Under the new guidelines, the amnesty is extended and customers who have fallen into arrears with repayments can escape a credit rating penalty if they restructure their loan or apply for another hardship program. Customers who have made partial payments during the loan deferral period will also exit with an improved repayment history.
The ABA has encouraged all customers to contact their banks if they are unable to start full repayments when their loan deferral periods end.
ABA chief executive Anna Bligh said banks had started contacting customers whose deferrals were soon ending.
“Protecting customers’ credit ratings is part of the suite of measures banks are offering in an effort to reduce the stress that financial impacts due to the pandemic are having on individuals and families,” she said.
Financial Rights Legal Centre chief executive Karen Cox said consumer groups had worked closely with the ABA to ensure customers were treated fairly and consistently during such “extraordinary times”.
“People find it difficult to talk about their financial situation and will often soldier on trying to resolve the situation themselves. Your bank can’t assist you if you are not frank with them about your circumstances and your credit report is likely to suffer as a result,” Ms Cox said.
Banks have allowed borrowers thrown into financial distress by the pandemic to pause loan payments for up to six months, with the possibility to extend the deferral period to 10 months or until March next year.
The combined value of deferred home loans and small business loans is more than $274 billion, or about 10 per cent of all bank loans in the country.
Ms Cox called on other lenders to follow the banks’ lead “and implement these principles for consumer credit reporting during the COVID-19 pandemic”.
A Global Asset Management Seoul Korea Magazine