Threat of penalty interest reduced

While more public relations than substance, there is some value in banks getting together to be a bit better at customer relations.

The Casey Civic Centre in Melbourne was the venue for the public relations launch by Prime Minister Kevin Rudd of a scheme, devised by the ABA and its four prime affiliates, for help working out new loan repayment plans.

Those looking for help can expect to rely on less evidence and anticipate swifter cooperation from their lender.

The actual aid is hard to measure given that a lot of what individual banks are now saying they will do to help newly unemployed borrowers is largely in line with current practice.

The main benefit is probably the clarity on the timing of when the threat of penalty interest rates, additional fees and enforcement action over the loan might apply.

Some early reporting on these arrangements stressed that banks would offer repayment holidays of 12 months. This time frame may be the exception.

To cite the announcement of ANZ, as an example, deferred or reduced interest payments may apply for only three months.

The other use of the coordinated bank announcement is the limits of the coordination.

No regional banks or foreign banks have committed themselves to being as cooperative in deferring interest and other rights under loans as the major banks.