In a statement, the ABA said affected customers will be contacted as they approach the end of their deferral period to ensure that, wherever possible, they can return to repayments through a restructure or variation to their loan.
If arrangements are not in place at the end of a customer’s original six-month deferral period, the ABA said they will be eligible for an extension of their deferral for up to four months.
However, the ABA said the deferral extension of up to four months will not be automatic, and will be provided to those who genuinely need some extra time, and that customers will be expected to work with their bank, during this extra time, to find the best solution for them.
Customers can work with banks to find the best options to restructure or vary their loan through options including:
- Extending the length of the loan
- Converting to interest-only payments for a period of time
- Consolidating debt
- A combination of these and other measures
If, during or at the end of any deferral, customers continue to be severely financially impacted and are unable to make repayments, they will be assisted through their bank’s hardship process to determine the best long-term solution for their individual circumstances, the ABA said.
In relation to credit reporting, the ABA noted that customers who recommence repayments on their existing loan or enter into a new repayment arrangement will not have their credit report impacted provided they meet the new repayment arrangements.
Further, if a customer is granted an extended deferral period approved by their bank, their credit report will also not be impacted.
The ABA said the banking industry has together developed the next phase of support following discussions with APRA and ASIC to provide the appropriate regulatory treatment.
It said the agreement has been reached pursuant to the interim authorisation granted by the ACCC, and implementation is subject to notification to the ACCC.
ABA chief executive Anna Bligh said banks have deployed over 5,000 extra frontline staff to meet demand, but they asked customers to be patient with bank staff as they enter the next phase of loan deferrals.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially,” Ms Bligh said.
“Australia’s banks supported their customers as the country entered the COVID-19 crisis, and they are determined to support their customers on the way out of the crisis.”
However, Ms Bligh said that customers who can restart paying their loans will be required to do so at the end of their six-month deferral period, and that it is best in the long run for the financial wellbeing of individuals, families and businesses to return to full loan repayments and pay off their debt.
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it,” Ms Bligh said.