1-minute quick-fix for clients in financial hardship

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Laurence Hugo is the director of Credit Mediation Service Pty Ltd, negotiation specialist assisting consumer and commercial entities with debt problems.  

Communication

This can make all the difference when dealing with the bank. If your bank does not know why your account is in arrears then they’ll follow an operational procedure in the recovery of your debt. If you disclose your predicament to the bank, in all likelihood, they’ll agree to hold action to allow you to work through your financial setbacks.

I remember a case where a bank I worked for had changed the locks on a property, the bank did everything to reach out to the customer to seek a resolution on non-payments, yet the customer failed to communicate. Upon changing the locks, the sheriff asked the customer why he let this happen, his response: “I just couldn’t pick up the phone, I was too ashamed”

If only he knew that the bank had programs that would assist him through his difficult times.

 

Budget

Before formally approaching the bank, it’s best to establish if you have a financial hardship or a spending problem.

By completing a simple budget, you can establish where your money is going and seek opportunities to save. For example: look through a single month’s bank statements and observe deductions like lunches, coffees, entertainment expenses, direct debits etc. Taking your lunch to work can save upwards $800 per month and $1,400 per month if you made your coffee in the office!

Budgeting will not only help you pay your bills, it is the key to saving money and building long-term wealth.

 

s72 – s75 National Credit Codes

There is a level of legislative protection if you’re in arrears with a consumer loan. This legislation, introduced in 2009, is designed to offer a framework for the lender to follow when a consumer seeks assistance when experiencing financial hardship.

The bank will want to assess your financial position by asking you to complete a simple income/expenditure, asset/liability statement. They will want to know what has changed in your circumstances that have triggered financial hardship.

Creditors Legislative Obligations:

  1. Must hold all enforcement action during the hardship application period
  2. Provide an answer to you within 21 days
  3. Offer an Internal / External appeal procedure to you if you disagree with their decision

Likely Consumer Outcomes:

  1. Creditor rejects hardship application
  2. Payment moratorium (Payment holiday) 
  3. Loan rewrite (extension of term to reduce monthly payments)
  4. Both 2 & 3
  5. Consumer exercises the appeal process upon a dispute on the banks' decision

Generally, if your hardship case is genuine, you will be approved for hardship and be provided with one of the above concessions by the bank.

 

There you have it, simple. A good portion of financial hardship cases can be resolved by following the above rules.

If you feel like you’re over your head and you need guidance with the banks, contact the author:

Laurence Hugo/ 1300 490 030/ www.creditmediation.com.auinfo@creditmediation.com.au

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