How banks are helping South Africans cope with the coronavirus lockdown

FNB recently explained how its credit insurance and cash flow relief products work for South Africans affected by the COVID-19 pandemic.

FNB’s Credit Life insurance is designed to help South Africans pay their loan instalments if they lose their income.

Cash flow relief is an alternative offered by FNB which helps customers who have FNB products not protected, or partially protected, by Credit Life.

FNB’s cash flow relief plan involves the bank covering the customer’s repayments across all of their FNB products for a three-month period, after which the customer has a period of up to 84 months to repay the bank for this service.

“In the long-term, the total cost of credit for a payment holiday with a term extension is significantly higher than a cash flow relief plan,” said FNB.

FNB is not the only bank that is helping customers through the COVID-19 pandemic.

MyBroadband spoke to other South African banks about the changes they have made to help out their customers, detailed below.

Capitec

Capitec said its credit insurance covers temporary loss of, or reduction in, income as a result of the impact of the lockdown and state of national disaster.

“Our credit insurance provides those clients that qualify, cover for their outstanding credit balances in the event of retrenchment, permanent disability or death, and instalment cover for up to 12 months in the event of a temporary loss of income or temporary disability,” said Capitec executive of marketing and communications Francois Viviers.

Capitec said its credit insurance is usually synonymous with short-term debt, and the bank requires customers with credit terms of seven months or more to have credit insurance.

However, Capitec noted that clients may need cash flow relief before their credit insurance claim can be processed.

“This means it may be necessary to restructure the loan at first and then claim the credit life insurance later once the required documentation is available,” said Capitec.

It added that the credit life insurance instalment claims will be processed at the dates of the related instalments to ensure a correct account balance.

“Wherever possible we offer cashflow relief with the relevant treatments, which include payment breaks, or the rescheduling of loans to give clients time to recover from financial setbacks,” added Viviers.

“We assess every client’s situation on an individual basis and do not believe that a payment holiday is right for every client, especially if a client can continue to pay their instalment in part or as a whole.”

Capitec added that in the event of the client passing away or being retrenched, the full outstanding loan balance will be settled.

Absa

Deputy chief executive of Absa Retail and Business Bank Bongiwe Gangeni said Absa acknowledges that the COVID-19 measures will have a financial effect both on individuals and businesses.

Gangeni said Absa therefore launched its Payment Relief Programme towards the end of March as part of a range of support actions for its customers.

“Absa’s Payment Relief Programme is comprehensive, with no turnover limits or income thresholds,” said Gangeni.

“It is open to 85% of our customer base using our credit products.”

Products that are covered by the programme include:

Home loans
Vehicle finance
Personal loans
Credit cards
Commercial asset finance
Mortgage-backed business loans

Gangeni added that the programme gives customers the opportunity to either continue paying their instalments if they are in a position to do so or to defer payments for a period of three months.

It has also reviewed its credit life products’ retrenchment benefits to provide more comprehensive cover to its customers.

“During the three-month special relief period we do cover temporary loss of income, for example, unpaid leave, provided that we obtain the supporting evidence,” said Gangeni.

“Importantly, many customers will qualify for both payment relief and the extended retrenchment benefit.”

Gangeni said that Absa generally recommends customers use credit life before payment relief.

“Having said that, each customer’s situation is unique, and a decision around the best possible option can only be taken once all the unique circumstances have been taken into account,” said Gangeni.

Nedbank

Nedbank said clients can access a payment holiday which allows them to suspend their monthly repayments for a period of three months if their income has been negatively impacted by COVID-19 and the national lockdown.

It offers three-month payment holidays on the following:

Home loans, or a 50% reduction on your monthly instalment for the next three months.
Vehicle finance, or choose to defer one, two, or three payments.
Personal loans, and the possibility of up to 12 months of coverage by Credit Life.
Credit cards, and instalment reduction to 2.5% (already active).
Student loans, or a reduction in your monthly instalment.

To opt-in, there are four options:

You will receive an SMS from Nedbank.
You can go online (web, Money app, USSD).
Call the relief centre on 0860 110 702.
Contact your dedicated relationship banker or business manager.

Other relief Nedbank will offer includes:

A 1% interest rate reduction on the utilisation of overdraft facilities (Account must have been in good standing for the six-month period ending February 2020).
All point-of-sale (POS) device rental fees will be waived for one month for all non-essential businesses as stipulated by the government.
These merchants’ minimum service fees will also not be charged during the lockdown period up to the end of April.