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How will a bank treat a COVID-19-affected borrower?
Are you looking for some clarification around the way banks can treat loan customers who have a need to access COVID-19 support packages, or wondering if there’s a catch?
How will a bank treat a COVID-19-affected borrower?
Are you looking for some clarification around the way banks can treat loan customers who have a need to access COVID-19 support packages, or wondering if there’s a catch?
The Australian Prudential Regulation Authority (APRA) has noted that many banks have recently announced COVID-19 support packages that provide affected borrowers – mainly home loan and small-business loan customers – with options to defer repayments on loans for up to six months.
All four major banks and a number of non-majors have already indicated they will be putting a number of measures in place to support their customers through the uncertainty of the COVID-19 pandemic.
According to the regulator, where a borrower who has been meeting their repayment obligations until recently chooses to take up the offer not to make repayments as part of a COVID-19 support package, the relevant bank does not need to treat the period of the repayment holiday as a period of arrears.
Loans granted a repayment deferral under a COVID-19 package also will not be considered as “restructured”.
In a similar vein, the credit reports of individuals who are required to access support packages are unlikely to be detrimentally affected, according to one such credit reporting business.
Steven Brown is the director of bureau engagement at credit reporting business illion.
He told nestegg’s sister brand Mortgage Business that they would not be counting deferments or variations as “credit events”.
“Where a borrower seeks and is granted varied terms for loan repayments under a hardship agreement, the information provided to a credit bureau is typically different from what is reported under a normal loan repayment schedule.”
He explained that it’s currently standard practice for lenders to omit providing loan repayment information to credit bureaus where hardship arrangements are in place.
As a result, any delayed payments “are not visible to new lenders and are not included in the borrower’s credit score”.
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