Page last updated on 08/07/2020
What do the changes mean?
- The approach for financial hardship is going to be very similar to the approach taken before the COVID-19 pandemic
- The risk of repossession and enforcement remains but should be less likely
- There should be greater flexibility in making repayment arrangements given the COVID-19 pandemic.
- You need to consider immediately cancelling the direct debit for any existing repayment arrangement your client can no longer afford. Talk to the lender about different methods for making payments.
What do you do differently?
- Do inform the lender if your client has been financially impacted by the pandemic
- Do let the lender know if your client is receiving JobSeeker or JobKeeper payments.
- Take extra care with offers of payment pauses, payment freezes, deferrals and refinances. If at all possible, payments should continue to be made on car loans to avoid the car being repossessed if the debt later becomes unmanageable.
- Make sure you consider the following issues in negotiations:
- Late fees and default/legal fees not to be charged
- If the lender will not stop interest, consider negotiating a reduction in the interest rate to a lower amount.
- Attempt to negotiate on the interest rate (if possible)
- Ask if the loan term can be extended (if that will assist)
- Repayments must be affordable
- Ask for your client’s credit report to be marked as paid for the purposes of repayment history information (‘0”) if a repayment arrangement is made (and your client keeps to it)
- Always ask for all enforcement (including repossession) to stop and that you and your client be clearly informed if your client’s car is to be repossessed or enforcement action is to commence
Common problem: Car surrender or sale (with consent)
Some clients may need to consider surrendering or selling their car. In negotiations with the lender, remember you can:
- Ask for permission for the client to sell their car privately (which should ensure a better price) with all of the proceeds from the sale to go towards the car loan. Then negotiate a repayment arrangement (or waiver if your client is likely to remain in long-term financial hardship) on any shortfall.
- Surrender the car and then negotiate a repayment arrangement (or a waiver if the client is likely to remain in long-term financial hardship) on any shortfall.
Common problem: Car repossession
- If car repossession is threatened, you or your client must lodge a complaint in AFCA immediately. Lodging a complaint in AFCA puts a stay on repossessions.
- If the National Consumer Credit Protection Act applies: Your client should also be aware that their car cannot be repossessed without a court order or their written permission if the car is on residential premises (for example in their garage).
- Always use the lender’s internal dispute resolution process or AFCA to negotiate a workable repayment arrangement. If your client will not realistically be able to pay the loan for the next year or so, discuss a sale or surrender of the vehicle.
Australian Banking Association: Support during COVID-19 – The Personal Relief Package (announced March 2020)
What has not changed?
Cars can still be repossessed either by an agent attending the premises to repossess the car or by the lender obtaining a court order
Lenders can start legal proceedings to seek a court judgment for a debt (if it is in default)
You should always check if the lending for the car loan was irresponsible and run a dispute if it was