If a borrower makes a hardship application, you are required to consider it and follow a specific process.
- the borrower has suffered a hardship they couldn’t reasonably have seen coming, such as illness or injury, loss of employment, the end of a relationship, or death of a partner or spouse
- as a result of that hardship, the borrower cannot reasonably meet their debt repayments, and
- the borrower believes they would be able to meet their debt repayments if the contract was changed in the ways specified by the Credit Contracts and Consumer Finance Act (CCCF Act).
When can a borrower make a hardship application?
- has been in default for 2 months or more
- has been in default for 2 weeks or more after receiving a repossession warning notice or Property Law Act notice, or
- has failed to make four or more consecutive debt repayments by or on their due dates.
What changes can be made?
- extending the term of the contract and reducing the amount of each payment, or
- postponing debt repayments for a specified period of time (a payment holiday), or
- extending the term of the contract and postponing debt repayments for a specified period of time (a payment holiday).
What do I have to do when I receive a hardship application?
You obligations when considering hardship applications
- Send a written receipt or acknowledgement to the borrower within 5 working days of receiving the application.
- Send a written request to the borrower for any further information necessary to decide the application within 10 working days of receiving the application.
- If you do not request further information, you must decide whether or not to agree to the changes and notify the borrower (in writing) of the decision, within 20 working days of receiving the application.
- If you have not agreed to the changes, you must advise the borrower of the reasons for the decision, together with a clear summary of the borrower’s rights to apply to the courts to change the terms of the credit contract.
- If you agree to change the contract, you must provide the borrower with specific information about the change before the change takes effect.
- 20 working days after making the request for further information, or
- 10 working days after receiving the information requested.
Can I charge a fee for a hardship application?
- is reasonable and reflects your costs of documenting the changes to the contract (excluding the cost of dealing with the hardship application)
- is set out in the contract, and
- has been disclosed to the borrower.
Can I repossess goods while the hardship application is open?
- giving a repossession warning notice
- repossessing consumer goods or entering premises for the purpose of repossession, or
- advertising, selling or disposing of consumer goods that have been repossessed.
Do I have to agree to change a contract as a result of a hardship application?
- the hardship is not unforeseen, and the borrower reasonably could have anticipated the situation leading to the hardship, or
- the changes being proposed aren’t reasonable – that is, you believe the borrower can afford to continue to meet their existing obligations under the contract.
- set out the reason for your decision in writing, and
- give the borrower a clear summary of their rights to apply to the Court to change the terms of the contract.