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Financial Hardship

This fact sheet is for information only. It is recommended that you get legal advice about your situation.

Covid-19 and Financial Hardship

For up-to-date information on Financial Hardship and Covid-19:


Joe had a car loan and a home loan with a bank. Joe had been working as a Storeman. The business Joe was working for went broke leaving Joe without a job. Joe started looking for another job but he knew he would not be able to make his next few repayments on his loans. Joe was confident he would get another job but he needed some breathing space. At first the lender was not sympathetic, so Joe sought legal advice about his rights under the credit law.


Financial hardship is difficulty in paying the repayments on your loans and debts when they are due. There are often two main reasons for financial hardship:

  1. You could afford the loan when it was obtained but a change of circumstances has occurred after getting the loan; or
  2. You could not afford to repay the loan when it was originally obtained.

If you are in the second category get legal advice immediately.

If you are in the first category of financial hardship you have certain rights if your loan is covered by the credit law: see our Does the National Credit Law apply? factsheet. If you have a credit card, personal loan, car loan or home loan the credit law will apply if the loan was taken out for personal purposes. Even if the credit law does not apply you can and should use financial hardship to try and negotiate a repayment arrangement.


Schedule 1 of the National Consumer Credit Protection Act 2009, the National Credit Code (the Code) sections (72–75) that specifically deal with financial hardship. From 1 July 2010, all requests for hardship are under the Code even if the contract was entered prior to that date.

Section 72 of the Code covers the circumstances where you can request a repayment arrangement on the grounds of financial hardship. This is called a hardship variation.

You must be having (or will have) trouble making your loan repayments because of reasonable cause (e.g. illness, family breakdown or unemployment). This is a very wide definition.

REMEMBER:   You can ask for any type of repayment arrangement as long as it will reasonably repay the loan.

You are entitled to request financial hardship even if the other co–bor­rower does not agree or is unable to be contacted.


You can call or write to the lender straight away requesting a repayment arrangement. Use our Request for Hardship Variation sample letter. Keep a copy of the letter you send. If you ask for it over the phone, keep notes on what was said.

When asking for a hardship variation, you should consider the following:

  1. The lender is more likely to accept your request if it is reasonable. Try to strike a balance between what you can afford and trying to at least meet some of the loan commitments during your period of hardship.
  2. Ask the lender to send out a financial statement for you to complete. You may consider seeking the assistance of a free financial counsellor to help you complete the form or work out an arrangement you can afford. For a referral, please call 1800 007 007 or visit our financial counsellor search tool.
  3. Do not commit to repayments you cannot afford.

It is advised you give sufficient details of:

  • The reasonable cause for hardship, for example, doctor’s certificates for an illness.
  • Your current income and other major financial expenses, for example, other loans.
  • What repayments you can afford.

IMPORTANT:   Even if the lender is demanding unrealistic repayments, it is in your interest  to keep making some repayments to the loan. You should continue to pay whatever you can afford during negotiations.

Partial payments will still be recorded as late on your credit report, but paying anything will help demonstrate to your lender that you want to get back on track and your lender will be less likely to take legal enforcement action.

A hardship variation may include, for example:

  1. Extending the term of the loan and adding arrears to the end of the loan.
  2. Reducing or freezing the interest rate for a period of time (under the Code the lender does not need to do this and they are unlikely to for a secured loan on a car or house, but they may consider doing it for a credit card as a once off).
  3. Waiving enforcement expenses (they don’t have to, but ask!)
  4. Accepting no payments for a period of time.

IMPORTANT: Applying for a hardship variation or having a hardship variation accepted will not effect your credit rating or be listed on your credit report. It is possible that late payments may be listed on your credit report even if you have an arrangement to pay less or not all: see Hardship Variations and your Credit Report below.


Under the credit law if you request a variation of your contract on the grounds of financial hardship then:

  1. The lender can request further information. This request must be made within 21 days of your request for hardship.
  2. You must provide any relevant information requested.
  3. The lender must then respond in writing within 21 days stating:
  • Whether the lender agrees to the change; and
  • If the credit provider does not agree to the change notifying you of:
    • the contact details of the internal dispute resolution scheme (IDR): see our Dispute resolution fact sheet
    • your right to go to External Dispute Resolution (EDR) with the Australian Financial Complaints Authority (AFCA), and
    • the lender’s reasons for refusing the hardship application.

If the lender does not agree to the application for change then you can apply to AFCA for the requested change: see our Dispute resolution fact sheet.

If you are unsuccessful in EDR with AFCA, or your lender is not a member, you still have the option of going to court but get legal advice before you do this.


When you ask for a hardship variation you should include a request that the lender does not:

  • list a default on your credit report or
  • report your payments as being overdue on your credit report.

Ask for an explanation of how your lender plans to report your repayment history information if your request for changed payments is accepted. If the lender agrees to your repayment arrangement but plans to continue reporting your payments as late on your credit report, you should make a complaint to AFCA: see our Dispute resolution and Your credit report fact sheets


If you have received a default notice and/or the lender is threatening legal proceedings, you need to act urgently. You should immediately:

  1. Send a letter to the lender requesting a variation of your contract on the grounds of hard­ship (if you have not sent one). If this is not possible ring the lender and ask for a variation on the grounds of financial hardship.
  2. Lodge an application in writing or online in EDR, scheme, which is administered by the Australian Financial Complaints Authority (AFCA). Its contact details are:
  • Ph: 1800 931 678
  • Email:
  • Web:

IMPORTANT:     The lender cannot commence court proceedings against you once you have lodged a written dispute with AFCA until the dispute is determined (or AFCA considers that it cannot consider your dispute).

3. Get legal advice.


  1. In NSW you have 28 days from the date you are served with a statement of claim to file a defence. After the 28 days has elapsed the lender can apply for judgment. It is recommended you lodge with AFCA rather than file a defence in Court. You must lodge with AFCA before the lender can get judgment, so lodge with AFCA as soon as possible. (See point 2 above).
  2. If you lodge online with AFCA you will immediately get an acknowledgment that the dispute has been lodged.
  3. Once you have lodged in EDR the lender must not apply to get judg­ment until the matter is dealt with by AFCA.
  4. If the lender is still threatening to get judgment ring AFCA on 1800 931 678 and let them know this and get legal advice.


If your lender is bound by the Code of Banking Practice (banks), the Customer Owned Banking Code of Practice (credit unions / building societies) or a member of the Mortgage & Finance Association of Australia then those lenders have obligations to work with you if you are in financial hardship. These obligations may cover your loan even if the Code does not apply or you are a small business or investment borrower. You can use a breach of those obligations as a reason to complain to AFCA.

You should still contact the lender and explain your situation. Ask for a reduction (or postponement) in your repayments for period of time. If the lender agrees, confirm the agreement in writing. Keep a copy of the letter. If the lender will not agree, you should keep making some of your repayments (if you can) and get advice from a financial counsellor and/or make a claim to AFCA, if your lender is a member.

If the lender will not agree to a change in repayments get advice. If court proceedings are commenced, you must get legal advice immediately.

If your financial difficulties are likely to be long term, it is recommended you get a financial counsellor to assist you.


See our Getting help fact sheet for a list of additional resources. If you are in financial hardship with a home loan see our Mortgage stress fact sheet.

Last updated: September 2019.