No impact on credit files during COVID-19 pandemic
Consumer groups have welcomed the announcement by the Australian Banking Association that bank customers applying for payment deferrals as a result of the COVID-19 pandemic will not have a missed payment or hardship flag appear on their credit file.
Importantly, this approach will apply across the board to all consumer debt, including mortgages, personal loans and credit cards.
Consumer advocacy organisations and banks have been working together to provide solutions for customers experiencing financial hardship as a result of the COVID-19 pandemic through the Australian Banking Association’s Consumer Outcomes Group. The ABA has worked with its member banks to ensure where repayment deferrals are granted due to COVID-19, credit reporting is conducted in a fair and consistent manner. This ensures clarity and minimises any risk of confusion by customers who have different credit products from the same bank.
This approach to credit reporting means that banks will not notify credit reporting bureaus of a customer’s missed repayments during the COVID-19 deferral period. This will give consumers peace of mind when entering into loan deferrals with their banks as their credit rating will not be negatively impacted.
They urge other credit providers to follow the banks’ example.
Fiona Guthrie, CEO of Financial Counselling Australia said, "financial counsellors are already getting questions from clients about the impact of COVID-19 related hardship on credit reporting scores. This puts the matter firmly to rest when it comes to interacting with the banks and we welcome it strongly."
"But this also shows why, when this crisis is over, this approach should remain in place. People are put off asking for hardship variations if they know it will hurt their credit report. No one chooses to experience financial hardship. When it happens we shouldn't be punished for it."
