Question 1

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
It should be easier to get interest stopped and fees waived
Waivers or reductions in debt should be available for people in significant long-term financial hardship
Stimulus payments and the coronavirus supplement should mean that some people can settle long term debt for a reduced amount as a full and final settlement offer
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.
Credit card debt remains a low priority debt

Question 2

What do you do differently?

Do inform the lender if your client has been financially impacted by the COVID-19 pandemic.
Do let the lender know if your client is receiving JobSeeker or JobKeeper payments.
Take extra care to avoid deferring payments where interest and fees are still being charged
Make sure you consider the following issues in your negotiations:
- Late fees and default/legal fees not to be charged
- Interest not to be charged
- If the lender will not stop interest, consider negotiating a reduction in the interest rate to a lower amount, say 10% p.a.
- Repayments must be affordable
- Repayment arrangements will need to be reviewed because the pandemic is likely to be causing an impact for many months (and likely more than a year)
- Where your client is in significant medium term to long term financial hardship a waiver or part waiver may be considered
- Negotiate a debt reduction in full and final settlement if the client has funds and the settlement would help financial stability
- 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)
- Ask for all enforcement to stop and that the lender contact you before they start/re-start enforcement action

Question 3

Common problem: cancelled credit cards

Lenders may cancel credit cards to manage the risk of default. The lender can cancel a credit card at any time for no reason at all.

Warn your clients that this may occur. Ensure they have a back-up plan to cover basic expenses. It is not recommended that people rely on their credit card for basic living expenses.

Question 4

Common problem: full and final settlement – reduced lump sums

The stimulus payment, coronavirus supplement or payments to cover holiday leave may mean that clients have access to lump sums.

When negotiating:

Make it clear that the reduced lump sum offer is in full and final settlement of the debt
Tell the creditor that the negotiations are on a “without prejudice” basis
Keep a detailed file note of all conversations
If the creditor agrees to your offer, make sure you confirm the settlement in writing via email.
Get instructions from your client about when they can make the payment and how.
Make sure the client has the money in their account before making an offer