New hardship laws a real shocker for industry: Denovan

by Adam Smith09 Apr 2013

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.

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  • by SIDBROKER 9/04/2013 10:22:01 AM

    WOW, Is this not what trigered GFC in the first place. WOW Mr. Swan does your stupity have any limit at all.

  • by Country Broker 9/04/2013 10:24:02 AM

    If they do not deal sensibly with this and amend these provisions , we potentially will see no 95% loans , and LMI premiums rising ( already happening) , what were the lobbyists who represent the lenders thinking or doing ??

  • by Chris C 9/04/2013 10:29:18 AM

    This is a cop out for the legislators....the solicitors who write this stuff. All this will do is create more legal fees that Banks and the Consumer will have to pay when the so called verbal advice is disputed or questioned as to its validity under this law. What ever happend to NCCP refgulations - everything has to be upfront and on paper and fully assessed for validity and correctness.