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Financial counsellors welcome new banking Financial Difficulty Guideline

Financial Counselling Australia welcomes today’s release by the banking industry of a new Financial Difficulty Guideline.

The guideline represents the continuing evolution from the banks in the way they respond to customers experiencing financial stress.

“This guideline is a really positive move from the banking sector,” said the CEO of Financial Counselling Australia, Fiona Guthrie.

“It means that bank hardship responses will be more flexible, there will be better communication and more options for people doing it tough,” Ms Guthrie said.

One key part of the guideline is the recognition of the importance of people having a savings buffer. While at this stage the commitment is only for banks to “consider” a savings buffer, it is an important start.

“A few years ago, a savings buffer was not even on the table. We expect that trials of the new approach, which are underway in some banks already, will quickly show its value.

“It has never made sense for creditors to expect a person to commit every spare cent to debt repayments, because it only sets people up to fail,” Ms Guthrie said.

The financial counselling sector also welcomes some other important elements of the guideline, including:

  • For people who are unlikely to be able to restore their financial position, a recognition that banks can still help, for example, through agreeing on an alternative arrangement, plan or contract
  • Adapting practices in times of emergencies or disasters, for example, by recognising that people may not have access to financial records immediately and that they will need time to come to terms with what has happened
  • Where a short-term solution will not help overcome the customer’s financial difficulty, but a longer-term solution may, the longer-term solution will be favoured (financial counsellors are often frustrated that the length of hardship arrangements are too short for people to actually get back on track)
  • Confirming that banks will have information on website home pages about financial difficulty. This will encourage people to seek help sooner
  • Providing clear information to people about the impact of a financial hardship variation on their credit contract, as well as on the person’s credit report
  • Proactively identifying customers experiencing financial difficulty

The new guideline also explicitly references the standard financial counsellor authorisation form. Again, this will be very welcome because when creditors reject this form it creates unnecessary barriers. Financial counsellors then need to expend time and effort to get the form accepted, when they should be representing their client and working with the creditor.

Financial Counselling Australia has also called on other sectors to develop similar guidelines.

“There are a number of elements in this new guideline that debt collectors, telcos, utilities and buy now pay later providers could usefully adopt.

“We encourage these industries to think about the overarching philosophy for the guideline, which can be summed up simply as: how can we help,” said Ms Guthrie.

For comment, please contact [email protected]

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