It is important to know that banks want to help their customers, especially if they’re experiencing financial difficulties and have specific policies, programs and practices in place to do this. Depending on your circumstances your bank may be able to help in a variety of ways.
Banks consider that there are three types of financial difficulty:
- Late payment assistance
- Financial hardship
- Prolonged and permanent state of financial difficulty.
Late Payment Assistance
Financial hardship is generally different from when a customer has simply missed a payment and needs temporary relief. For example, a customer would like to make their repayment at a later date, or they have accidentally missed a payment and would like the late fee waived. Banks have the discretion to provide relief to their customers in these circumstances, such as a payment arrangement deferral (known as ‘promise to pay’). They can also agree to refund or waive late payment or default fees.
Formal financial hardship assistance in this circumstance is unlikely to be required.
If you would like to discuss late payment with your bank call your bank’s call centre, this number should be available on your ATM or credit card or your bank’s website on the ‘contact us’ page.
Financial hardship is when a customer is willing but unable to meet their contractual debt obligations because of unexpected events or unforeseen changes that impacts cashflow, for example:
- Changes in income or expenditure
- Changes in employment status (such as losing a job or having hours reduced)
- Significant life events such as a relationship breakdown or death in the family
- Injury or illness
- Emergency event or natural disaster.
Importantly a customer in financial hardship can reasonably be expected to recover their financial position if appropriate assistance or arrangements were provided. Financial hardship assistance is intended to bridge the time between when a customer’s circumstances change (and cannot meet their normal repayments) and the time when they can start paying their debt in full - either because their original financial situation is restored (e.g. a person is re-employed after a period of unemployment) or because a new repayment arrangement is agreed which the customer can meet.
- For details on the types of arrangements that banks may be able to offer see here. Importantly, the decision to provide financial hardship assistance is considered on a case-by-case basis.
Permanent Change in Financial Circumstances
Some customers may have a permanent change in financial circumstances but have the capacity to continue to make their normal repayments, or would be able to continue to make repayments if appropriate arrangements were put into place. However, other customers experience a permanent change in their financial situation and are unlikely to recover their financial position and be able to make repayments, even if the existing credit contract were changed.
However, this generally only occurs in a small number of cases.
Options may include agreeing on an alternative arrangement plan or contract; refinancing or, for example, in rare circumstances a customer may have to consider selling the property, refinancing a business or pursuing bankruptcy or insolvency arrangements.