Banks, credit where credit's due

There’s certainly been a lot of bank bashing going on during the royal commission and while much of it has been well deserved, I thought it was time to mix a little good with all the bad.

While there seems to have been many examples of the banks putting profit ahead of people, there is one area where I feel the banks have improved and that’s helping clients in financial hardship.

I can hear the gasps from here, I’m kidding right?  Well actually I’m not!

One reason for this is legislation.  The National Consumer Protection Act (NCCP) along with the Banking Code of Conduct requires banks to help their consumer clients who are experiencing financial problems and cannot maintain their payments.

Having to help and wanting to help are two different things and it’s really the banks’ attitude towards hardship that I’m referring to.

Just to recap, here’s what financial hardship relief is.  During the term of a loan it’s common for people to experience challenging times.  Events like loss of employment, separation or illness can really affect a person’s ability keep up with their debts.  As long as the bank agrees that the borrower’s hardship is temporary, and it’s reasonable to assume that given a little help and some time they will be able to return to regular payments, then a bank is able to grant a period (typically 90 days to begin with) at reduced or even no payments.  Often this is just what a person needs to get back on their feet.

In the past when we spoke with a bank about a client that was having financial problems, it often felt as if they were looking for a way to decline hardship assistance and end the call as soon as possible.  Obviously, we would never let them get off the hook that easily! We often had to push very hard and even involve the Ombudsman if we felt the bank wasn’t doing the right thing by their client.

While this does still happen, I can say that these cases are reducing, which is great.  After all, the banks make plenty of money from their clients so we reckon the least they can do is have some compassion and help someone that is genuinely doing it tough. We don’t often hear the words compassion and bank in the same sentence, however we’ve recently seen a number of cases where a bank has gone above and beyond to help a struggling client.

As an example, we have had banks completely wave account balances even though we hadn’t asked them to do so.  Admittedly these cases were of a sensitive nature but still, the banks were under no obligation to forgive the debt and them doing so still deserves to be noted.

There is no doubt the banks have a lot of work to do when it comes to winning back hearts and minds and I do feel that much of the criticism of late is justified. Having said that, balancing the public’s expectations and maximizing profits for shareholders can be a challenge for any business.  Perhaps the biggest mistake we made was to privatise the banks in the first place, but that’s a subject for another time.

Let me end by saying that there has been genuine improvement by the banks when dealing with matters of financial hardship and while it could always be better, I feel they are moving in the right direction.

John Dickinson is the director of DebtX Mediation Services, a debt mediation company focused on helping people regain financial control through the reduction and elimination of their debts. Learn more at www.debtx.com.au.