COVID-19 Support: Phase Two - Questions answered

As customers approach the end of their six-month loan repayment deferral period, banks are implementing phase two of their COVID-19 support.

Stage 1: You can pay in full

- If you can restart paying your loan, then you’ll be required to do so at the end of your deferral period.

Stage 2: You can partially pay

- If you are in ongoing financial difficulty, you may have your loan restructured or varied to allow you to return to paying off your loan.

- If you can not restructure, you may be eligible for an extra deferral period of up to four months.

- During this four-month extension, you will be expected to work with your bank to find the best solution to return to repayments.

- This four-month extension will not be automatic, it will only be provided to those that banks believe will genuinely benefit from extra time.

Stage 3: You cannot pay

- If, during or at the end of any deferral, you cannot make repayments, you will be assisted through your bank’s financial hardship process to determine your best long-term solution.

- Banks will communicate with you in a clear and timely manner, act with honesty and integrity and treat you in a fair and ethical manner.

FAQs

What will happen when my six-month loan deferral comes to an end?

- If you can start your repayments again at the end of your deferral, do.

- If COVID has left you in difficulty and you need more time, talk to your bank.

- While you work with your bank to restructure your loan you may be eligible for a further four-month deferral.

Can a business borrow money at this time?

- Yes. Banks are offering loans at very low interest rates, supported by the Government, through an SME Loan guarantee. Your business would still need to meet certain lending criteria set out by your bank.

What evidence will my bank need to prove I have been impacted by COVID-19?

- Customers will self-assess whether their business has been adversely impacted, no further verification will be required.

Can I get help with my mortgage?

- Yes. Banks have hardship teams in place to assist people experiencing financial difficulty as a result of COVID-19. Banks are offering customers the option to defer home loan repayments for up to six months. Contact your bank to discuss how they can help you.

Can I get help with a credit card or personal loan?

- If you have been impacted by COVID-19 and are experiencing hardship, banks can help. Assistance can include waiving fees, restructuring loans or other things to help get you through the pandemic. Check your banks website under ‘Hardship’.

If I defer my repayments will it affect my credit rating?

- As long as you were up to date on your payments before COVID-19 the deferral will not impact your record. This applies to deferrals on your mortgage or other credit products.

If you defer my small business repayments, will that impact my credit rating?

- Banks don’t report information to credit bureaus about small business customers.

I’m nervous about telling my bank I’m in trouble

- Your bank wants to partner with you through this difficult time. Getting people back to work and keeping them in their homes is what is in the best interests of all Australians.

- Many banks are contacting their customers directly to see what help they may need. However, if you are worried it’s very important that you contact your bank as soon as possible. The earlier you contact your bank the more assistance they will be able to provide.

How will my loan deferral be reported if I was behind in my payments before the crisis?

- If you were behind in repayments before, banks won’t report the repayment history information for the deferral period, they will leave that field blank for the duration of the crisis deferral period.

Why is my bank still charging interest on my deferred loan?

- For every dollar that an Australian bank lends, regulation requires them to hold a certain amount of capital. If banks don’t charge interest, even if the loan is deferred, the loan must then be treated as ‘impaired’ under the accounting and banking rules. The bank is then required to hold more capital to support that impaired loan.

- If banks stopped charging interest on the hundreds of thousands of deferred loans during the COVID19 pandemic they would not have enough capital to provide new loans.

- That would not be in the best interest of Australians and the need to support the Australian economy.

If I’ve been deferring my mortgage, when should I begin my normal repayments?

- Customer who can restart paying their loans should do so.

Can I get an extension on my original deferral?

- Customers with reduced incomes and ongoing financial difficulty due to COVID-19 may be eligible for a further deferral period of up to four months, during which time they will be expected to work with their bank to find the best solution to assist them to return to repayments through a restructure or variation to their loans.

- This four-month extension will not be automatic, it will be provided to those who genuinely need some extra time.

What can I expect from my bank during this time?

- As banks implement phase two of their COVID-19 support, they will continue to act in accordance with the Guiding Principles of the Banking Code of Practice and communicate in a clear and timely manner and treat customers in a fair and ethical manner – according to 2020 Banking Code of Practice

- Banks have deployed over 5000 extra frontline staff to help speed up response times.

What happens if I cannot make any more payments at all?

- If you cannot make a payment at the end of your six-month deferral period or your four-month extension, your bank will work with you on the best solution to suit your needs.

When does the four-month extension take effect from?

- The extension takes effect from the end of an individual customers first six-month deferral period.

- This four-month extension will not be automatic, it will be provided to those who genuinely need some extra time.

Do I have to make one big repayment at the end of six months?

- No. Participating member banks will not apply or require payment of the capitalised interest at the end of the deferral period.

- It is a condition of the deferral scheme that participating member banks will not require payment of capitalised interest at the end of the 6 month term. If your bank is participating in the scheme and has told you that it will require such a payment, please ask to speak with someone more senior at the bank.

What about relief for employed/unemployed customers?

- Customers with reduced incomes and ongoing financial difficulty due to COVID-19 may be eligible for a further deferral period of up to four months, during which time they will be expected to work with their bank to find the best solution to assist them to return to repayments through a restructure or variation to their loans.

- This four-month extension will not be automatic, it will be provided to those who genuinely need some extra time.

If you have any concern that this change will effect your loan application, please do not hesitate to contact us.

Kind regards,

𝐾𝑖𝑒𝑛 𝑃ℎ𝑎𝑛 & 𝑃ℎ𝑢𝑜𝑛𝑔 𝑁𝑔𝑢𝑦𝑒𝑛.

Source: Australian Bank Association