What Your Lender Might Not Tell You: Your Rights When Facing Financial Hardship

Facing Financial Hardship? Know Your Legal Rights and What Your Lender Must Do

Facing financial hardship can be a frustrating and stressful experience, especially when you feel like you're not being heard. Many people are unaware of their rights under Australian law when they can't make their loan repayments, and this lack of knowledge can leave them feeling powerless.

This article will empower you by shedding light on your rights when facing financial hardship and how you can get the support you need.

What is a Financial Hardship Arrangement?

A financial hardship arrangement is a formal, legally binding agreement between you and your lender. It's a structured plan that allows you to temporarily change your repayment schedule to accommodate a difficult period, such as a job loss, illness, or a significant change in income.

It's crucial that this arrangement is properly documented and agreed upon by both you and your lender, as an informal "promise to pay" doesn't provide the same legal protection. A formal arrangement can include:

• A repayment plan: A new, temporary schedule for your repayments.

• A deferral: A pause on your repayments for a set period.

• A restructuring of the loan: This could involve extending the loan term to reduce your regular repayment amount.

The Frustration of Not Being Acknowledged

Many people feel a sense of frustration when they contact their lender and their situation isn't properly acknowledged. This can happen for a number of reasons:

• You're speaking to the wrong person: Not all customer service representatives are trained to handle hardship requests.

• Lack of proper documentation: If your hardship request isn't in writing, it can be easily lost or ignored.

• Lender reluctance: Some lenders may be reluctant to formalise a hardship arrangement.

When a lender doesn't properly acknowledge your situation, it can feel like you're hitting a brick wall. This is where knowing your rights becomes crucial. Under Australian law, you have a right to apply for a hardship arrangement, and your lender must consider it in good faith.

Crucial Timeframes: What the Lender is Obligated to Do

We understand the credit system because we’ve worked on the "other side of the fence" in credit and collections for over 20 years. This unique industry experience means we understand the processes of the credit bureaux and collections companies—and we can use that to support you.

Under the National Credit Code, when you provide a hardship notice (verbally or in writing), your lender has strict obligations and time limits they must meet:

• Initial Response Time: The credit provider generally has 21 days to notify you of their decision.

• Requesting More Information: If they need more information from you, they must ask for it within 21 days. If you provide the requested information, they have another 21 days from receipt to respond with a decision.

• No Refusal Without Reasons: If your lender refuses your request, they must tell you in writing and give you the reasons for the refusal. They also have to provide details for the Australian Financial Complaints Authority (AFCA), the free and independent external dispute resolution scheme.

• No Default Listing While Request is Active: A credit provider generally cannot list a default against your name when you have an active, unresolved request for a repayment arrangement.

It is important to understand that a default can only be listed 14 days after your request has been formally rejected. It is usually best to keep paying what you can afford during the negotiation period, even if it's not the full amount.

Where Most People Miss Out (and where Edit Credit can support you)

The most important takeaway is that most clients have limited knowledge of credit reporting systems and don't realise what they are fully eligible for.

When applying for hardship, customers often struggle to know:

• What you qualify for: Do you need a temporary reduction in payments, a full deferral, or a permanent loan restructure? The law allows you to ask for any type of repayment arrangement as long as it will reasonably repay the loan. Edit Credit helps you identify the most effective, long-term solution for your unique situation.

• What your lender can offer: Lenders generally have a far wider range of options for responding to hardship than they initially present. We leverage our expert understanding of the process to make sure your lender considers a better, more flexible arrangement than just the standard few, ensuring you avail yourselves of applicable hardship provisions.

• How to articulate your "reasonable cause": To qualify, you must be having trouble making payments because of a "reasonable cause" (like illness, unemployment, etc.). We help you effectively present your situation and documentation to make the strongest possible case.

Edit Credit: Your Supportive and Expert Intermediary

Navigating this process on your own can be confusing, frustrating, and costly. This is where Edit Credit comes in. We are the independent experts you can talk to, working efficiently on your behalf to help you:

• Formally apply for a hardship arrangement: We ensure your request is properly documented and sent to the right department, meeting all the legal requirements.

• Negotiate the best deal: We leverage our unique industry experience and knowledge of the system to negotiate the most favourable and sustainable repayment plan, improving your credit worthiness.

• Stand up for your rights: We ensure your lender adheres to their legal obligations and timeframes, preventing you from being "punished" by credit providers for issues they are not responsible for.

You don't have to face financial hardship alone. With the right guidance and an independent expert by your side, you can ensure your rights are protected and find a workable solution to get back on track and closer to your next milestone.