Information about Loans and Insurance – Consumer FAQs
Answers can be found here to the most frequently asked questions from consumers in relation to the Coronavirus.
In the event that you run into difficulties keeping up payments, you should act as quickly as possible, since in this case it is important to avoid additional high costs!
Try to arrange a meeting with your lender as quickly as possible (bank, leasing company, credit card company etc.)! It is best if you already contact your lender before you have missed a payment.
You can only avoid considerable additional costs by reaching a mutual agreement with you lender, like high default interest payments and expensive reminder fees.
There are a few possibilities that you may agree upon with your lender:
- For example, it is possible to arrange a suspension for one or several instalments. This means that one or several instalments are suspended from becoming due and these instalments are only repaid at a later date. This way you can tide yourself over in the event of a temporarily difficult financial situation.
- It is also possible to arrange lower instalment amounts while simultaneously extending the term of the loan.
- It is also possible to arrange to convert the overdraft on your current account into a cheaper repayment loan.
Austrian Bausparkassen (building and loans associations) have already been active and are offering customers experiencing financial difficulties the possibility to suspend repayments on their building savings loans. For example a large Bausparkasse is offering its customers the possibility to suspend repayments for up to six months, and during this period to only pay the interest being incurred on the loan.
Irrespective of what measure appears to be suitable for you, your lender must in any case explain to you about all financial consequences that arise, without charging you for this advice.
In the event that you end up in a position of indebtedness from which you cannot see a way out, you should contact a government recognised debt counselling organisation without delay (in Vienna, Schuldnerberatung Wien) Austria’s regional Arbeiterkammer, (Chambers of Labour) will also provide advice if you have further questions about this topic.
In its statement published on 25 March 2020, the European Banking Authority (EBA) clarified that it supports the flexible using of regulatory scope, but that no such leeway exists with regard to consumer protection. Lenders must act in the best interest of the consumer, and ensure free of charge that the borrower has an overview of and is able to understand all consequences of any measures taken. In addition, the measures shall not in any way be allowed to have a negative impact on the borrower’s credit rating.
!CAUTION! Exercise utmost care regarding loan sharks or debt consolidation companies. Unfortunately trusting consumers frequently fall victims to dubious online providers. Advance payment fraud is a particularly common method of fraud in this regard. In this case a credit intermediary demands a processing fee in advance, e.g. for checking your credit rating etc. In the case of advance payment fraud, the money that is transferred is lost, and you also do not get a loan.
A large number of banks have currently closed some of their branches. This is no reason to be concerned – it is being done for organisational rather than for economic reasons.
Partial closure of branches is being done to reduce social contracts and therefore to slow down the spread of the Coronavirus.
At the same time, many banks are focussing on maintaining a somewhat lower number of branches to be able to ensure that branches located in easy to reach locations also stay open in the long-term even if some of their staff members fall ill.
In light of the current situation, most banks prefer to give advice over the telephone, or refer customers to their online banking services or their self-service foyers.
If you show any signs of illness, we would kindly request you not to visit bank branches.
In case you do visit a bank branch, we would request that you maintain a safe distance of 1-2 metres from others, and that you refrain from shaking hands.
Information from the FMA about the possibility to defer loan repayments
Consumers and microenterprises may contact their bank and apply to defer loan repayment instalments in the case that they have suffered severe losses of income as a result of the COVID-19 pandemic. In the case of a deferment, loan repayment instalments are suspended for a period of 3 months. This approach allows the absorption of losses arising from COVID-19 and for the loan instalments to be repaid later.
If you are a private person and have bought goods or made use of a service for private purposes, then in this context you are considered to be a consumer. If you have taken out a loan in the capacity as a consumer, then this loan is considered to be a consumer loan.
Examples of consumer loans:
If you have e.g. taken out a loan as a consumer, to buy electronic devices for private purposes, to buy furniture, or have taken out a mortgage to buy an apartment, a plot of land or a house, then this loan is considered a consumer loan.
In contrast, you are not a consumer, if you have bought goods or made use of a service for professional or commercial purposes. A loan taken out for this purpose is not considered as a consumer loan.
An enterprise is considered to be a microenterprise, where it employs less than 10 persons, and where its annual turnover or annual balance sheet total does not exceed EUR 2 million.
Two criteria must be fulfilled, so that the repayment of loan instalments that were due between 01 April 2020 and 30 June 2020 may be postponed:
- The loan was taken out before 15 March 2020, and
- Currently you have such a severe loss of income, e.g. due to short time working or unemployment, that your subsistence or also the subsistence of persons to whom you are required to make maintenance payments, would be threatened.
In this case you may arrange a new payment plan with your bank. Where it is not possible to agree on a new payment plan, then the instalments are instead tacked on to the end of the term of the loan. Other conditions in the loan agreement remain unchanged.
The deferment or suspension of loan instalments does not automatically apply! You must inform your bank that you wish to make use of the deferment. You must also demonstrate that you have suffered a loss of income due to the COVID-19 pandemic. The loan instalment for the month of April may already have been debited or collected. Please contact your bank about this!
In order to avoid direct social contacts, you may use your online banking or may send an e-mail to your bank. An application form / online form or a hotline number can frequently be found on your bank’s website.
No, leasing contracts are not covered legally. Leasing instalments as a rule must continue to be paid. However, the option exists to make a separate agreement with the leasing undertaking.
No, the legal deferment does not apply for such payments, and such payments must continue to be made, although it cannot be excluded that another contractual arrangement is reached with your bank.
No, borrowers are free to choose whether they exercise this option, or continue with the repayment plan arranged at the outset. Where you do not wish to make use of this deferment, you do not need to inform your bank about this being the case, you will continue to service your loan as per usual.
If you continue to make payments, then the the deferment shall be considered as not having been exercise.
The term “moratorium” means a deferment, i.e. the temporary suspension of loan instalments becoming due. That does not mean that the bank excuses you from paying these loan instalments and that you therefore are not required to pay them. It simply means that your obligation to pay, is suspended at the current time during the prevailing corona crisis situation. You are required to pay back these instalments at a later date. Your bank shall not be allowed to charge you any penalty interest over and above the agreed interest to be paid.
This is a legal moratorium, i.e. the legal suspension of the claims of the bank for repayment, the payment of interest or payment of a repayment instalment towards consumers as they become due for the duration of 3 months and applies to consumer credit agreements that were concluded prior to 15.03.2020. (Article 2 of the 2nd Act on Supplementary Measures in the Judiciary in relation to COVID-19)
This is an assistance measure that is exclusively available for borrowers who are experiencing payment difficulties as a result of the CoViD-19 pandemic.
Understanding your insurance coverage during the Coronavirus/COVID-19 pandemic
Further information on the topic of insurance can be found under: https://www.eiopa.europa.eu/sites/default/files/publications/eiopa_covid_19_consumer_guide.pdf
Check your policy documents and ensure that your insurance cover corresponds to your needs: what does your insurance cover and what does it not?
Contact your insurer or intermediary, if you cannot fulfil your contractual obligations, for example if you are facing payment difficulties. They may be able to advise you about the potential consequences and provide you with alternatives. They may even already be implementing measures to help.
Check whether your insurer, your broker or the government have put in place contingency measures, e.g. changes to the claims management procedure. Such measures may help to address issues about an insurance policy.
If you receive an offer, make sure that you read the conditions of the offer through carefully. Be particularly alert about electronic messages or online services, if you have not used them before.
You can usually recognise a scam for example by the fact that an offer seems to good to be true, exercises unnecessary pressure on you or where you are requested to reveal personal information such as your user name, password, personal information or your account details.
Stock markets are currently very volatile, and could continue to be for a while. If you are worried about the drop in value, or are having doubts about whether your product is still suitable for you, first contact your insurer or intermediary before acting.
Your insurer or intermediary should act in your interests at all times, and is obliged to provide you with clear and timely information.