When we consider disputes, we take into account good industry practice and any applicable industry codes and guidance. There have been some recent developments in these areas that we wish to highlight about what is considered good industry practice for financial services providers (FSPs) when responding to financial difficulty disputes. These changes largely reflect our approach to financial difficulty disputes.
In addition to last year’s amendment of the financial hardship provisions of the National Credit Code and the more recent revision of the Australian Bankers’ Association (ABA) Code of Banking Practice, the ABA has now released a financial hardship package which provides greater guidance and certainty for borrowers and lenders when situations of financial difficulty arise. The package includes two publications that we will have regard to when we consider disputes involving financial difficulty:
- the Industry Guideline on Financial Hardship (the Industry Guide)
- the Consumer Fact Sheet on Financial Hardship (the Factsheet).
Below is a summary of some of the publications’ key points:
- Several hardship arrangement options are listed in the Industry Guide. We expect this list of options will help FSPs to consider being creative about helping borrowers overcome their financial difficulty.
- Customers are encouraged to speak with their other creditors and utility providers about their financial difficulty as well as contacting their FSP. If possible, customers should have an idea of their financial position and how much they can afford to repay on their loans. By having this information ready, a customer can often expand the options available to address their difficulties. The types of information that an FSP may ask for is set out in the Fact Sheet.
- Customers do not have to use particular terminology or formally apply for hardship assistance in order to have their FSP take action to help them. If it is unclear whether a customer is seeking hardship assistance, the FSP should check with the customer.
- FSPs should respond in a timely, efficient and fair manner to any expression of financial hardship – regardless of who a customer speaks to at the FSP.
- FSPs should accept industry standard forms (such as a Statement of Financial Position and/or Financial Counsellor Authority form). The ABA has worked with Financial Counselling Australia (FCA) to develop these standard forms.
- FSPs should speak regularly with their customers to ensure hardship arrangements remain relevant.
- It is unlikely that the FSP should need to see medical certificates/documentation if the customer receives a Disability Support Pension.
- Specialised staff should be trained to deal with financial difficulty situations, especially regarding the importance of identifying and dealing with special needs customers.
- Debt collection activity (including assigning debts and sending default notices) should cease if a hardship arrangement is being actively considered or if the customer is complying with the agreed arrangement.
- Where possible and practical, FSPs should identify strategies for harmonising hardship programs and debt collection practices to take into account a customer’s entire situation, not just selective accounts or debts.
- The hardship assistance process should minimise the effort and information required from customers – FSPs should only request information that is reasonably necessary to help them understand the customer’s personal circumstances and financial situation, and to determine whether assistance is suitable. Before requesting this information, FSPs should consider whether it is contained in, or can be derived from, other documentation that has already been provided.
- As a joint account is set up to allow joint borrowers to operate with several and joint liability, FSPs should not always require both borrowers to make a hardship request, especially in circumstances where there has been a relationship breakdown.
The Industry Guide notes that “while banks must meet their minimum legal and contractual obligations (under the National Credit Code and Code of Banking Practice), this industry guideline also contains additional good practice for banks in responding to customers who may be experiencing financial difficulties.” (Page 10). As the guidance set out in the ABA’s publications will help FSPs to respond appropriately to customers experiencing difficulty, we may have regard to these publications when dealing with disputes about financial difficulty.