Sydney, 8 May, 2009: The Australian Bankers’ Association (ABA) said banks want to help their customers if they are experiencing financial difficulty, and that’s why these customers should contact their bank as early as possible.

The ABA was responding to a report from the Australian Securities and Investments Commission (ASIC) ‘Helping home borrowers in financial hardship’ which examined processes and procedures lenders and brokers have in place to deal with borrowers experiencing difficulties in meeting the repayments on their mortgage.

For its report, ASIC surveyed 15 lenders – seven banks, four credit unions and friendly societies and four non-bank lenders.

David Bell, Chief Executive of the ABA, said he was pleased ASIC had found examples of “…..practice going beyond minimum legislative requirements and code commitments.” ¹

Mr Bell noted the ASIC report was based on survey data which was almost a year old.  “Since then, banks have ramped up their support to customers who are experiencing financial hardship.  Not only have banks adopted new measures²  to help, they are also being very public about encouraging customers to seek help if they are experiencing difficulties,” he said.

Banks have well established procedures and specialist staff who assist customers who find themselves in financial difficulties with their loan/s from the bank. However banks’ home loan books are still showing very low levels of housing mortgage defaults, especially when compared to non-conforming lenders which record much higher defaults on their sub-prime loans.

ABA retail member banks have adopted the Code of Banking Practice which requires banks to help customers (with their agreement) overcome their financial difficulties with a credit facility they have with a bank and inform the customer about the hardship variations in the Uniform Consumer Credit Code.

Mr Bell said: “Banks understand that you can face unexpected changes in your circumstances, for example, you can become ill or lose your job. This can affect your financial plans and your ability to pay back loan obligations. Once the bank understands the problem and its causes, it may be able to tailor a solution which can assist the customer to overcome temporary difficulties with loan.”

“If you do find yourself in difficulty, let your bank know as soon as you can. Tackling a debt problem is easier if you act early and get advice. For example, when you know your circumstances may change, get in contact with your bank. They will put you in touch with a team which specialises in this work.”

Mr Bell said the ABA’s retail member banks³ have now adopted the recently announced common set of principles⁴ to assist individual borrowers who are facing temporary financial hardship. The ABA would like to see all other lenders follow suit so that borrowers have peace of mind, especially in the current economic environment.

In its report, ASIC has recommended that lenders should ensure information about the options and assistance provided should be made available to all borrowers, even those who do not default on their loans.

Despite the very low levels of housing mortgage defaults, banks have adopted a range of new measures to help their customers since the ASIC survey in mid- 2008. 

Central to the banks’ approach, is to make certain that customers who are experiencing financial hardship know that there is help for them through information published on their websites, and that when they seek assistance from their bank, tailored solutions may be found for them.

The ASIC has also recommended lenders check with borrowers who are in arrears. This recommendation has already been covered by the hardship principles which require banks to have systems in place to assist in identifying borrowers who may be experiencing financial hardship and they will monitor and contact borrowers who default on their contractual obligations.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
           
ENDS