Released every month our debt collection blog contains news, stories and tips to keep you informed.
Case Study - Unfair Financial Difficulty Policies
Issue: There were concerns that a bank's financial difficulty policies and procedures for its home loans were not compliant with section 72 of the National Credit Code (NCC), clause 28 of the Code of Banking Practice (CBP), and the AFCA Approach to Financial Difficulty.
The financial firm’s hardship policies prevented it from offering hardship solutions if a customer had been in long term financial difficulty and had previously failed to adhere to hardship agreements, or where the period of delinquency was significant. This means the financial firm refused to consider options such as a serviceability test followed by a capping arrangement, and instead focused on alternative repayment options which were unaffordable in light of the circumstances.
Outcome: Following our identification of the issue, the financial firm updated its hardship policy to offer more sustainable solutions. This included having practical discussions with customers experiencing financial difficulty to assist them to overcome their hardship.
The firm also offered capping arrangements for investment properties on a case by case basis. Training was provided to the firm’s hardship team to ensure that the updated policies were implemented correctly.
Application: Policies should not automatically exclude a customer from receiving hardship solutions due to long term hardship and issues such as high arrears or long periods of delinquency. Instead, financial firms should assess each request for assistance on an individual basis, and place an emphasis on the customer demonstrating their ability to service the loan.
If a customer has a positive change in circumstances that allows them to restart payments on a loan, they could be offered a repayment trial followed by capitalisation of arrears – the repayment trial could be the usual minimum monthly payment (MMP), interest only payments or loan term extension with reduced MMP.
Alternatively, if the customer has received hardship assistance over an extended period and they are still unable to meet the repayment schedule, then it may be appropriate to decline further hardship assistance, but instead consider other options such as a timeframe to permit the asset to be sold to repay the debt.
It is being reported by Equifax that the Office of the Australian Information Commissioner (OAIC) has provided a view that all defaults will now be recorded as a paid status regardless of whether the debt is paid or settled.
Previously Creditors had the opportunity to record a debt as being settled where a reduced amount was accepted however the OAIC has advised Equifax that by 15/02/2019 all existing accounts listed with an "S" code (settled) must be converted to a "P" code (paid). Default informaiton also being submitted by IQ Connect, XML or Data Enrichment Systems by Creditors will also need need to follow the new definition of a paid default.
It's a question that is often asked and something that we have covered before in our article Recording Payment Defaults however is there a time-limit on when a credit provider can list a payment default?
The Office of the Australian Information Commissioner (OAIC) states in their Privacy Fact Sheet 35: When Can a Default Be Included in Your Credit Report -
Yes, a credit provider cannot wait more than 90 days after issuing you with the second notice to list the default.
If the credit provider does not disclose the default to a CRB within that 90 day period, it must send you another notice informing you of its intention to list the default. The credit provider must then wait at least another 14 days before disclosing the default to a CRB for inclusion in your consumer credit report.
You can find the answer to this question and more by visting the OAIC fact sheets page here.
You may take it for granted that when a Default Notice is issued that the customer receives the Notice however what would happen if legal action was commenced and the customer defended the action based on not having been issued with a Default Notice? Would you be able to prove service?
The ability to swear an Affidavit that meets the Courts requirements is paramount in having any such Defence struck-out with the Supreme Court repeatedly ruling that where service is effected by post several elements must be proven. These elements include:
In a recent matter before the Supreme Court in Victoria a Creditors Statutory Demand has been set aside by the Court on the basis that the demand was incorrectly addressed.
By way of background the Plaintiff, Mills Oakley, commenced proceedings against the Defendant, Assets HQ Australia, in the District Court in NSW and obtained a Judgment in October 2018. A Statutory Demand was issued in respect of the debt for $158,905.67 which remained unpaid. Pursuant to s459C(2)(a) of the Corporations Act a company is presumed to be insolvent if it has failed to satisfy a Statutory Demand within 21 days of service being effected.
In the proceedings Mills Oakley v Asset HQ Australia Pty Ltd  VSC 98, the Plaintiff relied on non-payment as a presumption of insolvency and commenced wind-up proceedings in the Supreme Court however Solicitors for Asset HQ Australia argued that there was insufficient evidence of the Statutory Demand being served. The basis of this argument focused around: