An industry figure has labelled new hardship provisions "a real shocker" that could end up locking borrowers out of credit.
An NCCP amendment was issued last week which formalised provisions for borrower hardship. The new provisions stipulate that borrowers can give notice orally "by simply stating that they are unable to meet their obligations". Gadens Lawyers' Jon Denovan told Australian Broker the regulation reduces the process for hardship notifications to "an offhand comment" from a borrower.
"If you're a decent lender, once the customer gets into default you would ring them up. When you ring them up and the customer says, 'I haven't paid because I can't pay,' you instantly have a hardship notice. Then if things deteriorate and you're about to send them a default, you ring up and they say, 'I still can't pay,' there's another hardship notice."
Denovan said the regulations had the danger of making lenders reticent to contact customers in mortgage stress, for fear they would trigger a hardship notice. Moreover, he said the new regulations mean borrowers won't have to enter into any arrangement with a lender to find a solution to financial problems.