Financial Hardship And What To Do About It

These are unprecedented times for financial hardship for most people.

Those people still alive who can remember the Great Depression are of an age now that they probably can’t remember it. Houses are being re-possessed, businesses are failing, stocks and shares have been decimated, savings have dwindled, relationships have been ruined by the pressure of it all, and most amazingly, banks have gone to the wall or been nationalised.

Why is financial hardship so huge right now? With all this going on, the average person might think they are helpless to improve their situation, but there are steps that can be taken. Mr Raj Venga is the Ombudsman for the Credit Ombudsman Service Limited (COSL), which is an external dispute resolution scheme for the non-bank credit industry. It is his job to oversee disputes within the industry between lenders and customers, and find resolutions. Most major industries have an Ombudsman and their power is substantial. No legal action can be initiated whilst the Ombudsman is on the case, and their decisions are final and binding on both parties

Mr Venga has some advice for anyone currently suffering financial hardship. When a customer is unable to meet their loan repayments, they are urged to contact their lender as soon as possible. The earlier this is done, the easier it will be to find a solution. That solution will be to “seek to vary their repayment obligations on grounds of financial hardship,” according to Mr Venga. It is in the lender’s interest to help the customer stay afloat, because if it all starts to go wrong and the customer becomes bankrupt, the lender will have to write off the loan and will also lose out.He advises that any lender who is a member of the Credit Ombudsman Service who is not cooperating with a customer request for a hardship variation should be reported to the Ombudsman immediately.

Mr Venga says it is not too late to take this course of action until a legal judgment has been granted to the lender allowing repossession. Until that time, the Ombudsman can freeze any legal proceedings until the case has been assessed. It is useful for the customer to know their rights when faced with financial hardship, and the Credit Ombudsman Service has released guidelines to clarify the situation. For example, it is necessary for every lender who is a member of COSL to provide the borrower with a swift reply to their application for a variation on their repayments, and they must not make life difficult for the customer by trying to impose extra conditions on the variation, such as requesting early release of the customer’s superannuation. The Ombudsman can decide whether a lender has acted unfairly, either in the original selling of the loan, or in their assessment of the loan variation request, for example if the lender has taken into account factors they should not have, such as the high loan-to-value ratio on the loan. Even where the lender has acted fairly according to the circumstances, Mr Venga says that the Ombudsman can still play a role in helping to alleviate the customer’s financial hardship by suggesting that the lender reconsiders their decision.

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