Dishonour Fees
Fees charged by a bank when a direct debit or scheduled payment fails because the account has insufficient funds.
In detail
Dishonour fees appear on bank statements when a scheduled debit cannot be honoured. While some banks have reduced or removed these fees in recent years, where they are charged they are a direct indicator of cash flow pressure. A file with multiple dishonours on recent statements signals to an assessor that the borrower is running close to zero more than once a month.
Dishonours are treated similarly to overdrawn balances. A small number of historical dishonours explained by a one off event may be accepted. Regular dishonours over the three months preceding an application are much harder to explain away and often lead to decline at cautious lenders.
Why it matters for brokers
Dishonours are a red flag that brokers need to catch early. A clean explanation at fact find is much more effective than a surprise discovery during credit assessment.
Example in practice
A broker spots two dishonour fees on the latest bank statement for a client who otherwise looks clean. The client explains that a direct debit for gym membership failed twice after he switched main transaction accounts. The broker includes a note with the application and the file proceeds without issue.
Related terms
Buy Now Pay Later (BNPL)
A short term instalment credit product that lets consumers split a purchase into equal instalments without interest.
Credit Card Limit
The maximum amount a credit card holder can spend on a card, whether or not the balance is drawn.
Credit Report
A record of a borrower credit history held by Australian credit reporting bodies.
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