ASIC clarifies expectations for lenders as deferrals expire

Guidelines address how to approach consumers who can't resume repayments on their mortgages

ASIC clarifies expectations for lenders as deferrals expire


By Madison Utley

ASIC has clearly communicated its expectations for lenders as consumers’ six-month loan repayment deferrals are set to expire over the coming months, including what they should do in cases where a customer is unable to resume repayments.

The regulator stressed there are certain processes lenders must have in place to not only ensure an “orderly transition” but also to support “appropriate and fair” outcomes.

Sitting atop ASIC’s list is the expectation that lenders make “reasonable efforts” to contact customers before their deferral expires to ensure they have sufficient time to consider their options. In instances when a consumer fails to respond, the lender is expected to try a range of other communication channels as they will be asked to provide evidence of the lengths they went to in order to get in touch.

Once contact has been made, lenders are expected to arm consumers with the information needed to assist their decision-making.

If a consumer indicates they can't resume repayments on their mortgage, lenders are expected to make an effort to connect with them directly, such as through a phone call, to gather personalised information about the circumstance and make a decision about the loan in a fair and appropriate manner.

When a lender determines further assistance is needed, its processes should be flexible enough to allow for tailored assistance to meet the needs of the consumer; however, ASIC emphasised it is crucial lenders keep records of the assistance options they are providing. 

If a consumer is unable to meet their repayment obligations after the expiry of their deferral and a lender decides not to provide further assistance, said consumer must be notified of his or her right to complain to the Australian Financial Complaints Authority (AFCA).

ASIC has also recently been meeting with a range of both bank and non-bank lenders to gauge the other concerns currently dominating the space.  

Off the back of those interactions, ASIC has communicated “more can be done” by lenders to help consumers understand how assistance arrangements may affect their repayments and the cost of their loan over the longer-term, through the provision of more personalised information and illustrative examples.

Conversely, ASIC has also been led to see where more guidance is needed. During these talks, some lenders have raised queries about how to approach situations where a consumer’s financial difficulties are so severe they will not be able to repay their loan over the longer-term.

While ASIC has already made it clear lenders are expected to make reasonable efforts to work with consumers and keep them in their homes if that’s in their best interests, the regulator recognised there will undoubtedly be some circumstances when offering a consumer additional assistance could make their situation worse and therefore not be an option. 

According to the regulator, “Such situations will need to be carefully identified by lenders and involve a high level of engagement with those affected consumers.”

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