Banks prepare for mass customer call-outs on deferred loans

A relatively small but growing number of struggling borrowers who put their mortgages or business loans on hold in response the coronavirus crisis are resuming repayments, new industry figures show.

As part of the banking industry’s response to the crisis, Australian lenders since March have allowed $274 billion in home loans and small business loans to be deferred for up to six months, with the possibility of further loan extensions.

Australian Banking Association chief executive Anna Bligh: “Customers know what’s best for them.”Credit:Alex Ellinghausen

From late this month, as some customers start to approach the six month mark, banks are contacting borrowers to determine if they will be able to resume repayments in part or in full.

Figures released on Sunday night by the Australian Banking Association showed that at the end of July, about 13 per cent of customers with deferred loans had resumed repayments, and the banks estimated a further 100,000 people began resuming payments in August.

The ABA expects banks will assess about 450,000 customers with a deferred loan over the coming weeks, as lenders discuss the options facing customers.

While lenders are encouraging borrowers who can afford it to resume repayments or switch to interest-only payments, lenders are bracing for tough conversations, which could include discussing the sale of properties or other assets to manage debts.

"Customers know what's best for them. It's the bank's job to set out all the options and implications and ensure customers have the information and the time to make the right decision for their needs," ABA chief executive Anna Bligh said.

In anticipation of the difficulties facing many customers, banks have sharply increased the number of staff in their hardship areas, and in call centres for contacting consumers about their loans.

"The loan deferral measure offered to customers by Australia's banks has led to the largest ever customer contact process in the industry's history, with an additional 5000 new or redeployed staff working to ensure customers understand their options," Ms Bligh said.

It comes as banks are bracing for a slow and grinding economic recovery, with Commonwealth Bank CEO Matt Comyn last week calling for ongoing stimulus measures from the federal government.

ANZ Bank chief executive Shayne Elliott on Friday said the worst of the crisis for banks was likely to occur around the middle of next year.

"When do the problems start emerging, people literally finding their businesses unable to operate? We think that’s probably more like the middle of next year … when the crisis will start to hit the banks, if you will," Mr Elliott said.

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