CREDIT CARDS

credit-cards2-dp.jpg

Page last updated on 08/07/2020

​​

More information

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



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



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.



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



What has not changed?

  • Credit card defaults can still be sent to debt collection
  • Lenders can start legal proceedings to seek a court judgment for the debt (if it is in default)
  • You should always check if the lending for the credit card, or the limit increase, was irresponsible and run a dispute if it was.