The ABA upsets the rules of rigor and introduces a savings buffer

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The Australian Banking Association (ABA) has announced an overhaul of its hardship assistance guidelines as the rate of customers seeking hardship assistance declines across the country.

As Australia slowly begins to emerge from lockdowns related to COVID-19, the rate of home loan clients seeking hardship help has started to decline, according to the ABA.

Last month, the ABA recorded the smallest increase in hardship aid approvals (12,000) since the announcement of the second COVID-19 aid package in July of this year.

Since July 8, nearly 69,000 customers have benefited from assistance in the event of hardship, including more than 27 mortgage deferrals and more than 4,000 business credit deferrals.

Australian Banking Association chief executive Anna Bligh said while the data shows people still need help, it’s reassuring to see people getting back on their feet.

“Banks have been available to help their customers throughout the pandemic, but it is heartwarming to see the need for help wane as many states and territories emerge from lockdown and borders begin to open.” said Ms Bligh.

“The majority of hardship approvals have come from customers in NSW and Victoria, which is obviously not surprising given the recent shutdowns, but we have seen thousands of customers across the rest of Australia asking for help. help and talk to their bank. “

ABA announces new directive on financial hardship

On the backs of the reduced number of Australians seeking help in hard times, the ABA reviewed industry guidelines for banks ‘programs to support financially troubled customers and announced today’ hui a new directive on financial difficulties.

According to the ABA, the directive “encourages good practice in the industry, which includes a framework for banks that balances the need for consistent and standardized access to help in times of financial difficulty with the need for flexibility. respond to clients’ unique personal and financial circumstances. “

Part of the new Financial Hardship Directive includes the option for financially troubled customers to use a savings buffer. This savings cushion allows people on a payment plan to let their bank set aside a small amount of funds for “unexpected expenses or emergency bills.”

A savings cushion as additional support could see more financially struggling Australians moving away from payment deferrals. This can be beneficial for some clients because deferrals are not “free”, with the suspension of your repayments often resulting in higher interest charges over the life of a loan.

The ABA expects that by the end of 2023 all banks will consider offering this option to customers with repayment plans in the event of financial hardship.

The big four banks, Westpac, announced today that they welcome the new guidelines, in particular the new savings cushion for financially troubled customers. Westpac was one of the first to adapt to these changes, introducing them to clients entering into hardship deals for mortgages, consumer credit products and some business loans starting in May of this year. .

Westpac’s Director of Client Vulnerability and Financial Resilience, Catherine Fitzpatrick, said: “Since industry leadership and the introduction of the savings cushion earlier this year, 535 clients have incorporated a savings cushion into their hardship agreements, giving them breathing space to save for unforeseen expenses. “

“We have been really encouraged by the results so far and are already seeing fewer customers falling back into repeated difficulties,” said Ms. Fitzpatrick.

“It helps these customers keep extra cash in their pockets to use as it suits them best – potentially for life events like medical emergencies, appliance repairs or car breakdown, or even the repayment of their debts. “

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