Credit Defaults:

If you fall behind in repaying money you have borrowed, a credit provider must not take recovery action against you until certain steps have been taken and one of these steps is first issuing you with a Credit Default Notice. These steps are designed to give you an opportunity to remedy the debt before recovery action is commenced which may include litigation. The National Credit Act allows you to request postponement of court proceedings. If this request is refused by the credit provider, you have the right to apply to the court for postponement of enforcement proceedings, or take the dispute directly to the credit provider’s External Dispute Resolution (EDR) scheme for independent adjudication-this will be either the Financial Ombudsman Service (FOS) or the Credit Ombudsman Service Ltd. Having professional legal and financial advice from an experienced Commercial and Tax Lawyer may greatly assist in advising and informing you about credit default notices.

The credit provider must first give the borrower or the mortgagor, and the guarantor, if there is one default notice informing that if the default is not remedied within a stipulated time from the date of the notice, the credit provider can begin enforcement proceedings to recover the debt.

The default notice must contain a prominent heading at the top which states that it is a default notice, the specific details of the default amount, what action is necessary to fix the default, how long you have to fix the default, the date after which enforcement proceedings will commence (and, if relevant, repossession of mortgaged property may begin) if the default is not fixed. It must state that repossession and sale of mortgaged property may occur. In addition, it should state that you have a right to apply to the credit provider for a hardship variation and that you have a right to make a request to the credit provider for a postponement of enforcement proceedings. In addition it should state that you have a right to apply to a court if your request for a hardship variation or postponement of enforcement proceedings is refused. It should provide details of the credit provider’s EDR scheme, that a further default of the same kind occurring during the time given to remedy the current default may result in enforcement proceedings commencing without further notice, notification that, if the debt remains unpaid for 60 days or more, it may be included in a credit reporting agency’s credit information file about the borrower. Thorough and sound legal advice in this area of law may be of immense value in determining whether the credit default notice has been properly drafted.

Note that, if the credit provider has reasonable grounds to believe that a borrower cannot fix the default, the default notice need only specify the default amount and that the credit provider may begin enforcement proceedings from 30 days after the date of the notice. If the default is remedied within the time stated in the default notice, then the contract or mortgage is reinstated and no acceleration clause can operate that is, a clause in the terms of a loan or mortgage stipulating that payments must be made earlier in certain circumstances. It is important to note that you not only need to pay back the amount you are in default, you also need to keep up with your regular monthly or fortnightly repayments as well, in order to avoid giving the credit provider grounds to take any further action against you. Our qualified Commercial Solicitors can have regard to your circumstances and advise you accordingly.

If you would like further information or wish to discuss your credit default notices matter with an experienced Commercial Lawyer please do not hesitate to contact us at our head office in Sydney CBD by telephone on (02) 9233 4048 or by email to info@navado.com.au. Alternatively, we may see you at one of our branch offices. Please peruse our "Locations" tab to see our other branch locations.

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