Sometimes, unexpected life events make it hard to make your loan repayments. If this happens, there are processes in place with lenders to support you.
Unforeseen hardship is a sudden life event that makes it hard for you to make your loan repayments. This could be because:
If you are facing hardship, your lender can make changes to your lending contract to help you through this difficult time.
It’s important consumers understand there are options available to support them if they are going through a difficult time.
The first step is to reach out to your lender so they are aware and can let you know your options. If you stop making repayments and don’t ask for help from your lender, you might not be able to make a hardship request later on.
Dan’s* hardship headache
A year after taking out a loan, Dan asked for an extension to his loan term. He said that he was in financial hardship after his accountant had stolen money from his bank account. He said he wanted to make a hardship application because he had also lost his job.
The lender asked Dan to provide information to confirm he had lost his job and the repayments he could afford. Dan did not provide this information. The lender declined Dan’s application. The IFSO Scheme found the lender had treated Dan reasonably and had made a reasonable information request. It was able to decline the hardship application when it didn’t receive this information.
Mrs Cee’s* transferred debt
Mrs Cee made a complaint after her lender transferred her debt to another lender. Mrs Cee said she had not been provided with a financial hardship application. She wanted to arrange a repayment plan with her lender.
The IFSO Scheme reviewed the communications between the lender and Mrs Cee. Before transferring the debt, the lender had set up a payment arrangement with Mrs Cee, but she did not make the repayments. The lender had emailed Mrs Cee with the details to make a hardship application, but did not receive an application from her. The lender had also notified Mrs Cee about the transfer of the debt. In these circumstances, the IFSO Scheme found the lender had met its obligations to Mrs Cee.
*Names have been changed
If you are going through a difficult time, you should talk to your lender as soon as possible. Your lender can let you know your options, including making an unforeseen hardship application.
You can make an unforeseen hardship application any time. However, there are some exceptions when you won’t be able to make an application. This includes when you have:
Your loan contract should have details of how to make an unforeseen hardship application. Generally, you need to write to the lender and tell it:
If you have information to support your application (like a doctor’s letter or redundancy notice), you can include this as part of your application.
When you’ve made the application, your lender should:
Generally, there are 3 types of changes that can be made to your lending as part of a hardship application:
Your lender can ask you for reasonable information to help it review your hardship application. This may include asking you for details about:
A lender does not need to conduct a full affordability assessment if the credit limit of your loan will not be increasing.
A lender is required to assess your application in a careful, diligent and skilful manner. It must treat you reasonably and ethically during this process.
The lender will review your financial situation and circumstances and then make a decision. You can help the lender by providing all the information it asks for.
My unforeseen hardship application has been declined – what do I do now?
A lender must consider a hardship application, but it is not required to agree to change the contract. The lender must provide you with the reasons for declining your application.
You can request a review of a declinature through your lender’s internal complaints process. If you are unhappy with the complaint response, you can ask the IFSO Scheme to investigate your complaint, for free.
You also have the right to apply to the courts to change the terms of your loan contract.
If you would like the support of a financial mentor to help understand your circumstances, you may wish to contact Moneytalks. Moneytalks is a free service that supports people and whānau to manage their money and obtain the financial support they need.
You didn’t know you could make an unforeseen hardship application
Under current legislation, your lender must include details of how to make a hardship application before you enter into the loan agreement.
Check the documentation that you received when you arranged the loan. If this information is missing, you can make a complaint to your lender. If this important information has not been provided, you may be entitled to remedies under the relevant legislation.
Your lender didn’t assist you to understand the impact of the hardship changes on your lending
Your lender is required to assist you to understand the effect of any variations to your loan. This means helping you understand the changes to your lending from an accepted hardship application. For example, the changes could increase the total amount you will need to repay over the full loan term.
If you feel you were not assisted to understand the effect of your hardship application, you can make a complaint to your lender.
You’ve had your property repossessed while your hardship application is being assessed
A lender should not repossess your property while it is considering your hardship application. This means it shouldn’t give you a repossession notice, enter your house for the purpose of repossession, or sell any repossessed goods.
There is an exception if the property to be repossessed is at risk.
If your property is repossessed while your hardship application is being assessed, you can make a complaint to your lender.