Consumer groups welcome the announcement by the Australian Banking Association that bank customers applying for payment deferrals as a result of the COVID-19 pandemic will not have a missed payment or hardship flag appear on their credit file. Importantly, this approach will apply across the board to all consumer debt, including mortgages, personal loans and credit cards.
Consumer advocacy organisations and banks have been working together to provide solutions for customers experiencing financial hardship as a result of the COVID-19 pandemic through the Australian Banking Association’s Consumer Outcomes Group. The ABA has worked with its member banks to ensure where repayment deferrals are granted due to COVID-19, credit reporting is conducted in a fair and consistent manner. This ensures clarity and minimises any risk of confusion by customers who have different credit products from the same bank.
This approach to credit reporting means that banks will not notify credit reporting bureaus of a customer’s missed repayments during the COVID-19 deferral period. This will give consumers peace of mind when entering into loan deferrals with their banks as their credit rating will not be negatively impacted.
We urge other credit providers to follow the banks’ example.
“Financial counsellors are already getting questions from clients about the impact of COVID-19 related hardship on credit reporting scores. This puts the matter firmly to rest when it comes to interacting with the banks and we welcome it strongly.
But this also shows why, when this crisis is over, this approach should remain in place. People are put off asking for hardship variations if they know it will hurt their credit report. No one chooses to experience financial hardship. When it happens we shouldn’t be punished for it.”
Fiona Guthrie, CEO, Financial Counselling Australia
“Customers are often deterred from applying to their credit provider for a deferral of their loan repayments due to concerns the deferral may negatively impact their credit rating and affect their ability to apply for credit in the future. We are pleased that banks have listened to the consumer concerns and will be reporting any consumer who is accessing the various repayment deferral schemes due to the global crisis, as a regular payment made on time.”
Gemma Mitchell, Managing Solicitor, Consumer Credit Legal Service (WA) Inc.
“History tells us that mature age workers are some of the first to be laid off and some of the last to be rehired after a financial downturn. We would like to thank the banks for moving swiftly to ensure that an individual’s credit rating will not be adversely affected during these unique circumstances that consumers of all ages are facing.”
Ian Yates AM, Chief Executive, Council on the Ageing (COTA) Australia
“We know there will be many consumers who were not up to date on all their payments before the COVID-19 process began. We understand the need for these people to be dealt with on a more case to case basis, but remind the banks that this current crisis is coming off the Black Summer of bushfires and subsequent destructive storms. We urge credit providers to extend the maximum assistance possible to all customers in hardship.
The ABA’s announcement is a relief to Australian consumers who have had their world turned upside-down in the last few weeks. The last thing consumers need now is to worry about their credit report and whether they will be able to access finance again in the future. We would encourage all consumers in financial stress to reach out to their banks for support on existing payments before considering taking on additional debt through credit card spending, payday loans or new buy now pay later services.”
Karen Cox, CEO, Financial Rights Legal Centre
Media Contact: Gerard Brody, CEO, Consumer Action Law Centre, 0415 223 211