Council explains clause
THE rapid spread of coronavirus disease (COVID-19) is a major public health challenge that is affecting not just businesses but consumers globally. It has reached our shores and the growing and evolving global nature of the outbreak and the disruptions it has caused, is forcing consumers to look for the avenues to stay afloat.
With the current health crisis and an entire city on lockdown, many will be stretching their budgets to make ends meet. For those with loans and hire purchase accounts, the added burden of having to meet repayments further stretches their finances. Fortunately, there is provision in the law to assist consumers during hardship. Force majeure for instance is an aspect that consumers can consider when seeking to balance their finances and repayments.
Force majeure is a provision in a contract that excuses a party from not performing its contractual obligations due to an event or effect that the parties could not have anticipated or controlled. These events include natural disasters such as floods, earthquakes and can now include loss of jobs and reduction of work hours because of the COVID-19 pandemic In practice many traders place provisions of unforeseen circumstances in contracts. However, in its absence, consumers can still rely on the Hardship clause in Section 66 of the Consumer Credit Act in seeking repayments relief at this time.
A hardship clause is a provision in the Consumer Credit Act 1999 that provides for the contract to be changed when circumstances have changed and one is unduly burdened. It provides for the contract to be changed when circumstances have changed and one of the contracted parties is unduly burdened.
It is when consumers who feel they are at the brink of total loss – for instance, those who are cashstricken and are unable to meet their payments can apply hardship clause or unjust transaction, as stipulated under the Consumer Credit Act 1999 and negotiate and restructure their payments with the financial institutions, banks or hire purchase companies.
Yes! the, Consumer Credit Act 1999, has provision to assist people facing genuine hardship. Section 66 of the Act allows for changes to your credit contract if you are unable to make repayments because of financial hardships. However, evidence is required to prove the cause of your financial hardship. These evidences include letters from employers indicating individuals have been made redundant or will have reduced hours of work, the contractual agreements made with creditors and sometimes even bank statements to verify that the consumer has no other source of finance. Consumers are requested to always ensure that they have these evidences available should they seek to apply for repayment relief under the hardship clause.
You have three options:
1. Temporary reduction of repayment amount If you can make repayments, but cannot afford the full required repayment amount, then you can apply for a temporary reduction in repayment amount. You should state the amount you believe you can pay as your repayment amount.
2. Ask for repayment holiday. That is deferring your repayment for a specified period. You can request your credit provider for a repayment holiday.
3. Extending the period of loan and deferment of repayments for a specified period. Under this provision you can apply for extension of loan period and a holiday repayment.
If you are uncomfortable approaching your bank or hire purchase company, you can also seek help from the Consumer Council of Fiji. The council provide free Debt Management and Consumer Credit Advisory service and will be able to assist you by taking your case to the credit provider. Remember as soon as you face hardship or you know that you will be facing difficulties, do not wait for a miracle to happen. You must immediately contact your bank or credit provider with evidence.
Consumers are also reminded that credit providers may not consider requests for restructure of loan accounts and hire purchase accounts due to prior negligence. The assistance may only be provided on case by case basis and those who have a clear credit history are likely to be assisted.
Consumers are advised to contact us via our National Consumer Helpline toll-free number on 155 should they require further information or need our assistance on the restructuring of their loan or hire purchases account.