Written byA hardship notice is a borrower's request, made verbally or in writing under the National Credit Code, to change a consumer credit contract because they cannot meet the repayments.
Also known as: hardship notice, financial hardship notice, hardship application, hardship request, notice of hardship
Key points
- Anyone with a consumer loan under the Code can give one, by phone or in writing; the lender usually must decide within 21 days.
- The lender does not have to agree, but a refusal must give reasons and point the borrower to AFCA.
- An agreed hardship arrangement is recorded on the credit file for twelve months, but repayments made under it count as on time.
- The Code covers personal, household and residential investment credit only; business car and equipment finance relies on the lender's policy or the Banking Code.
How a hardship notice works
Section 72 of the National Credit Code lets a borrower who is, or expects to be, unable to meet their obligations tell the lender so and ask for the contract to be changed. No form is required: a phone call counts, though written notice creates a record and starts a clear clock. With enough information the lender must decide within 21 days. If it needs more, it has 21 days to ask, the borrower has 21 days to answer, and the lender then decides within 21 days of receiving the answer, or 28 days from its request if nothing arrives.
A lender that refuses must say so, give its reasons, and state the borrower's right to complain to AFCA with its contact details. While a notice is being considered, and for a short period after the response, the lender cannot start enforcement action such as repossession.
What a hardship arrangement can look like
The usual variations are a pause on repayments, a temporary reduction, an extension of the term to lower the instalment, or capitalising the arrears into the balance. Interest generally continues to accrue, so a pause costs more over the life of the loan even though it relieves the immediate pressure. Lenders ask for a picture of income, expenses and the cause of the difficulty, and financial counsellors can help put that together at no charge.
Since 2022 an arrangement of this kind is recorded on the borrower's credit report as financial hardship information, which stays for twelve months alongside the repayment history. Repayments made as the arrangement requires are reported as met, which is the point of the flag: it explains a changed pattern of payments without recording a default.
Business loans and unregulated credit
The Code applies to credit for personal, household or residential investment purposes. A ute or excavator financed for business use, and most commercial loans, sit outside it, so section 72 and its timetable do not apply. Banks that subscribe to the Banking Code of Practice extend hardship help to small business customers under that code, and most non-bank lenders run a hardship policy of their own, but the process and the timelines are the lender's rather than the law's.
ASIC's 2024 review of lenders found that many made hardship help hard to find and slow to get, and its 2025 follow-up found improvements but continuing gaps. Lenders' hardship teams are set up to act before a payment is missed, and an arrangement agreed early is simpler than one negotiated after arrears and collections activity have begun.
Example
A welder in Whyalla loses his main contract and can see that next month's repayments on his personal loan and his family car loan will not be met. He rings both lenders, explains the situation and asks for a hardship variation. One has enough detail to agree on the spot to three months of reduced repayments with the term extended afterwards. The other asks for a statement of income and expenses, which he supplies within the week, and confirms a similar arrangement inside the 21 days. Both arrangements appear on his credit report as hardship information for a year, and his work ute, financed for the business, is handled separately under that lender's own hardship policy.
Not to be confused with
- Hardship
- hardship is the situation and the broad category of help, while a hardship notice is the formal request under the Code that starts the lender's clock
- Moratorium
- a moratorium is one possible outcome, a pause on repayments, while a hardship notice is the request that can lead to it
Frequently asked questions
Does a hardship notice have to be in writing?
No. The Code allows notice to be given verbally or in writing, and a phone call to the lender's hardship team is enough to start the process. Putting the request in writing, or following the call with an email, creates a record of the date, which matters because the lender's response deadlines run from it.
How long does a lender have to respond to a hardship notice?
Twenty-one days if it already has enough information to decide. If it asks for more within that time, the borrower has 21 days to provide it and the lender then has 21 days from receiving it. If the borrower does not respond, the lender must decide within 28 days of its request.
Does a hardship arrangement affect my credit report?
Yes, but not as a default. Since 2022 an agreed arrangement is recorded as financial hardship information for twelve months, next to the repayment history. Repayments made as the arrangement requires are reported as met. Lenders assessing a new application can see the flag and will usually ask about it.
What happens if the lender refuses my hardship notice?
It must tell you it does not agree, give its reasons, and tell you that you can complain to AFCA, with AFCA's contact details. AFCA can review the decision and can require a lender to offer a reasonable arrangement. A free financial counsellor through the National Debt Helpline can help prepare that complaint.
Can I give a hardship notice on a business loan?
Not under the Code, which covers consumer and residential investment credit only. Banks that follow the Banking Code of Practice offer hardship help to small business customers, and most other lenders have their own policy. Asking early, and explaining the cause and the likely duration, is the same in either case.
Related terms
Hardship
Financial hardship is when a change in your circumstances, such as job loss or illness, means you cannot meet your loan, credit or bill repayments on time.
Read definitionNational Credit Code
The National Credit Code is the federal rulebook for how consumer loans, leases and credit cards are documented, priced and enforced, found in Schedule 1 of the NCCP Act.
Read definitionAustralian Financial Complaints Authority (AFCA)
The Australian Financial Complaints Authority (AFCA) is the free, independent body that resolves disputes between consumers or small businesses and the lenders, insurers and financial firms they deal with.
Read definitionArrears
Arrears are overdue repayments on a loan or credit account: the borrower has missed instalments, which the lender tracks by days past due and which can lead to a default.
Read definitionDefault
A default is a borrower's failure to meet the terms of a credit contract, usually by missing repayments, which lets the lender demand the balance and enforce its security.
Read definitionMoratorium
A moratorium is a temporary pause on repayments or on creditor enforcement, agreed with a lender or imposed by law, that gives a borrower or an insolvent company breathing space.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.