This section documents some of the legal aspects of credit repair and the responsibilities of credit providers when marking a negative listing on a credit file.
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Most forms of credit will require a personal guarantee and/ or some form of security. Should the terms of the loan be breached the credit provider is generally empowered to commence action in order to recover amounts owing, this action can include:
There is strict legislation in place designed to protect the consumer and ensure credit providers follow a required process before they are entitled to enter a negative listing on a credit report.
Division Two of Part Five of the Code modifies the common law rights of the lender and sets out protocols for enforcement proceedings under a credit contract.
In most cases if a payment is missed, the credit provider will have to comply with the requirements of section 88 prior to commencing any recovery or possession action. A section 88 notice must:
A credit provider will be in a position to commence enforcement action under section 88 if:
Upon the 30 day period of the Section 88 notice expiring, the credit provider is entitled to exercise their rights under the credit contract and commence recovery action.
The credit provider must comply with relevant legislation when attempting to recover secured goods. These restrictions only apply to mortgaged goods. Mortgagee possession of real property follows different procedures, normally culminating with a writ in the Supreme Court.
Less than 25% owing: under section 83 of the Code, a lender cannot repossess mortgaged goods if the current balance of the loan is less than 25% of the amount of the credit provided, or $10,000.00 (whichever is the lesser).
A credit provider is unable to enter residential premises in order to recover mortgaged goods unless:
Within 14 days after repossession, the credit provider must provide the debtor with a notice under section 94 of the code that states:
Under Section 98 of the code the debtor can seek compensation if it is believed that goods were sold for less than the highest price possible. It must be noted however that in the case of vehicles, credit providers are able to sell at auctions which can result in the vehicle being sold at a wholesale price. This situation often leads to frustration by the debtor, however it is rare that this action is sufficient for claiming compensation.
When a credit facility is in default, it is not unusual for a higher rate of interest and additional fees and charges to apply. These, combined with recovery expenses, have the potential to increase the amount owing significantly.
In certain situations these additional expenses charged by the credit provider may be deemed unreasonable and if so the debtor may be in a position to seek compensation.
If unreasonable enforcement expenses have been charged to a borrower, application to the Credit List of the Victorian Civil and Administrative Tribunal can be made by the borrower under section 99 of the Consumer Credit (Victoria) Code. This asks for a determination of the borrower’s liability or a refund of amounts already paid.
It must be said that successful claims for unreasonable enforcement expenses are rare.
Information provided by Consumer Credit Legal Service.
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