If you're having trouble meeting your loan repayments you should do everything you can to prevent your car, home or anything else from being repossessed.

Borrowing money is easy. It's making the repayments that can sometimes be difficult. You might find that you have overcommitted yourself or that your circumstances have changed and you can no longer afford the repayments. If this happens, it's important that you don't ignore the problem and hope that it goes away because it won't.

If you're having trouble meeting your loan repayments you should do everything you can to prevent your car, home or anything else from being repossessed. This means contacting the lender to try to come to some sort of arrangement to repay the loan. They may agree to reduce your repayments and extend the term of the loan or postpone repayments for a certain period of time. Sometimes they will agree to a combination of both.

Important: Sometimes the lender will agree to change your repayment plan to make it easier for you to pay the loan. Once you come to an agreement it's essential that you get it in writing and file it away. If you feel that you still won't be able to repay the loan after the lender has agreed to an easier payment plan, it might be time to get advice from a financial counsellor.

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If you have made an arrangement to carry the payments but don’t keep to it, or if you do fall behind and don’t make any arrangements with the credit provider, you may receive a phone call from the credit provider requesting payment.

If you do not pay, you will then receive a default notice stating that you are behind with your payments. Do not ignore this notice as you may have a limited time to rectify the default before enforcement or legal action commences.

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If you fall into arrears in your repayments, the credit provider can repossess the vehicle. In general, a credit provider must issue a default notice under section 80 of the Credit Code before this occurs. This notice gives the borrower one month to fully adjust the arrears prior to the credit provider being able to exercise their rights under the mortgage. Note that a vehicle cannot be removed from private property without the written consent of the owner or with a Court Order.

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A mortgage is taken over property such as a house or car as security for the credit provider in case the borrower cannot meet repayments. 

The credit provider will lodge an interest in the property (eg. a mortgage on a house will be lodged with the Land and Property Information New South Wales). This means that you don’t have clear title to the property and cannot sell it without the credit provider’s consent.

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The Consumer Credit Code also covers leases for goods that are predominantly for personal, domestic or household purposes and where the lease period is fixed for more than 4 months, but not an indefinite or ongoing period. The lease agreement must include:

• A description of the goods hired under the lease.
• The amount of any deposit or any other thing of value needed before the goods are hired.
• The amount of any stamp duty or any other government charge payable.
• The amount and description of any other charge not included in the lease payments.
• The amount of each lease payment.
• The date of the first lease payment.
• The date when subsequent payments are due, or the interval between payments.
• The number of lease payments and the total amount payable.
• A statement of the conditions on which the lease may be terminated.
• A statement of any liabilities if the lease is terminated.

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If the credit provided is wholly or predominantly (over 50%) for business or investment purposes, the Consumer Credit Code may not cover you, and credit providers may want you to sign a declaration to this effect. By signing such a declaration, you may lose your protection under the Consumer Protection Code.

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Payday loans are loans provided for less than 62 days, which are often marketed as cash to tide you over until your next pay day. Until recently they were unregulated but are now covered by the Consumer Credit Code. This means that all the protections of the Code and the documentation required by the Code applies to this type of loan in the same way that it applies to personal loans, credit cards and other types of credit.

It is important to take note of the cost if you are considering a payday loan. Typically, the cost associated with this type of credit is very high and you should consider whether you could get cheaper credit elsewhere, or whether in fact you should consider alternatives to borrowing, such as contacting creditors to try to reschedule current debts. You may need to talk to a financial counsellor about this.

If you decide to take out a payday loan, you should be aware that payday lenders are not allowed to charge any more than 48% interest, and that no fees can be charged on top of this.

Prior to 1 December 2001 lenders did not charge interest, but set fees according to the amount of the loan. This is de facto interest, but since it was not expressed as an annualised interest rate, the consumer may have been unaware of the true cost of the loan compared to other possible sources of credit. If annualised, the cost of credit for pay day loans would average up to 1000%.

The Consumer Credit (New South Wales) Amendment (Pay Day Lenders) Act 2001 amends the Consumer Credit (New South Wales) Act 1995 to apply the provisions of the Consumer Credit Code to those providers of short term, high interest credit. Banks and other authorised deposit taking institutions are expressly excluded from the effect of the amendment.

The new laws require pay day lenders to disclose the cost of credit as an annual percentage rate. All fees charged which are in the nature of interest will be included in the annual percentage rate. The maximum interest rate of 48%, which currently applies in New South Wales, will be calculated to include fees and charges as well as interest. This applies only to pay day lenders. The Consumer Credit (New South Wales) Special Provisions Amendment (Pay Day Lenders) Regulation 2001 outlines how the rate must be calculated.

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The Credit (Home Finance Contracts) Act 1984 provides a facility for debtors who are experiencing temporary hardship in meeting their mortgage repayments to seek a variation to their loan contract.

Criteria for loans to be regulated under the Credit (Home Finance Contracts) Act:

• Balance of the loan must not exceed 110% of the average loan amount for new dwellings, as prescribed by the Australian Bureau of Statistics. This figure is released monthly by the ABS. If you are unsure of your eligibility, you should contact Fair Trading;
• The loan purpose must be:
  • (i) To purchase, renovate, make additions to or construct a home in which the  borrower is living;
  • To purchase a block of land on which a home will be built in the future. The  borrower must intend to live in the home on completion;
  • Loans originally taken out for the above purposes which have since been refinanced or consolidated with other debts.

If your home loan is regulated by the Credit (Home Finance Contracts) Act, the contract may be varied due to your circumstances. You must first apply to the credit provider for a variation of the contract. However, if the credit provider refuses to vary the contract, you may apply to the Office of Fair Trading for assistance in negotiating a variation of the contract.

The Department of Housing Mortgage Assistance Scheme can also assist if you are experiencing difficulties in meeting your home loan repayments. The Mortgage Assistance Scheme provides interest free loans of up to $10,000 for a period of up to 6 months; conditions apply.

For further information:
Telephone: 1800 806 653
Website: www.housing.nsw.gov.au
Postal Address: Locked Bag 7466, Liverpool BC, NSW 1871.

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You don't need to be up to your eyeballs in debt to get help from a financial counsellor. They can help you work out a budget and sort out your finances. They give free, confidential advice and are available through the Credit and Debt Hotline on 1800 808 488. Organisations that offer financial counselling are listed in the Yellow Pages telephone directory under 'Organisations Business and Professional'. You can also check the Financial Counsellors Association's website at http://www.financialcounsellors.asn.au which provides a list of financial counsellors. You can also find them through some neighbourhood centres, community legal centres, church groups and charitable organisations.

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Sometimes a lender will ask you to put up something valuable as security. This can be a house, car or other valuable thing and is known as secured property. When this happens you will be asked to sign a document that sets out the terms of the security. The lender will have certain rights over the secured property and you won't be able to sell it without their permission.

Secured property gives the lender a safety net. If you stop making repayments the lender can repossess the secured property. In some cases, you can lose the property and still owe the lender money. Let's say you apply for a loan for a car. The lender may want to mortgage the car as security. If you end up signing the mortgage agreement, the lender will have a claim on the car until you pay off the loan.

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If you've stopped making repayments, the lender may have the legal right to take possession of the secured property. Before they take the goods a lender will send you a 'default notice'. This is a written notice that gives you 30 days to fix the problem. It should tell you why the lender wants to take action and what you can do to stop them. If you get a default notice you should immediately contact the lender and try to come to some arrangement to repay the loan. The lender can go ahead and take legal action without notifying you if:

• they believe the secured property has been disposed of or will be disposed of
• they can't find you
• the Court has given permission.

If the secured property is being held on private property, the lender can only repossess it with the written permission of someone living there or with a Court Order.

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After a lender has repossessed your property, they must give you a notice in writing within 14 days. If you want to stop them from selling your property you have 21 days to do one of the following:

• pay the amount of money specified in the notice to the lender
• pay out the credit contract
• nominate someone who is willing to buy the property for at least its estimated price.

The lender must offer to sell the property to the person you nominate.

Important: If you have paid off at least 75% of the loan, the lender can't take the secured property from you unless they have the Court's permission.

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When the lender sells the secured property they must try to get the best possible price. After it's sold the lender will use the money raised toward your outstanding loan. If the sale price is less that what you owe, you must pay the difference.

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If you are in default, legal action is likely to follow if you ignore a warning letter or fail to negotiate with the lender. One way of stopping court action is to negotiate with the lender to repay the debt by instalments. This may stop any enforcement or court action against you as long as you keep up with the payments. You should always make sure that any repayment arrangement made with the lender is confirmed in writing.

If you became a guarantor or co-borrower unfairly, you may be able to avoid liability. Contact the Consumer Credit Legal Centre, a private lawyer or the Legal Aid Commission.

If you are unable to pay, legal action can include:

• A 'garnishee order' to deduct money from your wages and/or bank account;
• Repossession of any items which are security for the loan (such as a car or home);
• A Writ of Execution, which allows a bailiff (sheriff) to come to your home and to list property that could be seized and sold;
• Applying to make you bankrupt.

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Debt problems don’t strike without warning. People usually receive very clear early signals, for example:

• You keep receiving Late Payment or Reminder Notices;
• You don’t want to check the mail for fear of finding another bill;
• You are still paying off your credit card spending from last Christmas;
• Worse, you are still paying off the holiday you had two years ago!;
• You are now on your second mobile phone provider;
• You have three credit cards and have just applied for a fourth;
• None of your family or friends will lend you any more money;
• A sheriff came to the door and served you with some legal document;
• Your pay is allocated to debt repayments and there’s nothing left for food;
• You’ve started catching the bus because you can’t afford petrol for the car.

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If you can’t meet your repayment obligations due to unemployment, sickness or other reasonable causes, you should do everything you can to prevent your car, home or anything else from being repossessed. This means contacting your credit provider to come to some sort of arrangement to repay the loan. The credit provider may agree to reduce your repayments and extend the term of the loan, or postpone repayments for a certain period of time. Sometimes the credit provider will agree to a combination of both.

If the lender is not willing to change your repayment plan, you can contact the Office of Fair Trading and we may be able to help you. In cases of hardship, Fair Trading can assist by mediating with credit providers. However, Fair Trading cannot direct a credit provider to a particular course of action. Under the Consumer Credit Code, you may be able to request a Court/Tribunal to order a relief plan on the basis of hardship, if you can show that:

• you have tried to come to an arrangement with the lender; and
• the hardship has been caused by unemployment, sickness or some other reasonable cause; and
• your situation should improve in the near future

Contact your nearest Fair Trading Centre on 13 32 20 to find out if you are eligible for this kind of assistance.

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Financial counsellors

Over-reliance on credit can cause serious hardship.It creates financial and emotional turmoil for consumers. However, there are organisations that people can turn to for guidance and advice when they find themselves in over their heads with debt.

Community financial counselling services provide help for people experiencing problems with debt. They operate throughout New South Wales and provide free, confidential advice on financial matters.

Financial counselling groups provide a service to people from all walks of life who find themselves in serious financial difficulties.

After assessing their client’s financial situation, trained counsellors will:

• Prepare a full financial assessment and provide options for change and improvement.
• Detail the availability of any government assistance.
• Negotiate, advocate and mediate with credit providers and government agencies.
• Assist with information on debt recovery, bankruptcy and other para-legal matters.
• Ensure appropriate referral to other sources of assistance, for example Legal Aid, personal counselling and government services.

Financial counselling is a valuable community service that helps people regain control of their financial affairs.

Legal aid

Legal Aid provides a free 15 minute interview at which they will provide advice on credit/debt problems, and determine if you qualify for further assistance. For further information:
Telephone: 1300 888 529 (Law Access NSW)
Website: www.legalaid.nsw.gov.au
Postal Address: PO Box K847, Haymarket 1238, Sydney NSW 2000.

Consumer Credit Legal Centre

The Consumer Credit Legal Centre specialises in credit/debt matters. For legal advice call the Credit and Debt Hotline on 1800 808 488 (NSW only), Monday to Friday 9.30am - 4.30pm.
Website: www.cclcnsw.org.au

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Important advice includes:

• always keeping in contact with the lender and letting them know if you are having problems with repayments.
• never ignoring notices or letters from the lender. If you don't understand something, talk to the lender or get some advice from a financial counsellor.
• always paying as much as you can afford. This shows that you are trying to meet your obligations.
• contacting a financial counsellor if you can't seem to get on top of your debts.

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If you have not been able to find the answers to your questions on credit issues or managing debt, a website has been established that may assist. Consumer Credit Legal Centre NSW has 29 online credit and debt resources covering issues such as credit applications, managing repayments and dealing with bankruptcy.

 Listen to information on Problems with loan re-payments (1:44 mins)

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