National Consumer Credit Protection Act 2009

SCHEDULE 1 - NATIONAL CREDIT CODE  

Note:

See section 3 of the National Credit Act.

PART 5 - ENDING AND ENFORCING CREDIT CONTRACTS, MORTGAGES AND GUARANTEES  

Division 2 - Enforcement of credit contracts, mortgages and guarantees  

88   Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor  
Enforcement of credit contract

88(1)    

A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:

(a) the debtor is in default under the credit contract; and

(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and

(c) the default has not been remedied within that period; and

(d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:

(i) the debtor;

(ii) a practising lawyer representing the debtor;

(iii) a person with a power of attorney relating to the debtor ' s financial affairs.

Criminal penalty: 50 penalty units.

Note:

If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94.

Enforcement of mortgage

88(2)    

A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless:

(a) the mortgagor is in default under the mortgage; and

(b) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and

(c) the default has not been remedied within that period.

(d) if the mortgage secures an obligation under a credit contract for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the mortgagor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:

(i) the mortgagor;

(ii) a practising lawyer representing the mortgagor;

(iii) a person with a power of attorney relating to the mortgagor ' s financial affairs.

Criminal penalty: 50 penalty units.

Note:

If a mortgagor has given a credit provider a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see section 94.

Default notice requirements

88(3)    
A default notice must contain a prominent heading at its top stating that it is a default notice and specify:

(a) the default; and

(b) the action necessary to remedy the default; and

(c) a period for remedying the default; and

(d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property may begin if the default has not been remedied; and

(e) that repossession and sale of mortgaged property may not extinguish the debtor ' s liability; and

(f) the information prescribed by the regulations about the debtor ' s right to:

(i) give a hardship notice under section 72; or

(ii) give a postponement request under section 94; or

(iii) make an application to the court under sections 74 and 96; and

(g) the information prescribed by the regulations about:

(i) the AFCA scheme; and

(ii) the debtor ' s rights under that scheme; and

(h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and

(i) that, under the Privacy Act 1988 , a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and

(j) any other information prescribed by the regulations.

Combined notices

88(4)    
Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor.

When default notice not required

88(5)    
A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if:

(a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or

(b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or

(c) the court authorises the credit provider to begin the enforcement proceedings; or

(d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider ' s permission or that urgent action is necessary to protect the mortgaged property.

Non-remedial default

88(6)    

If the credit provider reasonably believes that a default is not capable of being remedied:

(a) the default notice need only specify the default; and

(b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice.

88(7)    
Subsections (1) and (2) are offences of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code .

Some defaults are not a basis for a default notice

88(7A)    

So far as a notice purporting to be a default notice relates to an alleged default under a credit contract for a reverse mortgage that is an event described in subsection 18A(3), the notice is not a default notice for the purposes of any of the following provisions:

(a) subsections (1) and (2) of this section;

(b) section 93.

Note:

This has the effect that:

(a) if the credit provider begins enforcement proceedings relating to the alleged default the credit provider will contravene subsection (1) or (2) of this section (unless subsection (5) of this section applies); and

(b) section 93 will affect the operation of an acceleration clause on the basis of the alleged default.

88(7B)    
To avoid doubt, subsection (7A) does not affect the status of the notice as a default notice for the purposes of section 89, 94 or 95.

Other law about mortgages not affected

88(8)    
This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section.

Note:

By virtue of subsection 183(2), a notice may contain information required to be given under other legislation or be included in a notice given under other legislation.