ASIC says more could be done on loan deferral front

  • By AB+F Editorial

Following a number of meetings with bank and non-bank lenders, ASIC believes that more can be done by lenders to help their customers manage their loan deferrals as it provides guidance to lenders on how to appraoch borrowers who are unable to start making repayments. 

On Thursday, the corporate regulator published guidance on what it expects of retail lenders when loan repayment deferrals end. 

As part of its monitoring activities on how lenders were helping customers in financial difficulty due to COVID-19, ASIC said it had been meeting with the industry – which was already signalled by Commissioner Sean Hughes at a recent parliamentary hearing.  

Based on this engagement, ASIC said that more can be done by lenders to provide consumers with personalised information or representative examples about how assistance arrangements may affect their repayments and the cost of their loan over the longer-term. 

“We think this is important for lenders to consider in the context of providing consumers with further assistance at the expiry of a repayment deferral,” ASIC said. 

Some lenders have raised queries with ASIC about how to approach situations where they identify that a consumer’s financial difficulties are so severe that they will not be able to repay their loan over the longer-term. 

ASIC said that it expects lenders to make all reasonable efforts to work with consumers to keep them in their homes if that is in their best interests. 

The regulator recognises that there will likely be some circumstances where offering a consumer further temporary assistance may make their situation worse and therefore such situations will need to be carefully identified by lenders and involve a high level of engagement with those affected consumers.

ASIC said it encourages lenders to “build continuous improvement into their processes as this will likely result in better consumer experiences and outcomes” for example, including consumer feedback into consumer communications. 

The regulator said it also encourages all lenders to work closely with their customers to develop solutions that not only provide consumers with relief but are sustainable and can assist consumers over the longer-term. 

It also remains important that lenders continue to ensure that information about assistance is relevant, accessible and available to all consumers.

ASIC is also working closely with APRA to ensure that its expectations of how it expects lenders to manage the impact of COVID-19 are aligned with that of the prudential regulator. 

In fact, APRA also on Thursday issued a consultation letter regarding capital measures and reporting requirements for loans impacted by COVID-19. 

It comes at a time when Australia’s largest lender reported a fall in the number of customers on loan deferrals – in part because of continuous and proactive customer engagement.