3.1The Code’s own words
Section 72 goes on well past its opening. Its first subsection, and the first sentence of its second, read:
“(1) If a debtor considers that he or she is or will be unable to meet his or her obligations under a credit contract, the debtor may give the credit provider notice (a hardship notice), orally or in writing, of the debtor’s inability to meet the obligations.”
“(2) Within 21 days after the day of receiving the debtor’s hardship notice, the credit provider may give the debtor notice, orally or in writing, requiring the debtor to give the credit provider specified information within 21 days of the date of the notice stated in the notice.”
National Credit Code, section 72
The regulations may shorten some of the section’s day counts for credit contracts they prescribe.
3.2Who can give one
The borrower, first. The hardship notice in section 72 is the debtor’s to give. ASIC’s guidance adds that a guarantor may ask a credit provider to postpone enforcement proceedings. Where two people borrowed together, the National Debt Helpline says one borrower can ask for hardship help even when the other does not agree or cannot be reached.
3.3Each side’s part
| Stage | The borrower | The lender |
|---|---|---|
| The request | Moneysmart says the first step is to contact the lender’s hardship team. | Must consider you for financial hardship assistance, Moneysmart says. The National Debt Helpline adds that it must respond and be reasonable about making a repayment arrangement. |
| While it is considered | If the lender asks, gives the specified information within 21 days of the date stated in its notice, under section 72(2). | Section 89A of the Code applies where a default notice is needed before enforcement and the borrower gives a hardship notice, before or after it. The borrower must have given no other hardship notice in the 4 months before, or the lender must reasonably believe the new one rests on a materially different basis. The lender then must not begin enforcement proceedings until it has given its section 72(4)(b) notice that the two have not agreed to change the contract, and 14 days from that notice have passed. It may still take possession of mortgaged goods if it reasonably believes the borrower or mortgagor has removed or disposed of them, or means to, without its permission, or that urgent action is needed to protect them. |
| Information | Typically asked why help is needed, your income and major expenses, and what repayments you can afford, Moneysmart says. | May ask, within 21 days of receiving the notice, for specified information. The National Debt Helpline says the information must be relevant. |
| The grounds | The National Debt Helpline says the trouble must come from a reasonable cause, such as illness or unemployment, and that, with the variation in place, the loan must still be one you can reasonably repay. Any type of arrangement can be asked for, as long as it will reasonably repay the loan. | Must write with the outcome within 21 days, or within 21 days of receiving any information it asked for, Moneysmart says of home loans. |
| The answer | Moneysmart says to agree only to an amount you can afford to pay. | Must give reasons if it refuses, Moneysmart says. |
3.4What a change can look like
Moneysmart, writing about mortgages, says a hardship variation may change the terms of a loan, or temporarily pause or reduce repayments. The Privacy Act, in defining a financial hardship arrangement for credit reporting, gives three examples of what the credit provider might agree to in such an arrangement:
“(a) defer or reduce required monthly payments for a temporary period; or (b) accept interest‑only payments for a temporary period; or (c) extend the term of a loan to reduce monthly payments.”
Privacy Act 1988, section 6QA
Where hardship is not temporary and a home loan can’t reasonably be repaid, the National Debt Helpline says you can ask the lender for hardship assistance that gives you time to sell the home.
A short change carries less paperwork. Section 73 of the Code, headed “Notice of change”, says its notice requirement does not apply where the lender and borrower agree to a change that defers or otherwise reduces the borrower’s obligations for 90 days or less.
3.5Keeping to it
For a secured loan, the National Debt Helpline says that if a financial hardship arrangement is agreed and kept to, the asset can’t be taken. If the agreed amount turns out to be too much, Moneysmart suggests paying what you can, even if it is less than agreed, and then negotiating a new arrangement you can afford.
3.6If the answer is no
Moneysmart says that if you are not happy with the lender’s response, the next step is its internal dispute resolution team, and if you still can’t reach agreement, the Australian Financial Complaints Authority (AFCA), which gives free dispute resolution. The National Debt Helpline adds that you do not have to accept AFCA’s decision, and that if you do, it is binding on the lender.
The Code also gives the borrower a court. Section 74 says that if the lender does not change the contract after a hardship notice, “the debtor may apply to the court to change the terms of the credit contract”. The court, after hearing the applicant, the lender and any guarantor, may change the contract, though not so as to reduce the amount ultimately payable to the lender, or may refuse. While the application is decided, it may stay enforcement proceedings under the contract. A lender whose contract has been changed this way may later ask the court to vary or revoke the order.
Two other routes that hold enforcement back are in the default notice and the wait before enforcement and disputing the amount, and the courts.
3.7Free help the sources name
The National Debt Helpline says a free financial counsellor can help you look at the options, negotiate with creditors, and make plans to manage debts. Moneysmart adds a caution: financial counselling is free, and businesses that charge fees for it are debt consolidation and refinancing companies, not financial counsellors.