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 are experiencing difficulty in meeting the repayments on your mortgage, credit card, personal loan or other form of consumer credit due to temporary hardship, the law allows you to apply to have your credit contract varied.

To apply for a hardship variation, you must be able to show temporary hardship such as unemployment, illness, relationship breakdown or other good cause. There are also certain ceilings on the amount of credit outstanding where a hardship variation applies.

For more information or to find out if you are eligible for hardship assistance visit your nearest Fair Trading Centre or call 13 32 20.

Request for Assistance form (NSW Credit Legislation) in PDF format (size: 54k).

You can also apply to the Consumer Trader and Tenancy Tribunal for a variation order to be made. You can ask the Tribunal to make orders to:

• extend the period of the loan and reduce payments accordingly
• delay payments due on a specific date
• stop making payments for a period of time and extend the period of the loan accordingly.

The Department of Housing Mortgage Assistance Scheme can also assist if you are experiencing difficulties in meeting your loan repayments. The Mortgage Assistance Scheme provides interest free loans of up to $20,000 over 1 year (conditions apply).

Mortgage Assistance Scheme

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

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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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.

Consumer Credit Legal Centre
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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Financial counsellors

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.

Financial Counsellors Association website - www.financialcounsellors.asn.au

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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To stop the lender taking action against you, you should:

• always keep in contact with the lender and let them know if you are having problems with repayments.
• never ignore 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 pay as much as you can afford. This shows that you are trying to meet your obligations.
• contact a financial counsellor if you can't seem to get on top of your debts.

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

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