The Australian Banking Association (ABA) has announced that its members will be taking a “common sense” approach to the treatment of loans that fall under COVID-19 support packages.
Under the new approach, banking customers who are banking at ABA member institutions who have been granted a COVID-19 support package will not have their credit rating negatively impacted by deferred loan repayments. That is, provided they were up to date on repayments prior to the crisis.
The Australian Banking Association (ABA) is an association that works to promote policies that improve the Australian banking industry. Its membership composes of 22-banks across Australia, including the big-4 as well as some regional and international titles (with Australian banking licenses).
According to ABA CEO, Anna Bligh, under the new COVID-19 policy, banks will report on customers as if they had not missed a repayment for the duration of their deferral period.
“If a customer is granted a deferral on their mortgage and other credit products because of COVID-19, banks will report customers as not having missed a repayment, provided they were all up to date when granted relief,” Ms Bligh said in a statement.
“Australia’s banks are here to support customers who have lost their jobs or significantly lost income because of COVID-19, through initiatives such as offering a six-month deferral on mortgage repayments. Customers in these circumstances should not have to worry about their credit rating as well,” she said.
The ABA announcement comes 2-weeks after an announcement from the Australian Prudential Regulation Authority (APRA) regarding their regulatory approach to the issue, where the regulator advised banks that they “need not treat the period of the repayment holiday as a period of arrears”.
“Many banks have recently announced COVID-19 support packages that provide affected borrowers with an option to defer their repayments for a period of up to six months. These packages have mainly been offered to small business and home loan customers,” said the regulator in a statement.
“Where a borrower who has been meeting their repayment obligations until recently chooses to take up the offer not to make repayments as part of a COVID-19 support package, the bank need not treat the period of the repayment holiday as a period of arrears.”
“Similarly, loans that have been granted a repayment deferral as part of a COVID-19 support package need not be regarded as restructured.”
CEO of the Financial Rights Centre, Karen Cox, has told the ABA that they “warmly welcome” this week’s announcement.
“People calling our advice services have so much to contend with right now: the stress of not being able to pay their bills, fears for their own health, and fears for loved ones. They should not have to worry about their ability to access credit when this is all over,” she told ABA.
“We warmly welcome the ABA’s announcement that their customer’s credit reports will be quarantined from the impact of this crisis and we call on the rest of the finance industry to follow suit.”
What lenders are offering COVID-19 support packages?
Many banks are choosing to offer COVID-19 support packages to allow customers to put a pause on their home loan repayments (usually for three to six months), including the big-4 and many smaller lenders.
Some of the banks offering COVID-19 support:
- Commbank: Apply here
- NAB: Apply here
- ANZ: Apply here
- Westpac: Apply here
- Bankwest: Apply here
- St George: Apply here
- Pepper Money: Apply here
- Greater Bank: Apply here
- Bank Australia: Apply here
This is not a comprehensive list. If your bank or lender doesn’t appear on the list above, and you believe you are in need of a COVID-19 support package, be sure to contact them directly.
How do I contact my bank to get a repayment deferral?
The process to request a COVID-19 support package varies depending on the bank in question. Although branch access is now somewhat limited (and discouraged) some banks are asking customers to fill in an online form whereas others are urging customers to call.
Once in contact, in most cases, you will need to be able to prove why you are ‘worthy’ of a COVID-19 support package in order to qualify – i.e. you will have had to have been directly impacted. For most, this will mean a loss of employment or lost/reduced income.
What if I was already behind on my repayments prior to being granted a COVID-19 support package?
The ABA has advised that the credit reporting process for customers who were already behind on repayments before being granted a COVID-19 support package will be put aside until their current deferral period is over.
“For those customers who are already behind in repayments when they are granted a deferral due to COVID-19, banks will not report the repayment history information, and leave the field blank for the duration of the deferral period,” said the ABA in a statement.
“When the COVID-19 repayment deferral period has ended, banks will determine how to report the repayment history information.”
Words by Kathryn Lee
- APRA Media Statement Monday 23 March 2020, APRA advises regulatory approach to COVID-19 support
- ABA Media Statement Monday 6 April 2020 A COVID-19 mortgage deferral won’t affect your credit rating
Yet to start your home loan journey? Still looking to get into the market? Try contacting an eChoice broker. With access to 100s of mortgage products from over 25 different lenders, eChoice brokers have the resources to help you find the best home loan deal.