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Government Seeks To Soften Blow For Consumers Who Lose Jobs
Kevin Rudd’s Government has signalled its intention to make it easier for borrowers who lose their jobs to stay in their homes as it plans a full review of existing consumer credit laws.
The strategy comes in the wake of comments made by Federal Treasurer Wayne Swan, who conceded that Australia may enter a recession that lasts for the remainder of this year. Mr. Swan told The Age in an interview, said that duration of an Australian recession depends on the length of one that occurs globally, but that Australia was far better positioned than its global peers. Speaking at the IMF Finance Ministers meeting Mr. Swan said
“The length of it (the recession in Australia) is in part determined by the depth and length of the global recession. If the global recession is longer it will take longer for Australia to recover, that’s the case. But I can tell you one thing: there wouldn’t be a finance minister in that room who wouldn’t swap places with Australia.”
Superannuation Minister Nick Sherry said the Government would extend the hardship provisions of consumer credit laws to all contracts worth up to $500,000, a sharp rise from $312,400 at present.
The Federal Government recently reached an agreement with the Big Four Banks, which provides mortgage relief for borrowers who lose their jobs. Under the agreement borrowers who lose their jobs can apply to have their payments deferred until they are employed again. The latest announcement signals the Governments intention to formalise the arrangement and draft it into law, whilst extending the measure to all types of consumer finance.
Senator Sherry will unveil draft legislation today for national consumer credit laws, which be effective from November 1.
The laws will allow borrowers who lose their jobs or fall seriously ill to ask their lender to extend the period of the contract, or reduce or suspend repayments until they return to work. If refused, they can appeal to the Financial Services Ombudsman.
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