WO2008070898A2

WO2008070898A2 - Credit contract repayment methodology

Info

Publication number: WO2008070898A2
Application number: PCT/AU2007/001851
Authority: WO
Inventors: Jennifer Fagg
Original assignee: Australia And New Zealand Banking Group Limited
Priority date: 2006-12-14
Filing date: 2007-11-30
Publication date: 2008-06-19
Also published as: WO2008070898A9

Abstract

A method of providing credit is disclosed. The method comprising the steps of a credit provider providing credit to a consumer, and the credit provider agreeing, upon occurrence of a trigger condition, to waive at least part of a principal amount of the credit.

Description

Credit Contract Repayment Methodology

FIELD OF THE INVENTION

The present invention relates broadly to a method of providing credit.

BACKGROUND OF THE INVENTION

Credit insurance is typically available in respect of credit contracts to a consumer. The insurance can, for example, be designed to enable a consumer to meet their obligations under the credit contract in the event that their income reduces or terminates due to specified conditions. The specified conditions are usually conditions of the consumer. For example, specified conditions of the consumer include: disability; involuntary unemployment; or death.

A consumer is typically not compelled to obtain insurance in respect of a credit contract.

SUMMARY OF THE INVENTION

According to one aspect of the present invention there is provided a method of providing credit, said method comprising the steps of: a credit provider providing the credit to a consumer; and the credit provider agreeing, upon occurrence of a trigger condition, to waive at least part of a principal amount of the credit.

Preferably the credit is provided in the form of a credit contract.

Preferably the method further comprises the step of the credit provider waiving a specified portion of repayments remaining in respect of the credit contract. More preferably the repayments are only waived while the trigger condition remains.

The period of time the repayments are waived is preferably limited to a capped period.

Preferably the step of the credit provider waiving a specified portion of repayments also involves the credit provider charging the consumer a waiver fee. More preferably the waiver fee is charged to the consumer periodically, for example monthly or yearly, for the term of the credit contract. Preferably the step of the credit provider waiving a specified portion of repayments is only performed in circumstances where the trigger condition occurs after a predetermined qualifying period. The predetermined qualifying period is preferably a specified period of time after commencement of the credit contract. This specified period of time is preferably greater than or equal to about 28 days.

Preferably the step of waiving at least part of a principal amount of the credit is only performed after a predetermined waiting period. The predetermined waiting period preferably comprises a predetermined period of time after the trigger condition occurred. The predetermined waiting period is preferably greater than or equal to about 14 days.

The trigger condition is preferably a condition of the consumer. The trigger condition in relation to the consumer preferably comprises one or more of:

(a) disability;

(b) total and permanent disability

(c) involuntary unemployment; or (d) death.

The consumer is considered disabled if they are unable to work due to illness or injury following a predetermined disability qualifying period. The disability qualifying period is preferably about 14 days. The consumer is preferably considered totally and permanently disabled if as a result of their disability they are unable to work.

The consumer is preferably considered involuntarily unemployed if they have been involuntarily unemployed for a predetermined involuntary unemployment period. The predetermined involuntary unemployment period preferably ranges from about 3 to about 6 months.

Alternately the trigger condition is the consumer having held credit with the credit provider for a threshold period, for example 12 months or longer. In this example the repayments are waived for a predetermined period, such as 1 to 3 months, depending on the credit amount.

The credit contract preferably comprises all forms of credit contracts. For example, it may comprise a personal loan. Alternatively it may, for example, comprise a credit or debit card contract, or mortgage. The credit contract is preferably provided in the form of a written agreement. Details of the credit contract and in particular the trigger condition are preferably documented in the agreement.

According to another aspect of the invention there is provided a method of providing credit, the method comprising the steps of: a credit provider providing a consumer with an electronic credit account having repayment obligations stored on a database memory; and upon occurrence of a trigger condition the credit provider modifying the database memory to waive at least in part the repayment obligations of the consumer.

Preferably the method of providing credit also comprises the step of the credit provider making an internal payment for the waived repayment obligations into the electronic credit account.

Preferably the method further comprises the step of the consumer paying a waiver fee in order to be eligible for waiving of their repayment obligations. More preferably the waiver fee is deposited in an account of the credit provider which is provisioned and reserved for the internal payment of the waived repayment obligations.

BRIEF DESCRIPTION OF THE DRAWINGS

A preferred embodiment of the present invention will now be described, by way of example only, with reference to the following tables, in which:

Table 1 is a table listing benefits of a credit contract in the form of a personal loan;

Table 2 lists exclusions of the personal loan;

Table 3 lists benefits and limitations of a credit contract in the form of a credit card contract; and

Table 4 lists exclusions of the credit card contract.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

In accordance with a preferred form of the method of the present invention credit is provided as a personal loan. The loan provider agrees to waive at least part of a principal amount of the personal loan. The loan provider only agrees to the waiver upon occurrence of trigger conditions. If the trigger conditions exist the loan provider agrees to waive a specified portion of repayments remaining in respect of the personal loan. In this particular example, the specified portion of repayments is capped at $100,000 in relation to death or disability (see table 1).

Under the personal loan a person is considered disabled if through injury or illness they are prevented from working.

At least part of a principal amount of the loan is also waived as a result of involuntary unemployment. If a person becomes involuntarily unemployed repayments up to $1,000 for each 30 day period are waived for up to a maximum of 90 days.

Waiving of repayments in response to disability and involuntary unemployment is subject to qualifying and waiting periods of 28 and 14 days respectively. In order to qualify for these repayment waivers 28 days must have passed since the commencement date of the personal loan. Additionally, repayments are only waived in relation to disability and involuntary unemployment after 14 days of disablement or involuntary unemployment.

Repeat occurrences of involuntary unemployment only qualify for a loan repayment waiver if the borrower has resumed permanent employment for at least 6 months.

In return for the personal loan provider agreeing to waive specified loan repayments the personal loan provider charges the borrower a waiver fee. The waiver fee is based on the specific loan including the loan term and is for example calculated at a rate per $1,000 borrowed. For example, a waiver fee for a 2 year loan of $15,000 to a borrower in New

South Wales, Australia would be:

Life and disability cover - ($13.71 x 15,000/1,000) + ($22.32 x 15,000/1,000 +

15%) = $590.67 Life, disability and involuntary unemployment cover - $590.67 + ($18.37 x

15,000/1,000 + 15%) = $907.55

Optionally, the waiver fee is included as part of the loan and is subject to interest charged. The waiver fee includes government charges including stamp duty and GST.

Table 2 outlines circumstances which do not apply to the loan. Upon death, disability or involuntary unemployment repayments qualifying with the above requirements are waived as described below. Upon death, repayments excluding any component relating to rebate of charges and arrears of monthly repayments of more than 2 months at the date of death are waived. For each day of disability, excluding the first 14 days, l/30th of the monthly repayment is waived. Similarly, for each day of involuntary unemployment, excluding the first 14 days, l/30th of the monthly repayment is waived.

If loan repayments are not equal monthly amounts the daily loan repayment waiver corresponding to disability and involuntary unemployment is the total amount of the loan divided by the number of days in the loan term.

The personal loan can include joint borrowers. The waivers described above apply independently to each joint borrower. However, if two or more joint borrowers are simultaneously entitled to a waiver of a repayment they are collectively only entitled to the loan repayment waivers described above.

The personal loan is subject to the borrower: (a) meeting entry age requirements;

(b) being engaged in permanent employment at the time of applying for the loan;

(c) paying the required waiver fee; and

(d) being a party to the personal loan contract.

According to the personal loan the borrower has a cooling off period of 21 days from the date of application of the personal loan to cancel the loan and obtain a full refund.

In another embodiment of the invention credit is provided in the form of a credit card contract. Under the credit card contract a credit card provider provides a credit card contract to a credit card consumer. The credit card provider agrees to waive a specified portion of repayments remaining in relation to the credit card contract upon occurrence of trigger conditions.

In this particular example, the specified portion of repayments is capped at $20,000. The capped amount of $20,000 applies in the event of death and total and permanent disability. Referring to table 3, waiving of loan repayments in relation to total and permanent disability is subject to a waiting period of 6 consecutive months. That is, repayments are only waived in relation to total and permanent disability after 6 consecutive months of total and permanent disability.

A credit card consumer is also entitled, via the credit card contract, to waiving of credit card repayments upon occurrence of an illness or injury which causes them to be disabled and unable to work. The consumer must satisfy a disability waiting period of 30 consecutive days. Following the waiting period loan repayments of 4% of the outstanding balance of the nominated credit card account are waived as at the date the disability first occurred (see table 3). However, also referring to table 3, loan repayment waivers associated with the disability are paid for a capped period of either 15 months or until the credit card consumer returns to work, whichever is sooner. Benefits associated with disability (excluding total and permanent disability) are also limited to a capped amount of $10,000 for each disability occurrence and a maximum of $20,000 for all disability occurrences.

According to the credit card contract loan repayments are also waived in response to involuntary unemployment. To be entitled to loan repayment waivers as a result of involuntary unemployment a credit card consumer must be involuntarily unemployed for a continuous 30 day waiting period. Once entitled to loan repayments as a result of involuntary unemployment monthly credit card repayments of 4% of the outstanding balance of the nominated credit card account are waived as at the date the credit card consumer became involuntarily unemployed (see table 3). Also referring to table 3, involuntary unemployment loan repayment waivers apply for a capped period of 6 months in any 12 month period. A credit card consumer must return to permanent employment for at least 6 consecutive months with one employer before again being entitled to a loan repayment waiver as a result of involuntary unemployment. For each occurrence of involuntary unemployment a credit card consumer is entitled to a capped loan repayment waiver of $10,000. A credit card consumer is also entitled to a capped loan repayment waiver of $20,000 for all involuntary unemployment occurrences.

In the event that a credit card associated with the credit card contract is stolen a capped amount of $200 is waived in relation to credit card loan repayments. The waiver only applies once in any 12 month period and also only applies in relation to the primary card holder. The waiver also only applies upon provision of a copy of the corresponding police report relating to the stolen credit card. According to the credit card contract the credit card provider charges the credit card consumer a waiver fee in the form of a monthly fee. The monthly waiver fee is 60c per $100 (or part thereof) of the closing balance of the corresponding monthly credit card statement. For example, for a monthly closing balance of $900 the corresponding monthly premium is $900 x $0.60 = $5.40. The waiver fee is only available up to a maximum monthly credit card statement balance of $20,000.

The waiver fee is automatically charged to the nominated credit card account and appears on the monthly statement. For any month in which the outstanding credit card balance is either less than $10 or is in credit, no wavier fee is charged.

The waiver fee includes government charges including GST.

Loan repayment waivers under the credit card contract do not apply to circumstances listed in table 4.

After confirmation of acceptance of an application for a credit card contract the credit card consumer has a period of 21 days from the date of receipt of confirmation to cancel the credit card contract and obtain a full refund.

The trigger conditions need not be limited to physical or medical conditions of the consumer, such as those described. For example, a consumer may be eligible for the waiver or debt forgiveness where they have held their loan (or other form of credit) for a threshold period, such as 12 months or more. In these circumstances the consumer is provided with a repayment holiday for a predetermined period, such as 1 to 3 months, depending on the loan amount.

Although the consumer in the preferred embodiment is (subject to payment of the waiver fee) forgiven at least part of the debt or credit owed, the credit provider or financial institution will make an internal payment equal to the waived repayment to the customer account. This internal payment is expected to be made from an account of the financial institution which is provisioned and reserved from waiver fees paid by customers subscribing to this credit product.

Now that several embodiments of the method of providing credit have been described, it will be apparent to those skilled in the art that this methodology has the following advantages: (a) the provision of credit is provided as a single "product" without the need for a separate insurance policy; and

(b) the provision of credit and the associated waiver of payment reduces administrative burdens for both the consumer and the provider which are otherwise inherent in conventional credit and insurance offerings.

Any discussion of documents, acts, materials, devices, articles or the like which has been included in the present specification is solely for the purpose of providing a context for the present invention. It is not to be taken as an admission that any or all of these matters form part of the prior art base or were common general knowledge in the field relevant to the present invention as it existed in Australia or elsewhere before the priority date of each invention of this application.

It will be appreciated by persons skilled in the art that numerous variations and/or modifications may be made to the invention as described in relation to in the specific embodiments without departing from the spirit or scope of the invention as broadly described. For example, the personal loan of one preferred form of the present invention may also comprise total and permanent disability provisions. The present embodiments are, therefore, to be considered in all respects as illustrative and not restrictive.

Claims

1. A method of providing credit, said method comprising the steps of: a credit provider providing credit to a consumer; and the credit provider agreeing, upon occurrence of a trigger condition, to waive at least part of a principal amount of the credit.

2. A method as defined by claim 1 wherein the credit is provided in the form of a credit contract.

3. A method as defined by claim 2 further comprising the step of the credit provider waiving a specified portion of repayments remaining in respect of the credit contract.

4. A method as defined by claim 3 wherein the repayments are only waived while the trigger condition remains.

5. A method as defined by either of claims 3 or 4 wherein the period of time the repayments are waived is limited to a capped period.

6. A method as defined by any one of claims 3 to 5 wherein the step of the credit provider waiving a specified portion of repayments also involves the credit provider charging the consumer a waiver fee.

7. A method as defined by claim 6 wherein the waiver fee is charged to the consumer periodically for the term of the credit contract.

8. A method as defined by any one of claims 3 to 7 wherein the step of the current provider waiving a specified portion of repayments is only performed in circumstances where the trigger condition occurs after a predetermined qualifying period.

9. A method as defined by claim 8 wherein the predetermined qualifying period is a specified period of time after commencement of the credit contract.

10. A method as defined by claim 9 wherein the specified period of time is greater than or equal to about 28 days. lϋ.

11. A method as defined by any one of claims 2 to 10 wherein the step of the credit provider agreeing to waive at least part of a principal amount of the credit is only performed after a predetermined waiting period.

12. A method as defined by claim 11 wherein the predetermined waiting period comprises a predetermined period of time after the trigger condition occurred.

13. A method as defined by either of claims 11 or 12 wherein the predetermined waiting period is greater than or equal to about 14 days.

14. A method as defined by any one of claims 2 to 13 wherein the trigger condition is a condition of the consumer.

15. A method as defined by claim 14 wherein the trigger condition in relation to the consumer comprises a disability.

16. A method as defined by claim 14 wherein the trigger condition in relation to the consumer comprises total and permanent a disability.

17. A method as defined by claim 14 wherein the trigger condition in relation to the consumer comprises involuntary unemployment.

18. A method as defined by claim 14 wherein the trigger condition in relation to the consumer comprises death.

19. A method as defined by claim 15 wherein the consumer is considered disabled if they are unable to work due to illness or injury following a predetermined disability qualifying period.

20. A method as defined by claim 19 wherein the disability qualifying period is about 14 days.

21. A method as defined by claim 16 wherein the consumer is considered totally and permanently disabled if as a result of their disability they are unable to work.

22. A method as defined by claim 17 wherein the consumer is considered involuntarily unemployed if they have been involuntarily unemployed for a predetermined involuntary unemployment period.

23. A method as defined by claim 22 wherein the predetermined involuntary unemployment period ranges from about 3 to about 6 months.

24. A method as defined by claim 3 wherein the trigger condition is the consumer having held credit with the credit provider for a threshold period.

25. A method as defined by claim 24 wherein the threshold period is about 12 months or more.

26. A method as defined by either of claims 24 or 25 wherein the repayments are waived for a predetermined period.

27. A method as defined by claim 26 wherein the predetermined period is calculated depending on the credit amount.

28. A method as defined by either of claims 26 or 27 wherein the predetermined period is about 1 to 3 months.

29. A method as defined by any one of claims 2 to 28 wherein the credit contract comprises all forms of credit contracts.

30. A method as defined by claim 29 wherein the credit contact comprises a personal loan.

31. A method as defined by claim 29 wherein the credit contract comprises a credit or debit card contract, or mortgage.

32. A method as defined by any one of claims 2 to 31 wherein the credit contract is provided in the form of a written agreement.

33. A method as defined by claim 32 wherein details of the credit contract and the trigger condition are documented in the agreement.

34. A method of providing credit, the method comprising the steps of: a credit provider providing a consumer with an electronic credit account having repayment obligations stored on a database memory; and upon occurrence of a trigger condition the credit provider modifying the database memory to waive at least in part the repayment obligations of the consumer.

35. A method as defined by claim 34 also comprising the step of the credit provider making an internal payment for the waived repayment obligations into the electronic credit account.

36. A method as defined by claim 35 further comprising the step of the consumer paying a waiver fee in order to be eligible for waiving of their repayment obligations.

37. A method as defined by claim 36 wherein the waiver fee is deposited in an account of the credit provider which is provisional and reserved for the internal payment of the waived repayment obligations.