Hardship provisions
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| Q.10 Do you agree that hardship applications should be able to be made when in default? Is the 2 month timeframe appropriate? |
Consumer representatives were unanimous in their support for allowing hardship applications to be made whilst borrowers were in default. This was for the reasons as discussed in the paper. Some suggested 3 months as a minimum.
Conversely, the banks were firmly against the proposal with one submitting that the status quo meant borrowers had an incentive to approach the bank quickly. All banks suggested they will listen to claims post default on their merits. The wider lending industry appears to be split with some submissions supporting the proposals noting they already carry on their business in the fashion proposed. Representatives from the industry and the legal profession appear to support the proposal though some suggest the 2 month period may be too long.
| Q.11 Will the proposed changes to the hardship provisions improve the effectiveness of the hardship provisions? |
Are the acknowledgement and processing timeframes proposed realistic and appropriate?
Do you think failure of a lender to meet their obligations should result in the Disputes Tribunal being able to make any order it sees fit under the hardship provisions? By what means should an application for hardship be recognised? Should it have to be in a written form – letter or email – or should allowance be made for verbal applications? Should a lender have to provide the reasons for declining a hardship application?
Consumer representatives were generally supportive of the above questions.
Lenders suggested the timeframes could work, though several noted they have their own practices which they consider to be suitable. There was some wariness that these proposals were simply a response to the economic recession.
One industry representative questioned the proposed right to go to a Disputes Tribunal as such an action would fit within section 58. This is not the intention, however, of the proposal. It is intended to coerce quick decisions. A decision made within the proposed timeframes that is not ‘fair' would still be subject to scrutiny under section 58.
Submitters would prefer communications regarding hardship between lenders and borrowers are in writing, though this can be difficult and some may prefer verbal communication. Indeed, one lender noted this was the easiest way for them to address hardship circumstances.
Where commented on, it was felt reasons for declining an application should be disclosed to the applicant.
