Banks' repayment holidays are expiring soon - but what about those who need an extension?

A worried owner of a small business.
A worried owner of a small business.
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  • Most banks offered a three-month debt repayment holiday from March/April. But this will end in June.
  • Yet the latest survey by TransUnion shows 91% of respondents are worried about their ability to repay their debts and bills.
  • Absa, FNB, Nedbank and Investec have said they will work with their clients, particularly those in sectors most affected by Covid-19, to find solutions.

The three-month debt repayment holiday that banks offered to struggling consumers will expire in two weeks. Yet, according to a survey conducted by credit bureau TransUnion, 91% of people interviewed are still concerned about their ability to pay their bills and loans.

Instead of seeing the number of people concerned about paying their bills decline as more people returned to work under lockdown Level 4 and 3, it has increased from 89% when the first survey was conducted at the beginning of the lockdown in April.

"Job loss has increased substantially since we began conducting our surveys," said TransUnion, explaining this increase in consumers' vulnerability.

The credit bureau company added consumers who reported that they've lost their jobs this month increased by six percentage points to 16% in June from 10% when these surveys began.

Now, the question that many who have lost their income or had it reduced will want to know is: will their banks sympathise?

FNB, Absa, Nedbank and Investec have shared how they plan to help consumers and businesses who find themselves on the brink of defaulting on their debt if these repayment holidays are not extended.

FNB may let you use a home loan

FNB said as at 15 June, it offered almost 300 000 individual customers payment breaks through a separate credit agreemen to the value of around R5 billion. Unlike the general Covid-19 payment holidays in the market, these have 60 months repayment term. But for customers with existing Covid-19 cashflow relief plans, the baank will extend the payment breaks by up to 3 months for those who qualify.

Raj Makanjee, CEO of FNB Retail, also said during a media roundtable earlier this month the bank was cognisant that lockdown Level 3 meant a lot of clients were still in need of debt relief as not all industries had returned to full operation. He said:

So, we are going by industry and by your role in the industry to look at how we extend relief beyond the three months. If you are a client that has been in good standing with us and you are operating in an industry that will take long to recover, we will look to extend beyond the three months.

The bank announced on Thursday that customers in selected industries who can demonstrate that their income has been materially affected by Covid-19 may be offered a 6 months payment break on their repayments through a separate credit agreement.

Makanjee also said during the media briefing that FNB was starting to look at alternatives like offering customers an option to consolidate their debt into mortgage accounts and using other investments they have as collateral to access cheaper debt. The bank is also letting customers access extra amounts they might have paid into their home loans to help them ease financial pressure over the next couple of months.

"I think there is a journey from July and arguably to December as different industries come out of lockdown and to the extent that they are able to recover. We do recognise that there is also a huge systemic risk of some industries and some employees not recovering at all. Our solutions for that will have to kick in," said Makanjee.

Absa may work on new solutions

Absa, which saw more than 682 000 account holders take up its debt repayment relief, said over and above the general three months holiday, customers in financial difficulty, including those whose problems predate the Covid-19 pandemic, were given customised repayment assistance.

This includes delaying mortgage repayments to avoid foreclosures and assisting business clients in the tourism, hospitality, retail and construction sectors, among other initiatives. But as some industries will remain closed beyond June, the bank said it may look at new solutions.

Deputy chief executive of retail and business banking SA Bongiwe Gangeni said:

Many variables, including the nature of lockdown levels 3 and 2, its impact on the economy and the unique financial position of customers will influence how Absa proceeds.

Gangeni said it is still early to gauge what upcoming solutions Absa will offer, but the bank encourages its clients to contact it directly.

Nedbank and Investec will evaluate cases individually

Nedbank said it had assisted more than 228 000 clients with debt relief since March 2020, but had seen some clients applying for extensions.

"We are mindful that payment holidays only started gaining traction in April; as such, we will only see the true picture of this population coming through from the end of June.

"We remain committed to supporting our clients during this time of uncertainty," said the bank, adding that those who want to renew or extend their payment arrangement should not worry because this will not affect their credit bureau scores.

Investec said it will work with its clients to find the right financial solutions based on their individual circumstances.

Our goal is to identify considered and appropriate solutions that aren't merely a quick fix but that help to manage and protect our clients’ interests over the longer term.

In a written response, it added: "We don't believe there is a single, blanket solution for all of our clients."

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