The Australian Banking Association (ABA) and the major banks have confirmed that they are implementing a new phase of support for customers impacted by the COVID-19 pandemic.
While many of the 800,000 bank customers who had deferred their repayments have already begun repaying their loans following an initial three-month hiatus, many more will look to do so at the end of their six-month deferral period (the maximum term allowed under the previous COVID-19 support package).
However, following discussions with APRA and ASIC to provide the appropriate regulatory treatment (and with interim authorisation granted by the ACCC), the banks have now agreed to extend this support package on a case-by-case basis for customers who require it.
Customers with reduced incomes and ongoing financial difficulty due to COVID-19 will be contacted by their banks and, if they cannot return to repayments or restructure/vary their loan (for example by extending the length of the loan or converting to interest-only repayment for a period of time) to support their current financial situation, they may be able to extend their repayment deferral by another four months (ending no later than 31 March 2021).
For most banks, this will be considered only when the current deferral is expiring.
As previously stated, customers who recommence repayments on their existing loan, enter into a new repayment arrangement, or extend their deferral period with approval from their bank will not see their credit report impacted (provided they meet the new repayment arrangements).
The ABA has said that banks will work with their customers to determine “the best long-term solution for their individual circumstances” should they continue to be severely financially impacted and unable to make repayments during or at the end of any deferral.
Extension aims to ‘avoid a cliff’ in September
The CEO of the ABA, Anna Bligh, commented: “Customers will be expected to work with their bank, during this extra time, to find the best solution for them.
“A deferral extension of up to four months will not be automatic. It will be provided to those who genuinely need some extra time. Many customers may need less than four months to either restructure their loan or get back into full repayments.”
She continued: “To meet demand, banks have deployed over 5,000 extra frontline staff who will proactively contact and work with customers to find the right solution, but please be patient with bank staff as we enter this next phase”.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially,” she said.
“Australia’s banks supported their customers as the country entered the COVID-19 crisis, and they are determined to support their customers on the way out of the crisis,” the ABA CEO continued.
Major banks to work with customers on an individual basis
The CEOs of the four major banks have all backed the new initiative.
ANZ – which has provided repayment deferrals on more than 100,000 home, personal, small business and commercial accounts since March 2020 – noted that customers on existing loan repayment deferrals who have not been financially impacted by COVID-19 will be required to begin making normal repayments at the conclusion of their six-month deferral agreement.
Those who continue to face financial hardship due to COVID-19 may be able to restructure their loans or, in some cases, receive the four month extension.
ANZ chief executive Shayne Elliott said: “Our primary focus through COVID-19 has been to do all we can to help our customers manage the economic impact of the pandemic.
“While this is clearly more difficult with the recent developments in Victoria, we want our customers across Australia to know we will continue to do all we can to support them through the coming months.”
He continued: “For many customers, their income hasn’t been as impacted as they first thought and they will begin making repayments. In fact, many customers are already back making their repayments, and this is a good outcome.
“There are, however, many customers on deferrals that remain in a difficult situation, and we will work through a range of measures, including restructuring loans and, in some circumstances, extending deferral periods.”
CBA CEO Matt Comyn also commented, stating: “We are committed to continuing our industry-leading support for customers and businesses to help them get back on their feet and inject vital financial stimulus into the Australian economy.
“While many customers are doing better than we expected, we know that some customers will require further support, and we will contact them over the coming months to discuss the options that might be available to them.
“To date, our coronavirus measures since March 2020 have provided about $15 billion in direct financial support to customers and stimulus for the economy. Supporting customers who continue to experience financial difficulty is a priority, and we are tailoring our support to make sure each customer gets the advice and assistance that suits them.”
Noting that CBA has provided loan repayment deferrals to almost 130,000 home loans and supported 100,000 business customers since the pandemic began, CBA CEO Matt Comyn said: “This next phase of our support reinforces the strong collaboration and effective cooperation between federal and state governments, regulators and the banking industry, which has allowed so much to be achieved in such a short time.”
NAB, which had nearly 40,000 business loans and more than 98,000 home loans deferred (as at 19 June), said it would offer an extension on business and residential loans to 31 March 2021 on a case-by-case basis.
Highlighting the increasing number of cases in Victoria, NAB CEO Ross McEwan said: “The recent news of increased COVID-19 detection has brought additional uncertainty to many businesses, individuals and families.
“Many are doing it tough, and banks play a critical role in providing support,” Mr McEwan said.
“NAB is already checking in with customers on deferment, to better understand their individual circumstances and to determine the best arrangement for them.
“While a significant portion of businesses and home owners that we have spoken to have started their repayments again, there are clearly still many customers who may need support for a bit longer.”
However, he said that while the deferrals have so far provided some much-needed relief, the bank is “encouraging customers who can begin repayments to do so as soon as they can [as] it is in the customer’s interest to repay debt sooner”.
Likewise, Westpac acting chief financial officer Gary Thursby added: “The COVID-19 pandemic is continuing to have a fast-changing impact here in Australia, and we know that for some customers, this will have a longer-term effect on their circumstances and further financial support will be required...
“For customers who remain under stress but can still contribute towards their loan repayments, we will provide support where we can help work through options that may be available to adjust their loan.
“However, we anticipate that a significant number of customers will be able to resume regular repayments when their deferral term ends. We expect these customers to start their repayments again, and we would encourage as many people as possible to do so,” Mr Thursby said.
Since the start of the COVID-19 pandemic, Westpac has helped more than 130,000 mortgage customers defer their repayments, as well as 23,000 small-business customers.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.