The question of financial hardship often comes up when dealing with the removal of Defaults or Court Actions.
Let’s first cover what financial hardship actually means and how relates to credit repair. In today’s world it is common for people to have debts such as homes loans, vehicle finance, credit cards and personal loans. When credit is first approved by a credit provider a number of factors are taken into consideration including the applicants ability to service the debt.
A person’s ability to service debt is based on their current situation such as their employment or the income derived from their business, in other words a loan is approved using information current at the time, after all, we cannot expect a credit provider to predict the future. The reality is however things change. People lose their jobs, business fail, people separate and people get sick, all of which can have a profound effect on someone’s ability to make payments on a loan.
Let’s say a bank approved a home loan with a 25 year term, the reality is a person’s income source is almost certainly going to change during this period. It would be normal for someone to have a number of different jobs or business during this term and their income may fluctuate along with their ability to service their debts.
Credit providers are well aware of this fact and now have a legislative responsibility to offer financial relief to a client experiencing financial hardship.
The moment a borrower even hints that they are having financial difficulty a credit provider is under a legal obligation to offer assistance. In fact in some cases the borrower doesn’t need to say a thing, if their repayment history has been good and suddenly payments are missed there is a solid argument that the credit provider should have picked up on this and made contact with their client to see what was wrong.
As most people know little about financial hardship or a credit providers obligation to assist it is the professionals obligation to display a proactive stance and explain what options are available to their clients even if they may not have asked directly for financial assistance.
What should happen and what does happen are often two different things. The truth is many credit providers are not fully aware of their obligations under hardship legislation and therefore the correct information is not always relayed to their clients.
There have been many examples of borrowers contacting credit providers to tell them they will not be able to meet a payment due to financial hardship and the lender offering no assistance at all. We have even heard of situations were credit providers have said that they don’t care and recovery action will commence if they don’t pay” or words to that affect. This attitude displays either an inexcusable lack of understanding of their legal obligations or a complete disregard for them, both of which are equally disturbing.
How does all this relate to credit repair ?
If a borrower contacted the credit provider and told them they were unable to pay due to financial distress and the credit provider did not offer the correct level of financial assistance, which is common, then there is a genuine argument that the matter should have never been referred to collections and in turn a default or court action recorded.
We have successfully challenged many credit providers on this basis and had a large number of negative credit listings removed for our clients as a result.