You are Here > Home > Borrowing > Monitor those payment holidays

Monitor those payment holidays

Oct 7, 2020

Monitor those payment holidaysWe have received several complaints from readers who have been unhappy with the management of their payment holidays. Many bank customers believe they were not fully informed about the consequences of taking a payment holiday or in some cases were granted a payment holiday without requesting it.

The acceptance of a payment holiday would have automatically extended the period of the home loan. This was to allow customers to continue to pay the same installment value as prior to the payment holiday.

Where customers initially took a payment holiday but then decided to make the installment payments without opting out of the payment holiday, they will find that their statement still shows the extended loan period. If you continued to make the installment payments, you would still settle the home loan in the original time with no additional interest cost, however, your statement would show the extended mortgage period.

This could provide some flexibility if you found you needed to reduce your installment in the future, or you could ask the bank to adjust this back to the original period.

In the case where a customer did not make payments during the payment holiday, they would need to increase their installments above what they paid before the payment holiday if they wanted to ensure they still settled the bond according to the original mortgage period.

As interest rates were cut during this period, it may be a bit confusing as to what installment you need to pay in order to repay your mortgage in the original time, so best to speak to your bank.

Automatic extension of some payment holidays

In another case, Vanessa discovered that her Standard Bank home loan account was not debited after the three-month payment holiday had passed.

“I was informed that I was given an automatic additional three-month payment holiday. I was concerned as I had not requested this so I asked about how the repayment would now work. I was told that for a three-month payment holiday my bond would be extended by twelve months and for a six-month payment holiday my bond would be extended by 24 months.”

Steven Barker, head of lending at Standard Bank, explained that due to the high number of calls at the beginning of lockdown from customers who wanted to take a payment holiday, the bank was concerned that they would not be able to process these in time.

Rather than having bounced debit orders which could negatively affect customers’ credit scores, Barker says the bank created three strategies to assist clients.

  • The majority of clients were pre-approved for a payment holiday and received an SMS where they could indicate whether they wanted to take up the payment holiday option.
  • Clients who were not pre-approved could contact the call centre and have their request considered based on their specific situation.
  • The bank identified customers they believed would be most vulnerable – primarily small business owner – who received an automatic payment holiday which they had to opt out of. In other words, those customers would have had to either inform the bank that they did not wish to take a payment holiday, or make their payments manually, as the debit order was suspended.

In Vanessa’s case, she owned a business identified by the bank as being in a sector that had been negatively affected by the lockdown, so the bank took a decision to automatically extend her payment holiday.

Barker says customers were all informed via SMS of the extension. Any customer who did not wish to extend the period could inform the bank.

The automatic extension of the payment holiday was an unusual step by Standard Bank. It appears that other banks required customers to specifically request an extension.

Given the speed at which the banks had to move to provide support to customers while still managing their own COVID-19 health and safety protocols, it is possible mistakes have been made on some customers’ accounts or that instructions have not been received.

It is important to check the statements on all your loan agreements and make sure your repayments have resumed. If not, notify the bank immediately.

Barker says any customer who did not want a payment holiday extension can notify the bank and they will be put back in their original position, however, this needs to be within a month of the payment not going through. If you only discover this in a few months’ time, it cannot be reversed.

Barker denies that the automatic opt-in was a way for the bank to make money. “Payment holidays are expensive for us. We had to provide for those payments from our balance sheet. We would prefer not to have payment holidays, but we did not want people to default,” he said.

Barker says the bank is now in the process of informing those customers who took the payment holiday on how to ensure that their loan is still settled in the original loan period.

“We will be providing our customers with payment plans that will ensure that where possible they still settle the loan according to the original timeframe and do not pay additional interest.”

Related posts:

This article first appeared in City Press.


Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Should I use my retirement lump sum to settle my debt?

A question that I often receive is whether it's a good idea to use one's lump sum on retirement to pay off short-term debts, such as car debt or one's credit card. For example, Ntombise recently wrote to me: “I have just retired from work and expect a lump sum...

The 2022 survival budget

As if the last two years were not tough enough, there is no silver lining awaiting us in 2022. In 2021 we absorbed further fuel-price increases, a 15% hike in electricity costs, and an interest-rate increase of 25 basis points – and this is only the start. It is...

Pay off my bond or invest?

Stephen Katzenellenbogen and Brendon Wright of NFB Private Wealth Management address a common dilemma faced by many: should I put all of my spare cash into my bond, or invest it instead? Many people are working towards the goal of being free of all debt, including...

Listen: Advance payments on your car finance

We did this podcast a year ago, about paying off your vehicle and home loan sooner – but I thought it was worth sharing again, as Absa has now released updates on its banking app for car finance. Absa car finance customers can use the app to pay in additional funds to...

When debt review works

Going into debt review is like going on a diet: it’s difficult to stick to and the results won’t be immediate, but it can be life changing. While there are serious issues around the way some debt counsellors conduct themselves, for Grace Bekwa, debt review gave her...

Video: Home loan tips

Buying a home is a major financial commitment. While the rate of interest on a home loan is lower than for other forms of credit, the length of time it takes to pay off the loan means you end up paying a hefty interest bill. By reducing your interest rate, you can...

Don’t rush into debt review

While debt review can be a lifeline for an over-indebted consumer, it should not be entered into lightly. You need to be aware that once you enter debt review, you cannot apply for new credit, and you cannot exit debt review until all your debts are settled. There is...

Struggling with car debt? Take action now!

According to the Experian Consumer Default Index, repayment of car debt has shown a marked deterioration as the extended Covid-19 lockdown puts South Africans under more financial pressure. Marc Friedman, CEO of car sale platform says that to avoid a...

Treasury says “no” to pension loan proposal

National Treasury has made it clear that it does not support any calls to allow members to borrow money from their pension funds. This was in response to a Private Member’s Bill to amend the Pension Funds Act. This Bill was put forward by DA MP Dr Dion George as a...

Don’t ignore your credit providers

The Credit Ombud wants to remind consumers that there are ways to ease the woes that come with being unemployed while having debt, and you shouldn’t just ignore your credit providers. If you’ve just lost your job or have had your salary reduced due to the Covid-19...

Pin It on Pinterest

Share This