• Decrease font size
  • Increase font size
  • Print Page

Hardship and enforcement action

How does hardship affect debt collection and enforcement action?

If a hardship arrangement is being actively considered by a bank or a hardship arrangement is in place, banks will not send default notices and will stop collections activity or recovery actions.

Under the 2013 Code of Banking Practice, banks will also not assign or sell the debt while they are actively considering the customer’s circumstances for a hardship arrangement or a hardship arrangement is in place*.

* A bank will only assign the debt in these circumstances as part of a funding arrangement e.g. securitization or the issue of covered bonds.

What happens if I don’t comply with the hardship arrangement?

If for some reason you don’t think you can comply with your obligations under the hardship arrangement, for example, because your financial position has continued to change, it is really important that you contact your bank. This is because if you don’t meet your obligations you might be in default and the bank can start enforcement proceedings.

Your bank may be able to offer you an alternative arrangement to ensure that your repayment obligations are manageable.

Under the National Credit Code, if a customer is unable to comply with the hardship arrangement, a bank may exercise its right to issue a default notice and reactivate collections processes.

If this happens, the customer will receive information about their rights after default including:

  • seeking a postponement of enforcement proceedings;
  • asking if their bank will reconsider its assessment of default and whether a suitable alternative arrangement can be put into place; or
  • seeking a review of the decision.

If after 30 days the default has not been remedied or a new arrangement has not been agreed, the bank can take enforcement action against the customer.

What if my bank doesn’t agree to a hardship arrangement?

Banks consider whether to provide hardship assistance to customers on a case-by-case basis taking into account the individual customer’s financial position and personal circumstances.

There are some cases where a bank will not agree to a hardship arrangement in the first place, or does not agree to a new hardship arrangement if you cannot meet your obligations under an existing hardship arrangement. This could be because the bank doesn’t feel that hardship assistance will help you restore your financial position, you can’t afford the repayments, won’t be able to afford repayments in the long term or would only be able to make repayments by experiencing further hardship (for example, not being able to afford essential goods). It may be that a hardship arrangement would not be in your best interests and may simply postpone inevitable default under your credit contract.

If the bank doesn’t agree to provide you with hardship assistance importantly, stay calm! There may be other options you can discuss with your bank.

If other options have been unsuccessfully explored, your bank will need to discuss with you what needs to happen next. This may involve some difficult decisions, for example, selling your home. However, this happens rarely. See information below on bankruptcy and refinancing.

You can also speak to a professional financial adviser, an independent financial counsellor or legal adviser to get information and advice on what you should do next. If your financial problems have been caused by other underlying issues, there are other services that can help you.

Contact details for people that can assist you are available here