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Recording Payment Defaults

Thursday, June 29, 2017 - Posted by Michael McCulloch

It has now been 3 years since we covered the process involved in recording a payment default with a Credit Reporting Body ("CRB") such as Equifax.

While the process has not changed we believe that it would be an ideal time as a refresher for those that may not be familiar with the process.

Assuming that a clause exists in your Contract or Agreement to record a payment default with a CRB, any debt regulated by the National Consumer Credit Protection Act 2009 (Cth), must be issued with a series of code compliant Notices before a payment default can be recorded.


SECTION 88 DEFAULT NOTICE & FORM 12A

What Is It?
The s88 Default Notice advises the customer that their account is in arrears, the amount currently in arrears and the time in which they have to remedy the default. The Form 12A which is attached to the s88 Default Notice provides the customer with information about their rights including information about financial hardship and the dispute resolution options available.

When It Must Be Given
The s88 Default Notice must be issued 30 days prior to commencing enforcement action. This includes listing default information with a CRB. The CR Code recommends that an additional 5 days be added (35 days in total) for postage.

Can It Be Combined?
The s88 Default Notice can be combined with a s6Q Notice however it cannot be combined with a s21D Notice.


SECTION 6Q NOTICE (PRIVACY ACT)

What Is It?
The s6Q Notice informs the customer of the overdue payment amount and requests payment of that amount. This Notice indicates to the customer that the amount can be reported to a CRB once that amount is 60 days overdue.

When It Must Be Given
The s6Q Notice must be given prior to disclosing default information to a CRB.

Can It Be Combined?
The s6Q Notice can be combined with the s88 Default Notice however it cannot be combined with a s21D Notice.


SECTION 21D NOTICE (PRIVACY ACT)

What Is It?
The s21D Notice advises the customer that the credit providers intends to disclose default information to a CRB.

When It Must Be Given
The s21D Notice must be given at least 14 days prior to disclosing information to a CRB and not more than 3 months prior to disclosure.

Can It Be Combined?
The s21D Notice cannot be combined with a s88 Default Notice or s6Q Notice.


OTHER CONSIDERATIONS

  • If a s6Q Notice is combined with the s88 Default Notice once the s21D Notice has expired only the arrears can be listed with a CRB.
  • If a creditor provider intends to list the full outstanding debt with a CRB a separate s6Q Notice must be issued and allow 30 days for this Notice to expire.
  • To issue a s6Q Notice the amount in arrears under the Credit Contract must be in excess of $150.
  • Before a default can be listed with a CRB the default amount must have been outstanding for more than 60 days.
  • The payment default must be reported to the CRB within 90 days after issue of the s21D Notice.
  • A payment default cannot be reported with a CRB where the customer is claiming financial hardship.
  • A payment default cannot reported with a CRB where the matter is before an External Dispute Resolution ("EDR") board nor 14 days after the dispute is determined.

SUGGESTED FLOWCHART

You can download our suggested flowchart of this process here.


IMPORTANT NOTICE

This article does not constitute legal advice and should not be used as such. You should obtain your own independent legal advice before acting on or relying on the content of this article.

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