Hardship assistance demand declines as Australia opens up

New data released by the Australian Banking Association (ABA) has shown a decline in demand for hardship assistance after a peak in early August, as Australia emerges from lockdowns and border restrictions across the country.

Almost 69,000 customers have received hardship assistance since 8 July this year, including more than 27,000 home loan deferrals and more than 4,000 business loan deferrals.

Comparatively, this is just 12,000 more hardship assistance approvals since last month, the smallest increase since the banking industry announced a second COVID-19 package of assistance in July this year.

Anna Bligh, Chief Executive Officer of the Australian Banking Association, said while the data shows people still require assistance, it is reassuring to see people are getting back on their feet.

“Banks have been on-hand to assist their customers throughout the pandemic, however it’s heartening to see the need for assistance declining as many States and Territories come out of lockdown and as borders begin to open,” Ms Bligh said.

“The majority of hardship approvals came from customers in NSW and Victoria, which is obviously no surprise given the recent lockdowns, however we did see thousands of customers across the rest of Australia seek support and talk to their bank.”

Financial Difficulty Guideline

In light of the COVID-19 experience, the ABA has recently reviewed industry guidance for banks’ programs that are aimed at supporting customers in financial difficulty and has today released a new Financial Difficulty Guideline for all ABA member banks.

The guideline promotes good practice across the industry, which includes a framework for banks that balances the need for consistent, standardised access to financial difficulty assistance with the need for flexibility when responding to customers’ unique personal and financial circumstances.

While some banks have already begun to implement practices within the guideline, banks across the industry will roll these out over the next 12 months.

A new initiative included in the industry guideline is the option of a savings buffer for customers in financial difficulty. A savings buffer allows a person on a payment plan to have a small amount of funds set aside by the bank for unexpected expenses or emergency bills. By the end of 2023, all banks will consider providing the option of a savings buffer to customers when calculating financial hardship repayment plans.

“The practices in this updated guidance demonstrate the commitment banks have to their customers experiencing financial difficulty and define the practical assistance banks can provide a customer who is unable to repay their debts,” Ms Bligh said.

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