COVID-19 and financial hardship: retail lenders’ obligations and ASIC’s expectations
29 April 2020
ASIC is closely monitoring how lenders are assisting consumers who are experiencing financial difficulties due to COVID-19.
We remind lenders 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 affected by this pandemic.
However, to respond to consumer financial difficulties fairly, lenders should consider the following five points in their processes:
- Advise consumers of different available options that may assist them.
- 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).
- Be flexible and offer tailored solutions to consumers where a standardised approach may not meet the consumer’s needs. 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.
- Have ongoing communications with consumers throughout the period of assistance to ensure that any assistance offered remains appropriate and continues to meet their needs.
- 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 lenders to continue to work closely with their customers to develop options that provide short-term assistance to customers experiencing difficulty due to COVID-19 and also longer-term viability post COVID-19.
If lenders have any concerns or questions about ASIC’s expectations, please contact us: ASICHardship@asic.gov.au.