While appreciative of the “good, balanced approach” adopted by the banks, government and regulators in supporting Aussie borrowers to date, the head of an aggregator group has expressed lingering concerns regarding the after-complaints which may arise from lenders lengthening customers' repayment pauses.
Connective executive director Mark Haron explained the anxiety stems from the fact that extending deferrals will see mortgage holders ultimately paying a lot more over the long-term.
“But the alternative is the bank has to take possession of their house and they get moved out,” he noted.
“That’s the most important thing: we don’t want to see people kicked out of their houses through no fault of their own, due to a pandemic rather than a lack of financial management.
“However, this is what will be sitting in the back of banks’ minds as they extend these repayments pauses: will people rise up and make complaints? Will lawyers start circling, trying to take advantage of the situation and challenge the banks?”
As long as lenders are providing and documenting clear and direct communication with their customers regarding their loan deferral options, they should be protected.
“I think the banks, with government and regulatory support, have done the right thing by helping people stay in their homes,” said Haron.
“It’s my belief that if the banks ensure people are aware of the consequences of extending their repayment pause, then anyone making that complaint down the track should hear AFCA saying, ‘You knew what was going on. The bank helped you stay in your house for the duration of the pandemic period and that assistance was appropriate.’"
However, Haron’s residual worry is “based on how AFCA has dealt with complaints” in the past.
“Some of their views have been divergent from the regulatory guidance we get from ASIC and certainly some of the commentary we’ve seen from APRA in terms of them supporting banks and enabling people to pause their repayments,” he explained.
“Further, it was very clear through ASIC’s guidance that when a bank decides not to continue allowing the customer to put a pause on their repayments, they should be clear the customer can take it up with AFCA if they want to.”
The risk of disgruntled borrowers complaining about their repayment pause down the line, despite the measure being the only reason they were able to stay in their homes, has led to Haron echoing his earlier advice to brokers.
“Brokers could get roped into a complaint if they seemed to have been giving advice as to what to do with extending or suspending payment deferrals,” he explained.
“They need to be careful how far they go in terms of providing any recommendations around that and rather focus on the larger financial impact for the customer instead.”