What if I cannot meet my credit card or loan repayments?
There is a regulatory framework which might provide options if you are experiencing ‘financial difficulty/financial hardship’ which, according to the Banking Code of Practice, means you are unable to repay what you owe and are experiencing difficulty meeting your repayment obligations.
What options do I have if I can’t repay my loan?
- Determine what changes you need to make to your debt contract.
- Contact the National Debt Helpline on 1800 007 007 for free financial counselling.
- If re-organising your financial arrangements to meet your loan repayments is not possible, a number of Australia's banks and mortgage lenders are offering support packages, which can include putting your home loan repayments on hold for six months, with interest capitalised.
- Consult the Australian Banking Association’s financial difficulty website.
Can I ask for help?
Yes, communication is key.
Contact your financial provider and explain the situation and assistance you are looking for1. You are encouraged to be open about your financial position to allow both parties to discuss viable and realistic alternatives.
What type of help can I get?
This will depend on your individual circumstances but may include:
- Changing the terms of your loan.
- Stopping your repayments for a period of time.
- Waiving fees and charges.
- Interest free periods or no interest rate increases.
- Having your payments reduced.
- Waiving your debt (at the lender’s discretion).
Does my lender have to provide assistance?
The lender must respond to your notification and assist you in overcoming your repayment difficulties.
What if my lender doesn’t respond or refuses to help?
The Australian Financial Complaints Authority (AFCA) is an independent body who will help resolve disputes with the lenders. Their decisions are legally binding. You may make a free complaint to the AFCA if the lender:
- Refuses to assist you.
- Offers changes to your repayments that will not help you in repaying the loan.
- Fails to respond to your request in 21 days.
You also have the right to apply to a court for a hardship variation but this is not recommended as it is complex and expensive.
Does the Government COVID-19 Economic Response apply to me?
On 12 March 2020, the Commonwealth Government announced a once off $750 Economic Support Payment for 6.5 million Australians. Those who are currently receiving social security payments will be eligible for the once-off payment.
The Commonwealth State and Territory governments are continuing to respond to the challenges posed to individuals and the support (payments, tax breaks etc) provided will continue to evolve. This can be monitored by reference to dedicated websites for Commonwealth Treasury and each State and Territory.2
What other payments might I be entitled to?
Centrelink provides emergency payments to people eligible for income support.3
You may be entitled to a ‘Crisis Payment’ if you are in an extreme situation such as:
- Severe financial hardship.
- An extreme life change.
- A natural disaster.
Useful Links and Resources
Many banks have dedicated pages in response to COVID-19. Please visit your bank’s home web page for more information.
National Debt Helpline [website (www.ndh.org.au) or call 1800 007 007] to receive free financial counselling.
Keep up to date with the Government’s Economic Response to the Coronavirus.
My business can’t make payments on its bank loan, can I seek relief from my bank?
Yes, if your business qualifies as a ‘small business’ and has ‘financial difficulty’.
What is a ‘small business’ under the Banking Code of Practice?
Your business will be a ‘small business’ if, at the time it obtained the banking services:
- It had an annual turnover of less than $10 million in the previous financial year.
- It had fewer than 100 full-time equivalent employees.
- It had fewer than $3 million total debt to all credit providers including:
(a) Any undrawn amounts under existing loans.
(b) Any loans being applied for.
(c) The debt of all its related entities that are businesses.
What is ‘financial difficulty?
Under the Banking Code of Practice, it means that your business is unable to repay what your business owes and are experiencing difficulty meeting your repayment obligations.
What type of relief is available?
Some measures may include fee free redraws or access to term deposit funds without reduction in interest rate.
If you have lost business or profits due to COVID-19, you should contact your insurance provider.
Small business owners still affected by the bushfires can contact the Small Business Bushfire Financial Counselling Support Line on 1800 413 828.
Does the Government COVID-19 Economic Response apply to me?
For this 2020 tax year there will be a $25,000 income tax write-off for businesses with a turnover of less than $50 million.4
The Government has also offered a deferral of GST, income and other tax payments for four months. This will be considered on a case-by-case basis.
Help from Banks – Small Business Relief Package
Many lending institutions are implementing support measures to help their business customers impacted by COVID-19.
On 20 March 2020, the Australian Banking Association announced a Small Business Relief Package. This includes banks deferring loan repayments for six months for small businesses. At the time of publication, this package was subject to authorisation by the ACCC.5
Most importantly, small businesses should contact their banks to discuss relief options.
Important note: These updates are applicable to Australian law only and are generic in nature. If you have any specific legal concerns relating to the impact of COVID-19 on your people or your business, please reach out to our pro bono team (email@example.com) and we will consider your pro bono legal request. If we aren’t able to help you, we will try to find someone else who can. This update is current as at 1 April 2020.