Banking: Michelle Baltazar

Banks are making an unprecedented effort to help their customers

On the whole, local banks have been swift to act and adjust their terms and conditions to suit the mood of the time. It has been far from perfect, of course. To deal with the record volume of queries, banking customers were forced to submit requests online. It’s pretty disconcerting when there’s a six-figure mortgage or a business loan at stake.

But with expedience came scale. Within two months, banks processed payment deferrals on more than 700,000 loans, approved 77,000 business loans under more favourable terms and provided businesses with $8.3 billion in loan top-ups.

While there’s no guarantee that the worst of the crisis is behind us, financial institutions are offering ways to help more people reduce the emotional and financial distress. Six key changes are:

Three- to six-month deferral of mortgage repayments for homeowners

According to the Australian Banking Association (ABA), 429,000 mortgages had been deferred as at May 16. This means that one in 14 mortgage holders has asked for relief. To expedite these deferrals, most if not all financial institutions have only asked for a personal declaration that the borrower has been affected by Covid-19. There were no laborious application procedures.

Business relief extended to landlords and renters

Many cafés, restaurants and tourism operators were caught out by the immediate lockdown of “non-essential” premises. In response, banks have offered a six-month deferral of loans to both the owner of the premises (if renting) and the renter. According to the ABA, 98% of all businesses with a loan from an Australian bank are eligible for this six-month relief.

Contactless payments lifted from $100 to $200

Since April, shoppers haven’t needed to enter their PIN for transactions under $200 (previously $100). This is a temporary measure in place for three months, subject to a review at the end of June. Banks will still have to monitor fraudulent activity under this new limit.

Deferrals won’t affect credit ratings

Banking customers who are up to date with home loan and credit card repayments before Covid-19 will have the same credit rating even if they request a deferral on their repayments. However, it is still prudent to contact your bank to have this confirmed once the deferral period is over. For customers who were already behind before Covid-19, banks will review their repayment history after the deferral period.

Loans with no repayments for six months

The federal government’s SME Loan Guarantee Scheme allows financial institutions to provide new unsecured loans to businesses and not-for-profit enterprises in urgent need of working capital. These loans are 50% backed by the government, which means they are on a lower rate than ordinary business loans. Businesses that apply for this loan are also automatically eligible for a sixmonth deferral of repayments.

Debit cards for 500,000 passbook holders

More than half a million banking customers, many of whom are aged 70 years and over, have automatically received a debit card. This will allow passbook account holders to make payments and do other transactions while following the social distancing rules. The debit card is fee free and the cardholder is under no obligation to activate it. However, debit cards are going to become a necessity as more businesses stop accepting cash.

To date, banks have hired 1500 new staff and redeployed more than 2200 staff to handle urgent inquiries. The ABA has also set up a dedicated website (ausbanking. org.au/covid-19) that details all the relief packages available from its member banks and another site that lists all the financial hardship phone numbers and websites (ausbanking.org.au/campaigns/financialdifficulty). You can also view important contact numbers on page 89 of Money.