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Chapter 13: Industry codes of practice

Many lenders agree to comply with an industry code of practice. There are three main codes of practice in the mortgage and finance industry. In each code of practice there are sections that cover financial hardship and how the lender should respond to your request for a repayment arrangement.

Financial hardship provisions

Banking Code of Practice

The Banking Code of Practice is a set of enforceable standards that customers, small businesses, and their guarantors can expect from Australian banks. For more information visit Australian Banking Association | Banking Code of Practice.

13. Hardship applications
13.1If a Member becomes aware, or is advised by a Customer, that the Customer is or may be in financial difficulties, the Member will consider in good faith whether it is reasonably appropriate to vary the payment terms of the credit facility, and if it is appropriate, suggest that the Customer contact the Credit Provider and request the Credit Provider to vary the Customer’s repayment terms.
13.2

Where appropriate, the Member must:

  1. have regard to the Customer’s financial circumstances and consider in good faith and within a reasonable time the Customer’s request to vary the payment terms; and
  2. suspend any action to recover any payments due under the Credit facility and, if it has not listed a default already, not list a credit default in respect of the Credit facility against the Customer until:
    1. the Member informs the Customer in writing whether or not it will vary the payment terms; and
    2. if the Member and the Customer agree to vary the payment terms, the Customer fails to meet the varied payment terms; and
  3. encourage the Customer to make payments the Customer can afford pending the Member informing the Customer of its decision; and
  4. have a documented policy and procedure in place for receiving and assessing requests to vary credit contracts upon hardship grounds and must provide information about their hardship policy to a Customer on request.
13.3

Members must act reasonably in assessing a Customer’s request to vary payment terms. Amongst other things, Members must not require the customer to:

  1. to apply for the early release of any part of the Customer’s superannuation entitlements; or
  2. the Customer to obtain funds from family members, friends or other third parties; prior to the Member considering whether to, or agreeing to, vary the payment terms.
13.4Members who decide to vary the payment terms must promptly and in any case within twenty one calendar days give the Customer written notice setting out particulars of the varied payment terms.
13.5

Members who decide not to vary the payment termsmust promptly and in any case within twenty onecalendar days give the Customer written notice of:

  1. its decision and the reasons for its decision; and
  2. the Customer’s right to make a complaint tothe Member’s IDR and EDR schemes (providing contact details for those schemes) if the Credit falls within the jurisdiction of those schemes.

Customer Owned Banking Code of Practice

The Customer Owned Banking Code of Practice is the code of practice for Australia’s mutual banks, credit unions and building societies.

24. If you are in financial difficulties
24.1We will work with you in a constructive way if you experience genuine difficulties meeting your financial commitments to us. With your agreement and commitment, we will try to assist you to overcome those difficulties. We will do this whether or not you have a right to seek a hardship variation or change under consumer credit laws.
24.2

Without limiting (24.1), we will have procedures in place to ensure we:

  • adhere to hardship variation or change provisions of consumer credit laws
  • respond promptly to any request or application made to us (we may also initiate contact to discuss your financial situation)
  • genuinely consider your application or request, taking account of your situation. However, we will only be able to do this if you provide us with the financial information and documents we may reasonably need to assess your situation for ourselves
  • encourage you to keep making whatever payments you can while we are considering your request
  • consider longer term as well as short-term financial issues when they are relevant. If you are experiencing longer term difficulties, we will try to develop an appropriate solution with you to allow you to meet your obligations
  • not list your default on your credit reference file while we are considering your application or request, unless legally required to do so
  • when you have made an application or request in respect of a debt, not sell that debt to a debt buy-out business while we are still considering the application or request
  • suggest other options or avenues that may be available to you, if we are unable to agree to your application or request
  • if we are unable to assist you, advise you promptly in writing, and refer you to a financial counselling or similar service in appropriate cases (subject to availability).

 

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