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Useful Information about Credit Repair and Credit Providers
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.
Make sure you keep good personal records:
- Always retain receipts or payments records.
- Make sure all letters you send to credit providers are dated.
- Ensure you keep copies of any correspondence you provide to a third party.
- Always make file notes on any conversations you have including the date and the name of the person you spoke to.
- In the case of making any sort of agreement with a credit provider, always ask that this is confirmed in writing. Continue contacting the credit provider until written confirmation is received and keep notes of these calls.
- Always hold receipts or evidence of payment in one place so you can locate them quickly should you need to do so.
Be proactive and don’t rely on the credit provider to do the right thing:
- If you move address make sure you inform your creditors immediately and ensure you redirect your mail
- If you notice a bill has stopped coming or a direct debit is no longer being taken from your account, contact the credit provider immediately
- If you find yourself not being able to meet a debt, call the credit provider and discuss the matter. In some cases credit providers are obliged to offer financial relief. Even if an agreement is not reached make sure you make a note of the conversation including the date and who you spoke to.
What to expect if a loan is not paid:
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:
- If an acceleration clause applies to the facility the credit provider may demand payment of the entire amount owing and not just the late payment.
- Commence legal action in order to take position of secured goods or property
- The credit provider may enter a negative listing on the borrower’s credit report such as a payment default or Court Judgment; such listings will remain on the credit report for up to five years and more in some cases.
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.
Section 88 of the code:
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:
- Provide the consumer with at least 30 days to remedy the default
- Note the credit facility and the payments that are in arrears
- Specify what is required in order to correct the default
- Note that unless remedied, the credit provider will have the legal right to commence enforcement action in relation to that default
A credit provider will be in a position to commence enforcement action under section 88 if:
- The debtor remains in default of the credit contract
- The debtor (and the guarantor) has received a default notice that complies with Section 88 and has been given a minimum of 30 days to bring the account back into order
A credit provider is not required to issue a section 88 notice if:
- The credit provider has reason to believe the debtor may have fraudulently entered into the credit contract
- The credit provider is unable to locate the debtor
- The court authorizes the commencement of enforcement proceedings
- The credit provider believes that the debtor has disposed of or intends to dispose of mortgaged goods, or that urgent action is necessary to protect the mortgaged property
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 can exercise recovery of secured goods if:
- Consent is given by the Court
- The facility is a continuing credit contract, which is rare in the case of secured goods
- The credit provider believes the debtor has disposed of, or may dispose of mortgaged goods.
Section 91 of the code:
A credit provider is unable to enter residential premises in order to recover mortgaged goods unless:
- The court has consented
- The occupier gives the credit provider written authorization. In this case the occupier must be informed in writing of the provisions of section 91 of the code
- A written request or phone call to the occupier requesting entry is made by the credit provider or agent
- If the request is made personally. It may only be requested between the hours of 8:00am to 8:00pm on any day other than a Sunday or public holiday.
- The consent in writing must be in Form 7 and signed by the occupier
- The written document of consent is not to be presented to the occupier for signature with, or as part of any other document (unless the other document or the remainder of the other document contains only the provisions of section 91 of the code)
After the repossession
Within 14 days after repossession, the credit provider must provide the debtor with a notice under section 94 of the code that states:
- The estimated value of the goods
- Enforcement expenses that have and will accrue
- A statement of rights and obligations as required under the regulations
- That the debtor has 21 days from the date of the notice to redeem the goods, after which they will be sold
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.
Unreasonable enforcement expenses
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