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Information for consumers in financial difficulty

This information is also available to download as a fact sheet: Financial difficulty [PDF]

Individuals and small businesses can unexpectedly find themselves in a situation where they are unable to meet their repayments under a credit facility. We call this situation financial difficulty. The causes of financial difficulty can include sickness, unemployment or over commitment.

What do I do if I can’t meet my repayments for a short period of time?
You may have obtained credit from a financial services provider (FSP) that is a member of the Financial Ombudsman Service such as:

  • a personal loan;
  • a business loan;
  • a home loan;
  • an overdraft facility; or
  • credit card.

If your financial situation changes so that you cannot meet regular repayments for a short time, then you can ask the FSP for assistance to overcome your financial difficulties. This may include a request to change the repayments under the credit contract for a period of time until you are able to meet repayments in full.

If your financial situation is not likely to improve in the short term (three to six months), you may wish to seek some financial advice about options that may be available to you. This may include the sale of an asset.

What sort of help can I ask for?

You can, for example, ask your FSP to make the following types of changes, including:

  1. Extending the period of the loan and reducing the amount of the regular repayments;
  2. Delaying payments due on a specific date;
  3. Stop making payments for a period of time and extend the period of the loan; and
  4. Any reasonable alternative to vary the credit contract that may help you to overcome your financial difficulty.

Sometimes your FSP will not agree to make any changes to your credit contract or will not agree to make the changes that you have requested.

How can I object to the FSP’s decision?
If you disagree with the FSP’s decision then you should first tell the FSP and ask for the decision to be reviewed. You can ask how long the review will take. If the FSP does not provide a further response or you are unhappy with the further response, you can refer the matter to us for review.

Does the FSP have to agree to change the repayments under the credit contract?
No. However, there is a certain process that the FSP must follow when you ask for a change to your repayments. The FSP must look at your current financial position and may ask you for more information to assess how it may be able to assist you. The FSP will consider whether or not things are likely to improve and whether you will eventually be able to repay the debt. The FSP does not have to agree to make the changes you have asked for.

If your circumstances have permanently changed, a variation to your credit contract may not necessarily be in your best interests as this may be postponing inevitable default under the facility.

What can the Financial Ombudsman Service do if the FSP does not agree to change the repayments under the credit contract?

  1. We can review whether the FSP has followed the correct procedures when considering a request for short terms assistance with repayments. If the correct procedure has not been followed, we can award compensation such as fees and interest which may have been imposed, however this does not iclude waiver of the debt.
  2. From January 2010, depending on the type and size of the credit facility, we will have the power to make a FSP change the repayments under some credit contracts including:
  • most credit card contracts,
  • personal loans,
  • car loans; and
  • some home loans (if they are less than $500,000) from January 2011.

Whilst we may exercise the power to vary in accordance with its procedures, our aim however is for financial difficulty disputes to be resolved by agreement being reached between the parties, through negotiation or conciliation where ever possible, with the power to vary the credit contract being used as a last resort.

Your financial circumstances and ability to meet a variation to the credit contract will be taken into account when reaching a decision to change the repayments under a credit contract.

What is conciliation?
The Financial Ombudsman Service offers telephone conciliation conferences to help resolve disputes between applicants and FSPs.

Conciliation is an independent and informal process which enables the parties in dispute to openly discuss and identify the relevant issues, and to generate potential options for resolving the dispute.

Conciliation conferences generally take about two hours and are conducted by an independent Financial Ombudsman Service Conciliator. During the conciliation conference, you will be able to speak directly to the FSP and the Conciliator all at the same time and in private with the Conciliator if necessary. The outcome of a conciliation conference is determined by the parties.

Participation in a telephone conciliation conference will be compulsory for you and the FSP. It is necessary that both parties have authority to settle. You may be represented by an agent however you must attend the telephone conciliation conference with your agent.

The Guide to Conciliation Conferences further explains the Conciliation Conference process.

Who should I contact first?
You should contact your FSP first and tell them about your situation. You should ask them if they have a dedicated financial hardship customer representative that you can speak to. However, if you have already asked your FSP to vary repayments and it has written to you and told you that it will not or it has not responded to you, you can contact us.

What happens if the FSP has already taken action in court against me or my business?
In some circumstances, we can make the FSP put the legal proceedings on hold while it considers the dispute. Whether legal proceedings can be put on hold will depend on what stage the proceedings are at. See Clause 13 of our Operational Guidelines for more information about this.

What information do I need to give you?
We need the following information:

  1. Outline that the dispute is about financial difficulty;
  2. Provide the name of the FSP that has refused or not provided any response to your request for assistance;
  3. Explain what assistance you have asked for and why;
  4. Tell us what your monthly income is and what your monthly expenses are (such as rent, living expenses (food etc), car expenses, other loans or any other expenses); and
  5. Explain when and how you think the situation will improve.


What happens after I write to the Financial Ombudsman Service?
We will ask the FSP to respond to your request for assistance. If your dispute is not resolved directly between you and the FSP then, where appropriate, we will write to you again to arrange a date for a telephone conciliation conference.

We may require you and the FSP to provide more information about the debt and your current financial position before a telephone conciliation can take place.

Please note that if you do not provide information requested or attend a telephone conciliation conference, we will not be able to consider the dispute further. This may mean that you are not able to have the credit contract changed.

What should I do while the Financial Ombudsman Service is looking at my dispute?

It is important that you:

  • make whatever repayments you can afford while we are looking at the dispute; and
  • reply to any requests made by the FSP or us for information about your situation.


What happens if I am unhappy with the result?
If you are still unhappy following a telephone conciliation and you can provide written reasons why you consider the request to vary has not been properly considered, we will look at the dispute and decide whether there is anything further we can consider. The dispute may be investigated or it may be referred directly to the Ombudsman.