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Consumer credit debt

Information about consumer credit debts.

  • This topic covers

    This topic covers

    • The obligations of credit providers
    • Complaints about debt collectors
    • Internal dispute resolution with a credit provider, including hardship variation applications
    • External dispute resolution through the Australian Financial Complaints Authority
    • Legal action, including default notices, Statements of Claim, judgements and property repossessions

    This topic is for individuals. National credit laws cover these types of contracts and these laws give additional rights to consumers if they have a consumer credit debt problem.

    This topic provides information about options that may resolve the problem outside of court. For information that is relevant if legal action has started in relation to a consumer credit debt, see the Debtor (when you owe money) topic. 

Dispute resolution

Time limitAction
Two years after a contract comes to an end or an Internal Dispute Resolution response by the credit provider (whichever is later)To complain to Australian Financial Complaints Authority (AFCA) about varying a credit contract due to financial hardship, an unjust transaction or unconscionable interest.
Six years of becoming aware of the problem, or two years of an Internal Dispute Resolution response by the credit provider (whichever is earlier)To complain to AFCA for other complaints about a credit contract,.
14 daysTo respond to a Statement of Claim, if your credit provider has served you with a Statement of Claim, you have then made a complaint to AFCA and AFCA refused your complaint. This means that your credit provider must wait 14 days from when AFCA refuses your complaint before applying for default judgment

Legal action

Time limitAction
N/AIn most circumstances, you can make a complaint to the Australian Financial Complaints Authority (AFCA) even if the credit provider has taken legal action against you. Making a complaint with AFCA will stay (stop) legal action temporarily until the complaint is decided.
30 daysTo pay any outstanding amount that is due on your credit contract after you are served with a default notice (Form 12). The amount will include any other payments that become due in that 30 day period, for example, late fees.
28 days from the date of serviceTo respond to a Statement of Claim. If you do nothing, the creditor provider can ask the Court to make a Default Judgment against you after 28 days of the Statement of Claim being served.
Six yearsTo take court action for a breach of responsible lending provisions.
Two years from when the contract endsTo take court action for an unjust contract.

Organisation

OrganisationResponsibilities
Australian Securities Investments Commission (ASIC)Regulates the licensing and responsible lending practices of credit providers.
Australian Financial Complaints Authority (AFCA)

All credit providers must belong to an External Dispute Resolution (EDR) scheme. The Australian Financial Complaints Authority (AFCA) is the sole EDR scheme. AFCA can assist with a broad range of complaints about consumer credit contracts, for example, financial hardship applications and unfair contracts. The amount in dispute needs to be less than $1,263,000 (as at 1 January 2024) and most hardship claims are less than this. The maximum amount of compensation that can be awarded by AFCA is $631,500 (as at 1 January 2024).

Federal Court of Australia, Federal Circuit and Family Court of Australia and State courtsHave jurisdiction to deal with disputes related to consumer credit contracts.

Legislation

AuthorityCovers
National Consumer Credit Protection Act 2009 (Cth)The law that applies to consumer credit contracts in Australia. Schedule 1 of the Act sets out the National Credit Code - an enforceable code that sets out the legal obligations of credit providers and rights of consumers.

Common termDefinition

Consumer credit contract

A type of contract ​​where you borrow money and are given the time to pay the debt back, with fees and interest. The money is lent to you for:

  • a personal, domestic or household purpose, for example, to buy a car or home to live in, or

  • to purchase, renovate or improve residential property for investment purposes, but only if the contract was entered into on or after 1 July 2010.

The definition applies to natural persons and strata bodies, but not businesses.

A business loan, or a loan or credit that is mainly for a business purpose is not a consumer credit contract. 

CreditWhen a person borrows money and is given time to pay the debt back, with fees and interest.
Credit ProviderA business that lends money, for example, a bank, credit union or other type of financial institution.
Credit ReportA report that contains information about your credit history including your repayment history, payment defaults, dishonoured cheques, court judgments and bankruptcy orders.
DefaultWhen you have not followed the terms of your credit contract, for example, missing a payment or paying too late.

Default judgment

When a credit provider gets a court order against you because you didn't take action to respond to a Statement of Claim within 28 days of being served with the claim. The credit provider can apply for this order without having to go to a hearing.

Default notice
(Form 12)

A notice that is legally required to be sent to you if you default on the terms of your consumer credit contract. The notice gives you 30 days to fix up the default and lists your rights and obligations under the national credit laws.

External Dispute Resolution (EDR)

A service provided by an independent third party to resolve certain disputes out of court. The Australian Financial Complaints Authority (AFCA) is the sole external dispute resolution provider. AFCA replaces three previous EDR schemes - the Financial Ombudsman Service, Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Financial hardship

Generally, financial hardship is when you can't afford to make repayments or pay your loans at the time your payments become due.

Under the national credit laws, you can apply for a variation of your contract on the grounds of hardship if:

  • you can't pay because of a reasonable cause, for example, you have been ill, lost your job, or your relationship has broken down

  • you can show you can reasonably repay the loan if the variation to your contract is made.

If you entered into a credit contract before March 2013 and your loan is above the hardship threshold, you may not have a right under the national credit laws to apply for a hardship variation.

However, your credit provider may be bound by other laws or a Code of Practice that requires them to consider financial hardship.

GuaranteeAn agreement by a third party, called the guarantor, to repay a loan if the borrower does not pay.
GuarantorA person that agrees to repay a loan if the borrower does not pay.
​Hardship threshold

​The highest amount loaned in a credit contract where your credit provider has to consider your hardship application. If you entered into a credit contract on or after March 2013, you can apply for a hardship variation whatever the value of your loan.

For more information on threshold amounts before March 2013, see Hardship threshold on the Australian Securities and Investments Commission website.

Internal Dispute Resolution (IDR)When you try to resolve a dispute directly with your credit provider. Most credit providers will have a dispute resolution process you can follow internally. If you are unhappy with this process you can consider making a complaint to an external dispute resolution provider.
Judgment debtThe amount of money a court orders a defendant to pay a successful plaintiff. It can include all or part of the original amount claimed, plus court fees and interest up to the date of judgment.
MortgageA contract where money is lent using real property as security for the loan. A home loan is a debt secured by a mortgage.
RepossessionTaking back possession of something, usually according to the terms of the consumer credit contract, for example, repossession of your car or house because you defaulted on your loan agreement.
Statement of ClaimA document used by a plaintiff to start a civil case in court. It tells the Court and the defendant what the plaintiff is claiming and why.

OrganisationFee
Your credit providerYou do not have to pay a fee to make an internal complaint with your credit provider - making a complaint is called Internal Dispute Resolution.
Australian Financial Complaints Authority (AFCA)You do not have to pay a fee to make a complaint to AFCA.
NSW Courts

You have to pay a filing fee to take court action. The filing fee depends on the Court you start action in. For more information, see Fees on the Local Court of NSW website. 

OrganisationForms
Your credit providerSpeak to your credit provider about the complaint process or hardship application. The forms and process can vary.
Australian Financial Complaints Authority (AFCA)You can make a complaint  online or in writing using the Complaint form. See Forms on the AFCA website.

TypeCosts
Your credit provider If you default on your contract and your credit provider starts legal action against you, they may charge you certain costs or fees, for example, a default fee. You should read your contract carefully if you want to check what costs your credit provider can add.
If your credit provider starts court action against you by serving you with a Statement of Claim, they will usually add their legal costs to the claim.
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Frequently Asked Questions

Frequently Asked Questions about consumer credit debts.

Go to questions

Services

Financial Rights Legal Centre

Financial Rights Legal Centre can help people in financial stress.

National Debt Helpline

The National Debt Helpline can help you find a free financial counsellor.

Redfern Legal Centre

Redfern Legal Centre provides free and confidential legal services.

More resources

Last updated: February 2024