29
April
2020
|
14:41
Australia/Sydney

Financial hardship: retail lender obligations and COVID-19

Summary
  • ASIC is closely monitoring how lenders are assisting consumers who are experiencing financial difficulties due to COVID-19.
  • Lenders who have concerns or questions about ASIC’s expectations should contact ASICHardship@asic.gov.au

ASIC is closely monitoring how lenders are assisting consumers who are experiencing financial difficulties due to COVID-19. We are also in close dialogue with representative and industry associations (inlcuding consumer advocates), the Council of Financial Regulators (including APRA) and peer regulators in other countries.

We remind all lenders (including non-bank credit providers) of their obligations under section 72 of the National Credit Code, whereby a lender must consider varying a consumer’s credit contract if a consumer notifies them that they are or will be unable to meet their credit obligations.

Lenders must also do all things necessary to ensure that the credit activities authorised by their licence are engaged in efficiently, honestly and fairly.

We have been encouraged by lenders that have announced assistance packages in response to COVID-19. ASIC recognises that offering assistance that is ‘standardised’ enables lenders to quickly provide relief to the large volume of consumers who may be similarly affected by this pandemic.

In order to respond to consumer financial difficulties fairly, all lenders should consider the following five points in their processes:

  1. Communicate with consumers about the different options that may assist them, depending on their circumstances.
  2. Be flexible and offer tailored solutions to consumers where a standardised 'one-size-fits-all' approach may not meet a particular consumer need. For example, if a consumer has had their loan repayments deferred, a lender should ensure that how a consumer will catch up on missed repayments is manageable and offer alternatives.
  3. Ensure all communications with consumers are clear and provide consumers with sufficient information to make an informed decision about the assistance available. This should include details of how different assistance options will affect the consumer’s loan and repayments over the short and long term, including the effect of capitalising interest (where relevant).
  4. Have ongoing communications with consumers throughout the period of assistance to ensure that any assistance offered remains appropriate and continues to meet their needs.
  5. Communicate with consumers as their period of assistance comes to an end to understand their financial circumstances at that time, respond as appropriate and ensure each consumer understands what will happen next.

We encourage all lenders to continue to work closely with their customers to develop options that provide both short-term assistance to customers experiencing difficulty due to the impacts of COVID-19 and also longer-term viability due to changes in employment, trading or community conditions post COVID-19.

If lenders have any concerns or questions about ASIC’s expectations, please contact us: ASICHardship@asic.gov.au.

Please also see ASIC's letter to the Australian Banking Association for clarification on retail-lending obligations.

Boilerplate

ASIC is Australia’s corporate, markets and financial services regulator.