The Federal Government has stepped up efforts to protect mortgagees who lose their jobs or face financial hardship. But the new rules will not be extended to business borrowers, many of whom use their family property to secure loans and overdrafts.
Under the new rules, people with mortgages of up to $500,000 will be able to seek help from their lender and legally request changes to their mortgage contract.
“This means if homeowners find themselves in financial hardship they will be able to request help. That might be a change to certain terms of their credit contract on the grounds of hardship, or a postponement of enforcement proceedings,” Senator Nick Sherry, Federal Minister for Superannuation and Corporate Law, said in a statement.
For a consumer to seek possible assistance from their lender under the hardship provisions they must contact their lender directly to discuss their options. Assistance may include extending the period of their contract, reducing the amount of their repayments, or a repayment holiday.
Under the new provisions, if a lender refuses to provide assistance, consumers can seek further assistance from the Financial Ombudsman Service.
But a spokesperson for Sherry confirmed the provisions are only for consumers. She could not comment on whether the Government was considering extending the protections for business borrowers.
Only one bank said it will come to the aid of business borrowers who strike some trouble. In early April, Wesptac (which also owns St George bank) announced that it would extend its hardship provisions to small business customers.
“The last thing we want as banks is to have customers that are feeling at financial hardship and feeling that they have nowhere to go,” Westpac chief Gail Kelly said at the time.
“The Australian economy is slowing; it’s really important that as an industry we step up and do what we can to support our customers in this time.”
So far, no bank has followed Westpac’s move. Perhaps a gentle nudge from the Government would help.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
