What is a financial hardship arrangement?

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  • What is a financial hardship arrangement?
  • What are the different types of financial hardship arrangements?
  • What doesn’t count as a financial hardship arrangement?
  • Protections for your financial hardship information

What is a financial hardship arrangement?

From 1 July 2022, financial hardship information will be a new type of credit information that can be reported about you under the Privacy Act 1988 (Privacy Act).

Financial hardship information will be reported when an individual is experiencing financial difficulty, and the credit provider and individual have put in place an arrangement to change the individual’s repayment obligations.

You can request to enter into a financial hardship arrangement, or your credit provider can offer you this arrangement.

There are different types of financial hardship arrangements – they can be temporary in nature (referred to as temporary FHA) or permanent in nature (referred to as variation FHA).

When you have started a conversation with your credit provider about a financial hardship arrangement, your credit provider must tell you what type of arrangement has been put in place (including if no arrangement has been made) and what this means for you.

What are the different types of financial hardship arrangements?

A financial hardship arrangement can be either temporary or permanent in nature.

Temporary financial hardship arrangement

A temporary financial hardship arrangement provides temporary relief from your obligations to make loan repayments. For example, this could be an arrangement where you don’t make repayments for a period of time (also referred to as deferring your repayments).

It can also be an arrangement to make payments at a reduced amount for a period of time, to provide you with some financial relief.

A temporary financial hardship arrangement still means that your original repayments will continue to fall due while the arrangement is in place. This means that there will be arrears which accrue and will still need to be paid after the arrangement has ended.

A temporary financial hardship arrangement will only provide temporary relief from your obligation to make payments. The obligations under your contract will still be the same.

Variation financial hardship arrangement

A variation financial hardship arrangement on the other hand means a permanent change or variation to the terms of your loan with your credit provider.

This means that your repayments are permanently changed and are set out under a new contract or loan with your credit provider.

These arrangements mean that your repayments are permanently altered, and you will not have any arrears owing. For example, if you had a $3,000 loan for 3 years, you and the credit provider may enter into a variation financial hardship arrangement to extend the life of the loan so that you can repay the $3,000 over 4 years instead. This would mean your loan is permanently altered and you would have a longer period to repay the loan.

See more information about how this will look on your credit report.

What doesn’t count as a financial hardship arrangement?

Not all arrangements are financial hardship arrangements.

For example, calling your credit provider and promising to pay in the future (a ‘promise to pay’) is not considered a financial hardship arrangement. A ‘promise to pay’ does not have the same protections under the Privacy Act as a financial hardship arrangement.

Where you make a ‘promise to pay’, any missed payments will be recorded alongside your repayment history information on your credit report. This may also affect your credit score. This is the case, even if the credit provider acknowledged your ‘promise to pay’.

Under the Privacy Act, not all credit products are subject to the financial hardship framework. For example, your telecommunication provider is not able to provide a financial hardship arrangement for your phone contract.

Your credit provider has obligations to tell you whether a financial hardship arrangement has been put in place (including if there is no financial hardship arrangement). They must give you information about the arrangement that has been put in place and explain how your credit information will be reported.

Protections for your financial hardship information

Financial hardship information is a new type of credit information.

If you enter into a financial hardship arrangement with your credit provider, the financial hardship information will sit alongside repayment history information on your credit report.

This will occur through a hardship indicator displaying next to your repayment history information in your credit report. Learn more about repayment history information.

Your credit report will not show the details of the financial hardship arrangement, or the reasons why you entered into the arrangement. Your credit report will only show that a financial hardship arrangement is in place.

To protect you, your financial hardship information is subject to privacy protections under the Privacy Act.

It can only be accessed in limited circumstances. For example, a credit reporting body cannot use financial hardship information to calculate your credit score. Further, credit reporting bodies will only be able to keep financial hardship information about you for 12 months. After this date, it needs to be deleted from your customer record.