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Debt Collection Default Notices and the Privacy Act 2014

Tuesday, May 06, 2014 - Posted by Philip Harvey

With the Privacy Act amendments commencing in March 2014, it is worthwhile reviewing how the Privacy Act impacts on the debt collection cycle and the compliance requirements it brings.

An important debt collection tool that many organisations have as part of their debt recovery process is the notification of default information to a Credit Reporting Bureau when a loan is in default. Section 6Q of the Privacy Act defines consumer credit defaults.

In collections, a credit listing is one of the best debt collections tools available. Where properly explained to people in arrears, it often yields a positive result. However, we would urge you to contact us or Collection Law Partners before listing a mortgage that is in arrears. This can have negative impacts on your debt cycle down the track.

A 6Q Notice must be issued if you intend to disclose information about a default to a Credit Reporting Bureau as part of your debt collection process. You must issue a new 6Q Notice where a full balance is due and payable if the previously issued notice was only for an arrears balance. This is likely the case where your organisation has incorporated the requirements of the 6Q Notice into the Section 88 Default Notice.

The next step before a default can be listed in the debt recovery process is to issue a Section 21D Notice. Unlike a 6Q Notice, a 21D Notice cannot be incorporated into another notice, and must be issued on its own. It is a notice that states you intend to disclose default information to a credit reporting body. The amounts stated in a 21D Notice must be over 60 days in arrears.

14 days after issuing a 21D Notice you can report the defaults stated in the notice to a Credit Reporting Bureau. If you have not reported the default after 3 months, you must issue another 21D Notice to report these defaults.

A possible simplified time frame for the issuing of notices for in consumer credit debt collection matter with an acceleration clause is outlined below.

  • 1 March 2014 - Day 1: A $1,000 payment is due on a loan of $20,000. Total arrears: $2,000
  • 1 April 2014 - Day 31: Another $1,000 payment is due on a loan of $20,000. Nil payments have been received. A Section 88 Default Notice is issued which stating the arrears of $2,000, and an Acceleration Clause specifies the $20,000 as due and payable if the $2,000 arrears is not paid.
  • 1 May 2014 - Day 61: Nil payments have been received. The Section 88 Default Notice has expired.
  • 1 May 2014 - A 6Q Notice is issued detailing the full $20,000 as outstanding.
  • 1 June 2014 - A 21D Notice can be issues for the arrears of $2,000 to be reported to the CRB
  • 15 June 2014 -  The $2,000 arrears can be reported to the CRB until 1 September 2014.
  • 16 June 2014 - A 21D Notice can be issued for the full $20,000.
  • 1 July 2014 - The $20,000 will be 60 days in arrears and can be reported to the CRB

 

Please note we make every effort to ensure this information is correct, however it should not be relied upon and does not constitute legal advice. As LCollect is not a lender, we do not have access to this section of the Credit Reporting Bureau's database.


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