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WHAT CONSTITUTES A ‘HARDSHIP
NOTICE’ UNDER THE NEW REGIME?
The biggest difficulty for many lenders will
be to determine when an oral hardship
notice has been given under the new rules.
As this only applies to credit contracts
Can any statement of an inability to pay comprise a
hardship notice? Amber Warren of Gadens investigates.
I NEED TO
The amendments to the National Credit
Code that commenced on 1 March
2013 provide two things:
• new procedures for handling hardship
• a new trigger for hardship applications.
The amendments only apply to credit
contracts entered into on or after 1 March
2013. Lenders can use the new procedures
for both ‘old’ and ‘new’ contracts. Lenders
may want to use the ‘old’ trigger for old
contracts to avoid a flood of hardship
applications, but use the new procedures
for both ‘old’ and ‘new’ contracts.
Lenders will need to develop a policy
(which will be acceptable to ASIC, EDRs, and
the courts) to determine when a hardship
notice is given for new contracts.
HOW DOES THE ‘TRIGGER’ DIFFER?
The old section 72, which applies to
credit contracts entered into prior to
1 March 2013, enables a debtor who is
unable reasonably, because of illness,
unemployment or other reasonable cause,
to specifically apply to the lender for
specific variations to the contract.
The new section 72, which applies to credit
contracts entered into on or after 1 March
2013, enables debtors who consider that they
are or will be unable to meet their obligations
entered on or after 1 March 2013, the
impact will take some time to flow through
to ‘live’ applications.
For example, does a debtor give a
hardship notice if they call the lender
upon receipt of a default notice, to say that
they are unable to pay their arrears? Or is
something more required?
On its Moneysmart website, ASIC
encourages debtors to contact their lender
to “explain why you are having difficulties
making payments, how long you think
your financial problems will continue and
how much you can afford to repay”.
As well as suggesting that a
under a credit contract, to give the credit
provider notice (a hardship notice), orally or
in writing, of the debtor’s inability to meet the
The new hardship provisions apply to all
credit contracts, regardless of the amount.
You will see that all debtors have to do to
trigger a hardship claim is to indicate that
they are unable to meet their obligations.
WHY WAS HARDSHIP AMENDED?
According to explanatory memorandum to
the NCCP Enhancement Act, amendments
to hardship have three primary aims:
1. to extend the availability of hardship
relief to all credit contracts, regardless of
2. to introduce flexibility around the types
of changes that could be requested; and
3. to make it easier for debtors to make a
One of the ways the new provision aims to
make it easier for debtors is to permit them
to give a hardship notice orally.
Most, if not all, oral hardship notices
will require supporting information. In
responding to an oral hardship application,
the lender should write to the debtor to:
• set out the lender’s understanding of the
grounds on which the application has been
• confirm any request for the debtor to supply
the information required to assess the
application (in accordance with the lender’s
entitlement under the Act to do so); and
• inform the debtor that if requested
information is not supplied, hardship may
It may be possible, based on the
information that the borrower initially gives,
to reach a decision on the spot to decline
hardship relief. In such cases, the credit
provider will proceed to immediately issue
a decision notice without requesting any
In some situations where hardship relief
is not appropriate, the lender may consider
agreeing to a temporary postponement of
enforcement action on compassionate grounds.
WHAT SHOULD YOU DO NOW?
It is important that credit providers have a
clear and well-documented policy in place to
deal with hardship notices. Existing policies
and procedures need amendment to deal
with the change in the law. •••
This document does not comprise legal advice and neither
Gadens Lawyers nor the MFAA accept any responsibility for it.
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