Credit and Debt

Credit and Debt

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Short term measures – utility relief grants and hardship variations

Utility relief grants

The Utility Relief Grant Scheme, provides assistance for people who are unable to pay their utility bills due to a temporary financial crisis. 

If the bills your client is having trouble with are for water, electricity or gas you should, in the first instance, contact their provider and let them know that the client wants to apply for the Utility Relief Grant Scheme.

The forms to apply for relief grants are available from gas, electricity and water companies or LP Gas suppliers or by calling the Department of Human Services (DHS) Concessions Information Line on 1800 658 521.

If your client meets the conditions set out below, either you or a financial counsellor can assist the client to apply for a relief grant. 

The DHS website sets out that:

  • assistance may be provided to low-income households suffering a short-term (within last 12 months) financial crisis who are unable to pay for a current utility account or LP gas account and who are at risk of disconnection, restriction of supply, or non-supply of gas bottles;
  • to be eligible, your client must hold at least one of the following concession cards:
    • Pensioner Concession Card;
    • Health Care Card; or
    • DVA Gold Card;
  • your client must be able to demonstrate that unexpected hardship has left them seriously short of money so that they cannot pay their utility bills without assistance and risk disconnection or non-supply;
  • the client must meet one of the following criteria:
    • a significant increase in usage;
    • a recent decrease in income, for example, loss of employment;
    • high unexpected expenses on essential items;
    • the cost of shelter is more than 30% of the household income; or
    • the cost of utility usage is more than 10% of the household income.

The application should clearly set out the circumstances that have led to the client's inability to pay the outstanding account.

Other consumer hardship schemes

In relation to non-credit contracts (for example mobile phones, landlines, internet, gas, electricity and water), industry codes or legislation require companies to implement hardship policies, so you should contact the company directly or the relevant industry ombudsman (see External Dispute Resolution) in relation to these processes.  For example:

  • the Electricity Industry Act 2000 and the Gas Industry Act 2001 - these Acts require each electricity and natural gas retailer operating in Victoria to have a hardship policy. The aim is to prevent disconnection for non-payment and the hardship policy must include flexible payment options, provision for auditing usage, arrangements by which appliances can be purchased, and provision for early response by both the company and the customer. Links to the hardship policies for electricity and gas retailers are available on the Energy and Water Ombudsman (Victoria) website; and
  • Telecommunications Consumer Protection Code (TCP Code) - the TCP Code requires telecommunications companies to implement credit management processes and a financial hardship policy.

You should contact the relevant company directly or the industry ombudsman (see External Dispute Resolution) in relation to these processes. 

Hardship variations - consumer credit contracts

These provisions apply to both the original lender and to debt collectors (i.e. as assignees of the original the debt).

Applying for a hardship variation

If your client finds themselves unable to meet credit repayments for a short period of time, because of illness, unemployment or other reasonable cause, you can apply to the credit provider for a hardship variation under section 72 of the Code.  The client must be able to show that if the contract is varied in the way you're requesting, they will be able to meet their obligations.   The hardship variation provisions apply to loans up to:

  • approximately $350,000 for mortgages taken out before 1 July 2010 (the threshold depends on the date of the mortgage - specific thresholds are available on the ASIC MoneySmart website ); or
  • $500,000 (unless otherwise provided under the Regulations) if the loan was taken out between 1 July 2010 and February 2013; and
  • an unlimited amount, for credit contracts entered into from March 2013.

Under the Code, the permitted variations are:

  • extending the term of the credit contract and reducing payments;
  • postponing payments during a specified period (without extending the term of the loan); or
  • extending the term of the credit contract and postponing payments during a specified period.

Although there is no legal obligation on the creditor to provide the following, you should also consider requesting that the creditor does one or more of:

  • reduce the interest rate for a specified period;
  • reverse default fees, default interest and enforcement costs;
  • waive default fees and default interest for a specified period;
  • waive part of the arrears or principal;
  • extend periods of reduced or nil repayments;
  • capitalise all, or a portion of, the arrears; and
  • allow the borrower time to sell the property, during which the lender will not require payments or will require reduced payments.

A template letter requesting a hardship variation under the Code is available here.

You should remind your client that, if one of the above variations is accepted, the postponed payments will need to be "caught up" by doing one of the following things:

  • making a lump sum payment after the postponement;
  • making extra payments over a period of time; or
  • capitalising the arrears.

To obtain a hardship variation, it will be necessary to show that the client will eventually be able to repay the debt.   You should keep in mind that, if the client's circumstances have permanently changed, a variation of their credit contract may not necessarily be the best option because it may be postponing inevitable default and increasing default fees and interest (thereby eating into any equity a person may have if the debt relates to a mortgaged property). If your client's financial situation is not likely to improve in the short term (three to six months), you should make an appointment with a financial counsellor. 

The creditor's response

Within 21 days of receiving the financial hardship application, the creditor is required to give the borrower a written notice stating:

  • whether or not the creditor agrees to the debtor's request to vary the payment terms; and
  • if the creditor does not agree to the variation:
    • the reasons for not agreeing;
    • the name of the EDR scheme of which the lender is a member; and
    • the debtor's rights under that EDR scheme.

If a creditor agrees to the hardship variation, the creditor must, within 30 days of the agreement, give the debtor and any guarantor a written notice setting out the particulars of the change in the terms of the credit contract.

Disputing a refusal to vary the contract

If the creditor unreasonably refuses the hardship variation, you should (subject to considerations regarding the client's ability to manage the credit payments in the longer term), lodge a dispute with the relevant External Dispute Resolution scheme. 

If the client is able to reasonably demonstrate that a financial hardship application should have been approved by the creditor, the creditor is generally not entitled to recover default interest and fees and enforcement costs from that time.  You should remind your client that, if the creditor requested documents reasonably necessary to consider the application and the client did not provide these, the creditor is not obliged to reverse these costs.

There is also an option, under section 74 of the Code, to apply to the court to change the terms of the credit contract.  The court may order that the credit contract is changed and make such other orders as it sees fit.

Also under section 74 of the Code, the court may, if it thinks it is appropriate in the circumstances, stay any enforcement proceedings under the credit contract until the application has been determined.