As customers approach the end of their six-month loan repayment deferral period, Australia’s banks will implement a new phase of support to assist customers to get back to making their repayments.
In this next phase, customers who can restart paying their loans will be required to do so at the end of their six-month deferral period. In the long run it is best for the financial wellbeing of individuals, families and businesses to return to full loan repayments and pay off their debt.
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it. Encouragingly, many customers have already chosen to resume making repayments” said ABA CEO, Anna Bligh.
Customers with reduced incomes and ongoing financial difficulty due to COVID-19 will be contacted as they approach the end of their deferral period, to ensure that wherever possible they can return to repayments through a restructure or variation to their loan.
If these arrangements are not in place at the end of a six month deferral, customers will be eligible for an extension of their deferral for up to four months. Customers will be expected to work with their bank, during this extra time, to find the best solution for them.
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it.”
ABA CEO Anna Bligh
A deferral extension of up to four months will not be automatic, it will be provided to those who genuinely need some extra time. Many customers may need less than four months to either restructure their loan or get back into full repayments.
Banks will work with customers to find the best options to restructure or vary their loan.
Options may include:
- Extending the length of the loan
- Converting to interest only payments for a period of time
- Consolidating debt
- A combination of these and other measures
If, during or at the end of any deferral, customers continue to be severely financially impacted and are unable to make repayments, they will be assisted through their bank’s hardship process to determine the best long-term solution for their individual circumstances.
This is a distressing time for many Australians, with over 800,000 deferring their repayments throughout this crisis.
“To meet demand, banks have deployed over 5000 extra frontline staff who will proactively contact and work with customers to find the right solution, but please be patient with bank staff as we enter this next phase”.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially” said Ms Bligh.
“Australia’s banks supported their customers as the country entered the COVID-19 crisis and they are determined to support their customers on the way out of the crisis” Ms Bligh said.
In relation to credit reporting, for customers who recommence repayments on their existing loan or enter into a new repayment arrangement, their credit report will not be impacted, provided they meet the new repayment arrangements. If you are granted an extended deferral period approved by your bank your credit report will not be impacted.
As banks continue to support their customers through the difficult impacts of COVID-19, they will act in accordance with the Guiding Principles of the Banking Code of Practice. In particular, they will communicate with customers in a clear and timely manner, act with honesty and integrity and treat customers in a fair and ethical manner.
The banking industry has together developed this next phase of support following discussions with APRA and ASIC to provide the appropriate regulatory treatment.
This agreement has been reached pursuant to the interim authorisation granted by the ACCC, and implementation is subject to notification to the ACCC.
