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New laws passed by parliament yesterday will allow struggling borrowers to change their repayments to banks in times of hardship.
The Consumer Credit Legislation Amendment (Enhancements) Bill 2012 gives the banks a legal obligation to review requests from Australians experiencing financial hardship
CEO of credit repair agency MyCRA Graham Doessel believes it is a better alternative than being banned from borrowing from lenders.
“There are many cases of genuine hardship – especially illness and temporary unemployment, which should not see consumers banned from obtaining credit for years to come,
“And many lenders are ready to work within these guidelines to come up with something best for all parties prior to starting the debt recovery process,” Mr Doessel said.
From 1 March 2013, a debtor will have a statutory right to request a hardship variation where the debtor cannot meet their obligations under a credit contract, regardless of the amount of credit that is provided under their contract.
However, there is no obligation on the Credit Provider to comply with this request, but they must have issued written notification of their refusal to comply with a hardship request prior to enforcement proceedings.
Financial Services Minister, Bill Shorten said the changes are in the best interests of Australians.
“Simplifying the procedures for borrowers to apply for a variation to their repayments on the grounds of financial hardship, as it is in the best interests of both parties to try and resolve these situations as quickly and simply as possible.”
Official policy on hardship is varied, but Mr Doessel says the ‘spirit’ of both government and industry body positions on financial hardship variations is for lenders to reasonably consider the request before issuing enforcement against the borrower.