Latitude Financial Services yesterday became the first Australian lender to offer debt waivers to its most troubled borrowers.
The lender confirmed to Banking Day last night that it will waive half of the outstanding balances on credit cards where customers are able to repay 50 per cent of their debt by May 5.
The offer is only available to cardholders who are already 90 days in arrears on their repayments, which means customers who lost regular sources of income in the last month are not eligible.
"This offer to people in particular difficulty is among the measures Latitude has put in place to support our customers as the community deals with the impact of COVID-19," a Latitude spokesperson said.
"We continue to work with our customers to identify the best ways we can assist them during this difficult time."
The company plans to close credit card accounts as soon as troubled cardholders repay 50 per cent of their debt.
Latitude is also offering relief to customers who fall 30 days behind on repayments.
Such borrowers are being offered an interest holiday for three months and will only have to repay half of the required repayment on principal.
Latitude has not clarified whether interest would be capitalized for these borrowers.
The company said in a memo to mortgage brokers on Tuesday that the debt waiver for borrowers who had not made a repayment in 90 days also applied to customers with car finance and personal loan contracts.
Latitude revealed in the memo it was being inundated with calls from customers that were causing "longer than usual wait times".
The lender has stopped taking calls from customers with queries about insurance taken out on their loans.
"Due to the extremely high call volumes, in the short-term our insurance team is unable to answer calls," the company told brokers in the memo.
"That doesn't mean we're not here to support your clients.
"We are still processing claims that are submitted online."
While the debt concessions being offered by Latitude might add to public pressure on banks to extend debt waivers to borrowers hard hit by the economic downturn, it might also indicate that providers of personal finance are resigned to absorbing extraordinarily high loan write-downs this year.
Latitude's debt waivers might reflect a view that the economy is bound to touch an economic nadir not experienced in almost a century.