in hardship onto the cheapest available plan, automatically
• meet higher thresholds before disconnecting anyone for debt
• extend protections to more customers, including those in long-term arrears or on outdated pricing.

These sit alongside the Payment Difficulty Framework, which is explicit that disconnection is a last resort and support should start early, before debt spirals. The direction matters more than the detail here. Hardship is being built into pricing, billing and account management, not bolted on once someone is already in crisis. Every regulated sector should expect its own version of this.

Vulnerability is now a design requirement

In 2025 the Australian Energy Regulator strengthened its family violence protections: mandatory reporting of breaches, ongoing reporting on affected customers, and explicit recognition that family violence and financial abuse drive hardship. The ESC has gone further, embedding safety by design into its better-practice guidance and asking organisations to find and remove risks, like the misuse of an account or the unsafe disclosure of personal information, before any harm is done.

That moves the standard of care well beyond the frontline conversation. The question is now how systems, data and products either protect or expose someone at their most vulnerable. In our experience that is where the real exposures sit, because a well-trained agent cannot compensate for a system that discloses a new address to the wrong account holder.

Hardship in collections is being judged as conduct

The formal collection rules have barely changed. How they are interpreted and enforced has tightened considerably. The expectation is plain: treat every customer with fairness and respect, recognise vulnerability early, and never pressure or disadvantage someone already doing it tough.

What has changed is the lens. Poor hardship handling is increasingly treated as a complaint and a conduct issue, which takes it straight into dispute resolution and regulatory enforcement. An operation can follow every collection rule and still fail the standard, because the standard is now about outcomes.

Support that collapses in sixty days is deferred recovery

This is the real shift. It is no longer enough to say hardship support is offered; it has to be evidenced. Consistent, fair, effective outcomes, backed by data and systems, improving over time.

An arrangement the customer cannot sustain, that collapses within weeks and lands back in arrears, is not support. It is recovery with a delay, and regulators are learning to read the difference in the data. The operations they supervise should be reading it first.

Five questions to put to your collections and hardship operation

• Can you evidence outcomes rather than activity: how many arrangements complete, and how many customers re-enter difficulty within ninety days?
• Does support start before debt spirals, and how would you know difficulty was building before the customer told you?
• When an assessment is underway, does every form of collection activity actually stop, including any partner acting on your behalf?
• What do your systems protect, or expose, for a customer experiencing family violence or financial abuse?
• Is hardship built into your pricing, billing and account design, or does it begin at crisis?

None of these is a policy question. Every one of them decides whether the operation meets the standard now being enforced.

The gap is widening

Compliance matters, but it has never been the point of this work. What regulators are asking the industry to protect is trust, accessibility and fairness: how we respond to people during some of the hardest moments of their lives. Get that right and the compliance follows.

For anyone still working from a traditional, recovery-first model, the distance to the new standard grows every quarter, in the eyes of the regulator and in the eyes of the customers and communities we serve. The future of collections is support, prevention and financial inclusion, designed into every part of the system. That is the work we are building every day, and the standard we want to be measured against.

Talk to the Recoveriescorp team about what the new standard for hardship in collections looks like in your operation.