ASIC's expectations when mortgage deferrals expire
The Australian Securities and Investments Commission (ASIC) has published COVID-19 and financial hardship: ASIC's expectations of retail lenders when loan repayment deferral ends, outlining its expectations of lenders when the 6-month mortgage deferrals introduced at the start of the COVID-19 pandemic expire. These expectations are in addition to ASIC's earlier expectations guidance, COVID-19 and financial hardship: retail lenders' obligations and ASIC's expectations, published on 29 April 2020. The list of expectations covers a range of situations, including how lenders should approach consumers who cannot resume mortgage repayments and the methods lenders should use to communicate with consumers.
Lenders are required to do all things necessary to ensure that the credit activities authorised by their licence are engaged in efficiently, honestly and fairly. ASIC interprets this obligation to include having processes in place that will allow an orderly transition and deliver consumers appropriate and fair outcomes. ASIC expects these processes will include the following:
Contacting consumers about the expiry of their deferral
Lenders should make reasonable efforts to contact consumers before their repayment deferrals are due to expire, allowing customers sufficient time to consider their options.
Lenders should provide consumers with information that will assist their decision-making in accordance with ASIC's earlier expectations.
Where a consumer does not respond to a communication, lenders should try contacting the consumer through another means of communication. Lenders should be able to show evidence that they made a reasonable effort to contact consumers.
If a consumer cannot resume repayments on their mortgage
For consumers who cannot resume full repayments on their mortgage, lenders should make reasonable efforts to interact with the consumer directly (for example, via a phone call) to gather more personalised information to assist the lender to make a decision about the consumer's loan fairly and appropriately.
Where a lender determines it would be appropriate to offer further assistance to a consumer, the lender’s processes should be flexible and empower staff to offer tailored assistance. ASIC expects lenders to keep records setting out the assistance options they are providing to each consumer.
Other
If a consumer is dissatisfied with a lender's response, lenders must ensure that they comply with the requirements set out in ASIC’s Regulatory Guide 165: Licensing: Internal and external dispute resolution, including notifying the consumer of their right to complain to the Australian Financial Complaints Authority.
Where a consumer’s repayment deferral expires and they miss a repayment, lenders should make reasonable efforts to contact the consumer and assess the appropriateness of further assistance being offered to them.
Lenders should have in place processes that are easy for consumers to understand and navigate.
ASIC is closely monitoring how lenders are assisting consumers experiencing financial difficulties due to COVID-19.
Please contact our commercial team for more information or to discuss how these changes might impact your or your clients.
The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.