(1) This section is made for the purposes of sections 6QA and 21EA of the Act.
Note 1: Section 6QA of the Act sets out the definition of financial hardship arrangement and financial hardship information. A financial hardship arrangement exists where a credit provider and an individual (who is or will be unable to meet their obligations under the credit received from the provider) make an arrangement affecting the individual’s monthly payment obligations. These arrangements can be either a permanent variation to the terms of the credit (a variation FHA) or temporary relief or deferral of the individual’s obligations (a temporary FHA). Repayment history information is calculated by reference to the affected payment obligations. When repayment history information is calculated in this way, financial hardship information may also exist.
Note 2: Section 21EA of the Act provides that if a credit provider discloses repayment history information about an individual in relation to a monthly payment and financial hardship information exists in relation to that payment, the financial hardship information must also be disclosed.
Disclosing financial hardship information
(2) Financial hardship information may be disclosed in relation to consumer credit if the individual’s payment obligation for a month under that consumer credit is affected by a financial hardship arrangement.
(3) For the purposes of subsection (2), an individual’s payment obligation for a month is affected by a financial hardship arrangement if the financial hardship arrangement is active on the later of:
(a) last day of the month to which the repayment history information that could be disclosed for that month relates; and
Note: See section 8 for further information about disclosing repayment history information.
(b) if a grace period applies for that month, the last day of the grace period allowed by the credit provider (the assessment day).
(4) For the purposes of subsection (3), a financial hardship arrangement will be active where:
(a) if the arrangement is a variation FHA: a payment due in that month (as determined by reference to the terms of the consumer credit) was affected by the financial hardship arrangement and that payment was the first payment affected by the arrangement; and
(b) if the arrangement is a temporary FHA: a payment due in that month (as determined by reference to the terms of the consumer credit) was affected by the financial hardship arrangement and no other payments (as determined by reference to the terms of the consumer credit) that are unaffected by the arrangement have subsequently fallen due in that month (whether or not those subsequent payments have been paid).
(5) If two or more financial hardship arrangements are active on the assessment day, the financial hardship information and repayment history information that may be disclosed is to be determined by reference to the financial hardship arrangement that requires the lowest payment obligation for that month.
Note: It is possible for more than one financial hardship arrangement to be ‘active’ for a month. However, a credit provider can only disclose repayment history information and, therefore, financial hardship information in relation to one of those arrangements: see paragraph 8(3)(a).
(6) If the consumer credit is held jointly by two or more individuals and a financial hardship arrangement is made between any of those individuals and the CP, financial hardship information may be disclosed in relation to all individuals who hold the consumer credit.
Note: If a credit provider complies with the conditions associated with making a financial hardship arrangement with one individual who holds the consumer credit, the need not e.g. obtain the agreement or consent to the financial hardship arrangement of other individuals who jointly hold the consumer credit. The provider may need to consider whether it would be appropriate to notify those other individuals.
(7) Subject to subsections (14) and (15), if a credit provider discloses financial hardship information in a month in relation to consumer credit, the provider must also disclose repayment history information in relation to that consumer credit for that month.
(8) An individual will satisfy the conditions of paragraph 6QA(5)(b) of the Act if the individual pays their ordinary monthly payment in the month plus all amounts overdue from previous months, and that payment is made by the last day of the month.
Note: Information about a temporary FHA is not financial hardship information where the conditions of subsection 6QA(5) of the Act are met, including that was equal to, or greater than, the amount the individual would have been obliged to pay apart from the arrangement.
Timing of commencement of financial hardship arrangements
(9) For the avoidance of doubt, a financial hardship arrangement is made when the individual and a credit provider agree to the arrangement and not when a hardship request is made. However, the commencement date of a financial hardship arrangement may be backdated:
(a) to no earlier than the day the hardship request was made by the individual:
(i) if the credit provider has unreasonably or unnecessarily delayed agreeing to the arrangement, having regard to the time that the provider acting reasonably would have taken and any conduct of the individual that contributed to the delay; or
(ii) otherwise, where the credit provider considers that the backdated commencement date more accurately reflects the date the arrangement ought to have commenced, having regard to all the circumstances; or
(b) if:
(i) the individual requests a credit provider to backdate the commencement date of the financial hardship arrangement on the basis that the individual was not able to make a hardship request at an earlier time because of the unavoidable consequences of circumstances beyond the individual’s control, such as illness or natural disaster; and
(ii) the credit provider is satisfied that this is the case.
Temporary FHAs
(10) For the purposes of the definition of temporary FHA:
(a) an overdue payment arrangement is presumed to be a temporary FHA if the individual will not pay at least their ordinary monthly payments within the next month. This presumption does not apply if:
(i) the credit provider reasonably believes that the individual’s inability to meet their obligations in relation to the consumer credit is the result of a mismanagement of funds in the short term; or
(ii) the individual has not provided the information that the credit provider reasonably requested to assess the reason for the individual’s inability to meet their obligations in relation to the consumer credit; or
(iii) the individual explicitly states that they do not want to make a hardship request.
(b) an overdue payment arrangement is presumed not to be a temporary FHA if the individual is to pay at least their ordinary monthly payments (without immediately paying all amounts that are currently overdue) within the next month. This presumption does not apply if:
(i) the arrangement directly follows, and is in response to, an earlier temporary FHA; or
Note: This will apply to arrangements that are commonly called ‘payment test periods’ (or ‘serviceability periods’) or ‘catch-up periods’ that follow an earlier temporary FHA, and which relate to the overdue payments (as determined by the terms of the consumer credit) that have accrued during that temporary FHA.
(ii) even if the individual makes those payments, the consumer credit is likely to still be overdue after 7 months; or
(iii) the individual has made a hardship request and the individual and credit provider have explicitly agreed to a temporary FHA.
(c) if a credit provider does not agree to a hardship request, an overdue payment arrangement directly following that refusal is presumed to be a temporary FHA unless the provider tells the individual that the arrangement is not a financial hardship arrangement.
Note: This subsection relates to the arrangements that are put in place between the individual and the credit provider for the purposes of the credit reporting system. A provider must separately consider whether the individual has given a ‘hardship notice’ under the National Credit Code. If an individual gives a hardship notice, the provider would have obligations under sections 72 or 177B of the National Credit Code. If the individual gives a ‘hardship notice’, the provider is not required to agree to a temporary FHA.
Variation FHAs
(11) For the purpose of the definition of variation FHA, an agreement between the individual and a credit provider to vary the terms of the consumer credit is a variation FHA if:
(a) the agreement is made:
(i) following and in response to a temporary FHA; or
(ii) in response to a hardship request; and
(b) one or more of the following types of variations has been agreed:
(i) reducing the monthly payment obligations that are to fall due under the consumer credit (whether for the remainder of the term of the credit or a shorter period) so that if the individual satisfies those obligations (and not the previous obligations) the credit provider would treat the consumer credit as not being overdue (as determined by reference to the terms of the consumer credit); and
(ii) treating payments that are already overdue in relation to the consumer credit as being no longer overdue (as determined by reference to the terms of the consumer credit) without the individual paying those overdue amounts;
(iii) extending the term of the consumer credit;
(iv) waiving debt under the consumer credit (whether that debt is made up of principal, interest, fees or other charges), including where the CP agrees to permanently cease efforts to collect the debt;
(v) reducing the interest rate, fees or other charges payable in relation to the consumer credit (unless this is done as an incidental part of an overdue payment arrangement); or
(vi) changing the repayment terms in relation to the consumer credit from principal and interest to interest only or extending a current interest only period (whether for the remainder of the term of the credit or a shorter period).
Providing information about RHI and FHI to be disclosed
(12) If an overdue payment arrangement or variation FHA is put in place, a credit provider must take reasonable steps to provide the individual with information that describes the repayment history information and, if relevant, the financial hardship information that may be disclosed to a credit reporting body as a result of the arrangement. This information:
(a) must relate to the specific type of arrangement that is put in place (i.e. temporary FHA, variation FHA or other type of arrangement that is not a financial hardship arrangement);
(b) is not otherwise required to be tailored to the specific circumstances of the individual;
(c) may be given verbally or in writing;
(d) if given in writing, may be given by provision of an electronic link to a website that includes the information that relates to the specific type of arrangement that is put in place;
(e) must be given at the time the arrangement is put in place or as soon as practicable afterwards;
(f) if the arrangement is an overdue payment arrangement, is not required to be given if the payment or payments subject to the arrangement are due to be made within the grace period that applies to the overdue payments under subsection (3); and
(g) if the arrangement is a variation FHA and is to be the last step to finalise the individual’s hardship arrangements following an earlier temporary FHA, may be provided when that temporary FHA was made (and in conjunction with the information given about that temporary FHA).
Expression of financial hardship information
(13) Where a credit provider discloses financial hardship information about consumer credit provided to an individual, the provider must take reasonable steps to ensure that the disclosure is expressed using one of the following codes:
(a) “V” — representing financial hardship information relating to a variation FHA; or
(b) “A” — representing financial hardship information relating to a temporary FHA.
Transitional matters
(14) If an arrangement is made on or after 1 July 2022 in response to a hardship request made before that date (and where the arrangement would otherwise be a financial hardship arrangement), the credit provider may treat that arrangement as not being a financial hardship arrangement;
(15) If an individual and a credit provider have prior to 1 July 2022 agreed to an arrangement affecting the monthly payment obligations of the individual which is a temporary relief or deferral of the individual’s obligations in relation to consumer credit and, on or after 1 July 2022 the individual and the provider agree to:
(a) an extension of that temporary relief or deferral – the credit provider may treat that further period as not being a financial hardship arrangement;
(b) a variation FHA that directly follows and relates to that earlier arrangement – the credit provider is not required to disclose financial hardship information in relation to that variation FHA even if the provider discloses repayment history information in the month that the arrangement is made.
Restrictions on requesting financial hardship information
(16) A credit provider or mortgage insurer must take reasonable steps to ensure that it does not seek the disclosure of financial hardship information from a credit reporting body in circumstances in that the body is not permitted to disclose that information to the provider or insurer.
Note: Subsection 20E(4A) of the Act prohibits credit reporting bodies from disclosing financial hardship information to a credit provider for the purpose of collecting payments that are overdue in relation to consumer credit or commercial credit and for certain other purposes. Credit reporting bodies are also prohibited from disclosing financial hardship information to a mortgage insurer in some circumstances.