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Home-owners pressured by banks to make-up for loan deferrals caused by Covid-19

15 February, 2021 - 0 Comments

Mij Gibson Feb 15, 2021

A NAB spokesperson told Mortgage Business that home loan deferrals had provided much-needed relief and time to customers affected financially by the COVID pandemic. And while it was pleasing to see most of their customers had resumed repayments, they know that some customers will need their ongoing assistance.

The Consumer Action Law Centre said that bank customers needed to know that while automatic loan deferrals were ending, people could still apply for hardship assistance.

About 10% of bank customers accepted the mortgage payment 'holidays’ as a result of the economic impact of the coronavirus and paused their loan payments. But now, with these loan deferrals coming to an end, banks are pressuring them to make unrealistic bulk payments to make up for the mortgage payment 'holidays’. Wow!

Banks needed to do the right thing by their customers said the Consumer Action Law Centre because it’s not a realistic option for many Australian families.

The banks had been forced to do the right thing last year by offering the mortgage payment 'holidays' to home-owners. In July 2020 the Australian Prudential Regulation Authority (APRA) announced banks could extend mortgage holidays to their customers by four months, to cover a maximum period of 10 months from the start of a repayment deferral, or until March 31, whichever came first.

Australia's banks have stopped offering automatic mortgage holidays and have begun asking customers to make repayments. These so-called “friendly and caring” banks are now pressuring their customers to make "significant, bulk" payments as the loan deferrals come to an end on March 31.

Home loan deferrals at the Commonwealth Bank, Westpac, National Australia Bank, ANZ, BOQ, Suncorp and Bendigo banks dropped 80% between June and December, 2020, from 493,440 to 101,342, said the Australian Banking Association, with business loan deferrals dropping almost 90 per cent from 228,070 to 25,497.

But people have started repaying mortgages said financial counselling services with some banks forcing customers to make large payments to make up for the deferral.

The director of policy at the Consumer Action Law Centre, said that their organisation had received calls from borrowers who had been told they needed to "catch up" on what they owed to clear their arrears, rather than simply extending the length of the loan.

A caller told the National Debt Helpline that they had been told to pay $20,000 in arrears before regular payments could restart. Wow! Not a friendly or caring bank after all. This has caused concern for financial counsellors who say that the pressure from these ‘friendly’ banks will send some people to payday lenders. It seems the banks weren’t doing their struggling customers any favours!

The director of casework at the Financial Rights Legal Centre, said people were being rejected by banks when they reached out for help after experiencing a second round of hardship, such as illness or a death in the family. The banks have said that they can't apply for hardship again. These situations, continued the director, were only getting resolved when legal centres stepped in.

People are advised to speak with their bank if they are in financial difficulty. If they are unhappy with the bank’s response then they should make a complaint to the Australian Financial Complaints Authority and call the National Debt Helpline.

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Home-owners pressured by banks to make-up for loan deferrals caused by Covid-19

People are advised to speak with their bank if they are in financial difficulty. If they are unhappy with the bank’s response then they should make a complaint to the Australian Financial Complaints Authority and call the National Debt Helpline.