Consumer credit debts

​Is it a consumer credit contract?

A consumer credit contract is a type of agreement where you borrow money from a credit provider and agree to repay the money by a certain time, including any fees and interest. The money is lent for:

• personal, domestic or household purposes, for example, to buy a car or house

• to purchase, renovate or improve residential property for investment purposes, if the loan was taken out after 1 July 2010.

​If the money was lent mainly for a busines​s purpose then it is not a consumer credit contract.

​Common examples of consumer credit contracts are:

• personal loans

• credit cards

• home loans

• payday loans (short term loans granted until pay day).

What obligatio​ns does my credit provider have?

Your credit provider has certain legal obligations under the national credit laws. They must:

• assess whether the consumer credit contract is not unsuitable in your circumstances

• respond to an application you make for financial hardship within 21 days of your request and provide you with written reasons for their decision

• inform you about your right to make a complaint with the external dispute resolution scheme (EDR), the Australian Financial Complaints Authority (AFCA), if your request for a hardship variation is refused

• be a member of EDR scheme - AFCA.

What if the credit or loan is partly for business purposes?

If you took out a business loan, or the loan or credit was mainly for a business purpose, it is not a consumer credit contract and the national credit laws do not apply. If, however, you used the loan for a business purpose and personal purpose, the national credit laws will apply if more than 50% of the loan was intended for a personal purpose, for example, to purchase or renovate your home.

If your loan was for both a business and personal purpose, you should get legal advice. A lawyer can advise you about whether the national credit laws might apply to your situation.

What can I do if I am experiencing domestic violence?

If there is or has been domestic violence in your relationship and you are concerned about joint bank accounts or debts, whether in your name or in both names, you may have options to manage your finances and protect yourself.

The Australian Bankers' Association has released a new industry guideline for dealing with financial abuse and domestic violence. The guideline provides clearer processes for banks so they can better support customers who may be experiencing financial abuse and domestic violence. 

For more information, see Protecting vulnerable customers from potential financial abuse on the Australian Bankers' Association website.

In addition to current financial hardship arrangements available under the national credit laws, the new industry guideline allows banks to offer more flexible arrangements to customers experiencing domestic violence.

If you are concerned about debt or joint bank accounts, you should get legal advice. 

What if I can't meet my rep​ayments?

Your options vary depending on the reason(s) you can't pay, whether legal action has been taken and what outcome you want.

If you can't pay because you are in financial hardship, you can ask your credit provider for a hardship variation. You should also speak to a free financial counsellor about your situation. ​​

To find your nearest financial counsellor, see Find a Financial Counsellor on the National Debt Helpline website.

If you believe the terms of your contract were unfair, for example, you could never afford the loan when you took it out, or you were pressured into signing the loan agreement, you should get legal advice about whether you have grounds for an unjust or unfair contract claim.

Should I see a financ​ial counsellor?

A financial counsellor can help you assess your financial position and work out what you can do to manage your debts. They can:

• advocate for you in some circumstances, for example, by negotiating with the bank on your behalf

• help arrange instalment payment plans

• identify other appropriate options, for example, hardship programs for electricity, gas and​ water suppliers.

For more information, see Get help on the Financial Counsellors’ Association of NSW Inc website.

To find your nearest financial counsellor, see Find a Financial Counsellor on the National Debt Helpline website.

What is financi​​al 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 in certain ​circumstances.

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

If you are having prob​lems making your repayments on time or paying your loan, you should speak to a free financial counsellor. It is best to do this before legal action is started. 

To find your nearest financial counsellor, see Find a Financial Counsellor on the National Debt Helpline website.

For more information, see Financial Hardship on the Financial Rights Legal Centre website.

What can I do if I'​​m in financial hardship?

Your option​s will​ depend on:

• why yo​u are in financial hardship
• whether l​​egal action has started against you
• whether there is a judgment against you.

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

• you cannot pay because of a reasonable cause, for example, you have been ill, or lost your job, or your relationship has broken down
• you can s​how you can reasonably repay the loan if the variation to your contract is made.

If legal action has not started, you can try internal dispute resolutio​n with your credit provider for a hardship variation to your contract.

If legal action has started, you should get legal advice as soon as possible and consider making a complaint to the Australian Financial Complaints Authority (AFCA). 

For more information, see Make a complaint on the AFCA website.

​​How can my contract ​be varied if I am in​​​​ financial hardship?

If you apply for a hardship variation, how your contract is varied will depend on your circumstances. It could be that the term of your loan is extended and your payments are reduced, or that your repayments are postponed for a period of time.

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

A financial counsellor can help you to work out what variation might be best in your situation.

To find your nearest financial counsellor, see Find a Financial Counsellor on the National Debt Helpline website.

If I miss a payment, will it​ be on my credit report?

Your credit report (also called your credit history) will contain information about:

• your repayme​nt history, for example, when your payments are due, when they are paid, whether payments were made after the due date and whether you missed a payment, including if it was only a part payment. This type of information will be recorded for two years from when the payment was due
• defaults, but only i​​f the amount of the overdue payment is $150.00 or more, the payment is at least 60 days overdue, and you have been given written notice about it being overdue and have been asked to make a payment.
• dishonoured cheques
• court judgments
• bankruptcy orders. 

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

For more information, see Your credit​ rep​ort​ on the Financial​ Rights Legal Centre website.

You can get a free co​​py of your credit record every three months from these credit reporting agencies:

• Equifax - veda Advantage
• Illion (formerly Dun & Bradstreet) 
• Experian.  

Who can see that I have been in financial hardship?

When you apply for a new loan or credit card, your bank, credit union or licensed finance company can see if you have been in a financial hardship arrangement within the last 12 months. 

If you have made your repayments on time, it will show as current and up to date with payments for that month. The bank can use this information to check if you are still experiencing hardship and if you can afford the loan or credit. 

Your repayment history remains available for two years while the hardship information is removed after one year. 

What was the National Hardship Register Scheme? 

The National Hardship Register (NHR) closed on 30 June 2023.

NHR was a joint initiative between the Australian Collectors and Debt Buyers Association Limited (ACDBA) and the community sector to address the serious issue of long-term and severe financial hardship experienced by a small number of vulnerable consumers.

Following an internal review prompted by a falling number of applications to the scheme, ACDBA decided to close the NHR. Participating creditors pursuant to their agreements will honour the 3 years listing of all applicants on the NHR as at that date.

What rights do I have if I a​m dealing with a debt collection agency?

Your rights in dealing with the collection agency are the same as if you were directly dealing with the credit provider. This means you can:

• negotiate with the collection agency (without admitting you owe any money if you have a dispute)
  
• make a complaint to the Australian Financial Complaints Authority (AFCA), if you are in financial hardship or if you feel the contract was unfair.
  

Debt collectors must be professional and reasonable in their contact with you. If you have concerns about their conduct you may have grounds for a compla​​int.

You may also get legal advice about other options available to you. 

How do I make a complaint a​bout a debt collector?

Debt collectors must be professional and reasonable in their contact with you. They are not allowed to:

• threaten you or other people you know or make threats to damage your property
• stay on your property if you refuse them permission or ask them to leav​e
• be verbally abu​​sive or discriminatory towards you
• contact you at unreasonable times
• contact you ​an unreasonable number of times each day or week
• tell other people, for example work colleagues, friends or family, about the situation unless you give them permission to
• make false or misleading statements about the debt, for example, statements that you owe more than the debt, or that a family member will have to pay your debt.

If you have a complaint against ​a debt collector, you can:

• write to the debt coll​ector to complain about their conduct 
• compla​in to the Australian Competition and Consumer Commission (ACCC)
• co​mplain to Australian Securities and Investments Commission (ASIC)
• speak to the police if the debt collector intimidates, harasses or is violent towards you.     
  

For more information about writing a letter to the debt collector, see Sample Letter Generator on the Financial Rights Legal Centre website.

What responsibility does​​ a gu​arantor have?

If you agreed with a credit provider to repay the loan if the borrower defaulted, the credit provider will hold you legally responsible for paying the person's debt. 

If you are in this situation, you should get legal advice.

What if my con​tract is unfair or unjust?

In some circumstances, a contract might be considered unfair or unjust if:

• your credit provider has not followed the national credit laws
• you could ​never afford the loan when you took it out, or
• your credi​t provider didn't make reasonable inquiries into your financial position, such as checking your income or salary.

​In most circumstances you will be able to make a complaint to the Australian Financial Complaints Authority (AFCA), but you might also have grounds for an unjust contract claim. A lawyer can help you to work out what is best to do. You have two years from when the contract ends to make an unjust contract claim.

If you believe your consumer credit contract is unfair or unjust, you should get legal advice.

What is Afterpay? What can I do if I have a problem with Afterpay?

Afterpay is a type of Buy Now, Pay Later (BNPL) service where you can buy goods by paying in instalments. Other BNPL services include Zip Pay and Certegy.

If you have a problem with a BNPL service, you should contact them first. If you are unable to resolve your dispute, you can complain to the Australian Financial Complaints Authority (AFCA), if they are a member. If the service is not a member of AFCA, you can contact NSW Fair Trading. 

For more information, see Buy now, pay later services (including Afterpay, Certegy, zipMoney, zipPay, Openpay) on the Financial Rights Legal Centre website. 

What is Internal Dispute Re​solution?

Internal Dispute Resolution (IDR) is when you try to resolve a dispute or complaint with your credit provider directly. It can include following the complaint process they have put in place. You can use this process to:

• ask for a hards​hip variation
• disput​e a term(s) of your contract, for example, a fee or charge added
• complain ​that your contract is unfair or unjust
• complain about the lending practices used by your credit provider, ​for example, that your credit provider was not responsible in checking that the loan was suitable for your financial position. 

How do I make a complaint to m​y credit provider? 

If you want to make a complaint to your credit provider, you can:

• contact them by tel​ephone to discuss the best process for making a complaint
• write a letter to the​m
• use a complaint form, if one is provided to you or is available on their website.​

It is a good idea to keep copies of any letters you send and/or details of any telephone calls you make to your credit provider.

What should I include in the complaint to my credit provider?

When you make your complaint to your credit provider, you should include information about:

• the grounds of your complaint, for example, why you dispute the debt, cannot afford to pay or are in financial hardship
• what ​outcome you want, or how the complaint could be resolved
• your financial position, if this is relevant to your complaint.​

You can also provide your credit provider with any supporting documentation, for example, bank statements, or letters from third parties.

It is a good idea to keep copies of any letters you send and/or details ​of any telephone calls you make to your credit provider.

Can I try Internal Dispute Resolution if​ legal action has started?

Generally, you can make a complaint to your credit provider at any time. However, when legal action has started, you should get legal advice as soon as possible and consider making a complaint to the Australian Financial Complaints Authority (AFCA).

For more information, see Making a complaint on the AFCA website.

Can I ask my credit provider for a​ hardship variation?

If you can't make your repayments on time, or have been experiencing financial hardship, you can ask your credit provider for a hardship variation. Your credit provider will use their internal dispute resolution processes to deal with your request.​

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

• you ca​n't pay because of a reasonable cause, for example, you have been ill, or lost your job, or your relationship has broken down, and
• you can show you can reasonably repay the loan if the variation to y​our contract is made.

Also, most credit providers will be bound by a code of practice and this code may set out additional grounds for a hardship variation.

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

For more information, see Managing debt on the Moneysmart website.

If legal action has been started against you, you should get legal advice as soon as possible.

How do I apply for a hardsh​ip variation with my credit provider?

If you want to apply for a hardship variation with your credit provider, you should put your request in writing. 

For help drafting a letter, see Letter requesting hardship variation on a consumer loan or lease using the Credit, Debt and Banking letter generator on the Financial Rights Legal Centre website.

For more information, see Mortgage stress handbook on the Legal Aid NSW website.

If your lender has started legal action against you, you should get legal advice as soon as possible and consider making a complaint to the Australian Financial Complaints Authority (AFCA).

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

For more information, see Financial difficulty on the AFCA website.

What happens after I ap​ply for a hardship variation with my credit provider?

If you have contacted your credit provider to request a har​dship variation, they m​ust respond in writing to your request within 21 days and tell you whether they:

• agree to your​ request, or 
• disagree with your request and the reasons they disagree an​​​d your right to make a complaint with the external dispute resolution provider, the Australian Financial Complaints Authority (AFCA).

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

If your lender has started legal action against you, you should get legal advice as soon as possible. You may lodge a complaint to AFCA to get help negotiating with your lender. Once you make a complaint, your lender must stop taking any action against you.

For more information, see Financial difficulty on the AFCA website.

What if my credit provider refus​​es or ignores my request for a hardship variation?

If you apply for a hardship variation with your credit provider, they must respond to your reques​​t in writing within 21 days.​

If your credit provider refuses or ignores your request or does not respond to your request within 21 days, you can make a complaint to the Australian Financial Complaints Authority (AFCA). 

You have two years from your credit providers decision to make a complaint to AFCA.

Will my credit provider ne​ed both of us to apply for a hardship variation if we are both on the contract?

If you entered into a consumer credit contract with another person, for example, your partner, or a relative, and you are now experiencing financial hardship, you can apply for a variation on your own or jointly.  ​

You may also have other​ rights, such as making a claim for an unjust co​ntract. This might be an option if you could never afford the loan in the first place or if your credit provider never made reasonable inquiries into your financial circumstances. Before making a claim for unjust contract, you should get legal advice.

What happens if my credit p​rovider agrees to a hardship variation?

It is important to ensure that any agreement you have with your credit provider is in writing. A lawyer can help you to ensure your agreement is recorded if you have difficulty getting something from your credit provider in writing.

From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.

You should also keep to your agreement. If you feel you can’t meet your obligations, you should get legal advice.

How do I make a complaint to the Australian Financial Complaints Authority?

If you want to make a complaint to the Australian Financial Complaints Authority (AFCA), you can do it online.

If are unable to make a complaint online, you should contact AFCA directly t​o discuss other ways of making your complaint.

For more information, see Making a complaint on the AFCA website.

If your lender has started legal action against you and you make a complaint to AFCA online, you should write in your complaint that legal proceedings have started. Your complaint may be dealt with more urgently.

How do I know what to ask​ for when making my complaint to the Australian Financial Complaints Authority?

When you make a complaint to the Australian Financial Complaints Authority (AFCA) you need to state what outcome you want. This could include:

• extra time to pay the arrears
• reduced payments for a period of time 
• postponed payments for a few months
• variation to the contract (such as a swap to interest only mortgage).

The outcome you ask for should be a solution that takes into account your whole financial situation, including other debts you might owe. You should speak to a Financial​ Counsellor about your position as they can help you to decide what outcome might be best for your situation.

To find your nearest financial counsellor, see Find a Financial Counsellor on the National Debt Helpline website.

After you have lodged a complaint with AFCA, your credit provider may make an offer or suggest an arrangement to resolve your complaint. You sh​ould not agree to anything if you can't afford or stick to it. If you reach an agreement, you should get it in writing.

Before agreeing to any offer, you should speak to a financial counsellor and/or lawyer.

What happens after I make a complaint to the Australian Financial Complaints Authority?​

To see what happens after you make a complaint, see Process map AFCA complaint resolution process on the Australian Financial Complaints Authority website.

Can I make​ an urgent complaint to the Australian Financial Complaints Authority?

When you fill in a complaint form for the Australian Financial Complaints Authority (AFCA) you will need to state whether legal action has started against you.

Legal action​ includes being served with a:

• defau​lt notice (Form 12)
• State​ment of Claim
• Notice to Vacate.

You should cle​arly mark on your form (or let AFCA know) that legal action has started, as this will ensure your complaint is dealt with urgently. You should also notify the credit provider that you have lodged a complaint with AFCA.

What are the benefits of making a complain​t to the Australian Financial Complaints Authority?

External Dispute Resolution with the Australian Financial Complaints Authority has the following benefits:

• it's fr​e​e
• you don't have to have a lawyer and there are no legal costs involved
• it's informal and simple compared to going to court
• it's independen​t
• legal a​ction against you temporarily stops (this is called a stay), and 
• it can encourage negotiation between you and your credit provider.​​

Do I have to pay ​​a fee to make a​ complaint to the Australian Financial Complaints Authority?

There is no fee to make a complaint to the Australian Financial Complaints Authority.

What types of complaints does the Australian Financial Complaints Authority deal with?

The Australian Financial Complaints Authority (AFCA) is the sole external dispute resolution provider for licensed financial service providers in Australia. 

AFCA can assist with a broad range of complaints about consumer credit contracts so that consumers have access to a single EDR scheme.

You can complain about:

• credit products, for example, credit cards
  
• finance facilities, for example, pay day loans
  
• loans, for example, home loans or personal loans
  
• banking deposits and payments
  
• insurance policies
  
• superannuation
  
• investments
  
• financial advice.
  

To find out if your credit provider is a member, you can contact AFCA.

What if I disagree wi​​​th the decision made by the Australian Financial Complaints Authority?

You don't have to accept the decision made by the Australian Financial Complaints Authority (AFCA), but it will be binding on your credit provider.

If you are not satisfied with the decision, it is still possible to deal with your dispute in court as long as it is within statutory time limits.

Before rejecting AFCA's decision and starting or continuing court proceedings, you should get legal advice.

Do I have to complain to the Australian Financial Complaints Authority before taking court action?

You don't have to make a complaint to the Australian Financial Complaints Authority (AFCA) before going to court. However, it is usually in your best interest to take advantage of the AFCA complaint process and resolve a matter without going to court.

What is a default notice (​Form 12)?

A default notice (Form 12) must be provided to you if you have breached the terms of your consumer credit contract with your credit provider. The most common situation is where you have missed payments and have arrears. 

When you get a default notice you will be given 30 days to fix the default. The notice also outlines your rights under the national credit laws in form 12.

How do I respond ​​to a def​ault notice?

If you receive a default notice in relation to your consumer credit contract, you can:

• pay the default in full - you will need to ensure you pay all of the a​​rrears and any payments due within 30 days, including any fees
• try internal dispute resolution with your credit provider, for example, if you want a hardship variation to your contract​, or if you believe your contract is unfair
• make a complaint to the Australian Financial Complaints Authority.

If you need help coming to an agreement with your lender, you should get legal and financial advice.

Can​ my vehicle be reposses​​sed?

If you receive a def​ault notice from your credit provider and you have been unable to pay the default, the credit provider may be able to repossess your vehicle if it was security for the loan.

They will need a court order to repossess the vehicle if the vehicle is on private ​property and you haven't given them permission to enter and take it.

They also need a​ court order to repossess the vehicle if less than 25% of the amount borrowed is outstanding or less than $10,000 is owed, whichever is the lesser amount.

If you are in financial har​dship or have a dispute with your credit provider, you can make a complaint to the Australian Financial Complaints Authority. It is better to do this before your credit provider threatens or takes action to repossess the car.

If your car has been repossessed, or your credit provider is threatening repossession, you should get legal advice as soon as possible.

​​How do I respond to a Statement of​​​​ Claim?

If you have been served with a Statement of Claim, you should get legal advice as soon as possible. 

Depending on your situation, you may consider:

• lodging a complaint to the Australian Financial Complaints Authority
  
• negotiating with your lender
  
• filing a Defence.
  

What is considered a substantive step in the proceedings?

A substantive step is usually something more than filing a Defence or Cross Claim, including:

• having a hearing date, or
• already attended a hearing for your case.

In these situations, Australian Financial Complaints Authority (AFCA) might decide that they can't deal with your complaint as it doesn't meet their guidelines.​

If you are not sure whether you can make a complaint to AFCA, you should get legal advice as soon as possible. ​

Can I still negot​iate with my credit provider after a Statement of Claim has been served?

Although you can negotiate with your credit provider after being served with a Statement of Claim, your credit provider can apply for default judgment against you if you do not respond to the claim within 28 days of being served. 

To avoid further legal action by the credit provider, you should get legal advice as soon as possible.

You may consider making a complaint to the Australian Financial Complaints Authority (AFCA). Following the complaint process, AFCA may help you to resolve the situation outside of court, which may help to avoid additional legal fees. It will also stay (temporarily stop) all legal action against you whilst the complaint is being dealt with. ​

Can I make a complaint to the Australian Financial Complaints Authority if I have filed a Defence and/or Cross Claim?

If you have already filed your Defence and/or Cross Claim you can still make a complaint to the Australian Financial Complaints Authority (AFCA) as long as judgment has not ​been given or a substantive step has not been taken in the proceedings. Making a complaint to AFCA will temporarily stay (stop) proceedings.

If you are in this situation, you should get legal advice.

What if I reach an agreement with my​ credit provider?

If you reach an agreement with your credit provider, you should put it in writing. This is important because it will clearly set out the terms of your agreement, for example, how long payments will be postponed for, or what period of time reduced payments will be for. 

The agreement should include:

• the date of the agre​ement
• who entered into the agreement, for example, your details a​nd your credit providers representative
• any undert​aking you or your credit provider make
• the details of any variation to your contract, for example, the period of time involved, the amount of payments, and any effect to the term of your loan.

It is best​ to get a lawyer to check your agreement to ensure it is recorded correctly.

Can I make a complaint to the Australian Financial Complaints Authority if I get the judgment set a​side?

If you are successful in getting judgment set aside, it may be possible to make a complaint to the Australian Financial Complaints Authority.

If you are in this situation, you should get legal advice.

Can I make a complaint to the Australian Financial Complaints Authority after judgment?

There are limited grounds to make a complaint to the Australian Financial Complaints Authority after judgment.

You should get legal advice as soon as possible about your circumstances.

What options do I have after​ a judgment is made?

If you have a judgment against you for a consumer credit debt, and it's not related to a home loan:

• you may be able to make a complaint to the Australian Financial Complaints Authority (AFCA)
• you can apply t​o the Court to pay off the judgment debt in instalments - see Debtor (when you owe money) topic on this website
  
• you can pay the judgment amount in full, including the fees, interest ​and costs. You should pay your credit provider (not the Court).

If you do nothing, the credit provider can enforce the judgment against you. This means that they may get a court order to seize property, garnish your bank account or wage, or apply to have you made bankrupt (if the ​debt is over $10,000).

The judgment against you will also be listed on your credit report.​​

If there is a judgement against you, you should get legal advice.

Your optio​ns are different if the consumer credit contract is related to a home loan.

What options do I have if I ha​ve been given a Notice to Vacate my home?

If the Supreme Court of NSW has made a judgment against you, you will usually be given a Notice to Vacate - a notice that states a date and time that you must move out of your home. 

In very few situations, you may be able to make a complaint to the Australian Financial Complaints Authority.

You should spe​ak to a lawyer urgently about your options. In some cases, you may be able to:

• negotiate an ar​rangement with your credit provider, if you can pay the arrears. Any arrangement or agreement you reach should be in writing. Before you agree to an arrangement, you should get legal advice.
• apply to the Supreme Court of NSW to have the judgment set aside, if you have a Defence and reasonable explanation for not r​esponding to the Statement of Claim within 28 days of being served 
• apply to the Su​​preme Court of NSW for a stay of proceedings (a temporary stop on legal action). You can try negotiating this with your credit provider or applying to the Supreme Court of NSW for it. This might be an option if you need more time to move out of your home or where you are re-financing or selling.

If a judgment has been made to repossess your home, you should get urgent legal advice.

For more information, see Mortgage Stress Handbook on the Legal Aid NSW website. 

Should I access my superannuation​ to help with arrears?

In some situations, early access to superannuation can be given if you are in severe financial hardship. 

You should talk to a lawyer or financial counsellor about your situation before you apply for early access to superannuation, as it may not be appropriate in all cases. 

If you are given early access to a portion of your superannuation it will also be taxed at a higher rate.

For more information, see Accessing your superannuation early on the Financial Rights Legal Centre website.