5.1Three sections of the Code
- Section 36: the numbersA statement of the amount owing, given on request.
- Section 38: one entryA written dispute about a particular amount, and a wait before enforcement on it.
- Section 76: the whole dealA court’s power to reopen a contract, mortgage or guarantee it finds unjust.
5.2Asking for the numbers
Section 36 of the Code is headed “Statement of amount owing and other matters”. Its rules about the statement, in plain words:
| Question | What the section says |
|---|---|
| Who receives it | Where there are joint debtors or guarantors, only the one who asks need be given it. |
| How quickly | Within 14 days if everything asked about relates to the year before the request; within 30 days if any of it goes back further. |
| In what form | It may be given orally, but if the request was in writing, the statement must be in writing. |
| How often | The lender need not give another written statement if it gave one to the same person in the 3 months before the request. |
| How far back | The lender need not cover amounts from more than 7 years before the request, unless they are currently overdue and payable, or a court orders otherwise on the application of the debtor or guarantor. |
| If it does not arrive | A court may, on the application of the debtor or guarantor, order the lender to provide it, or work out the amounts itself. |
5.3Disputing one entry
Section 38 starts with the borrower’s written notice disputing a particular liability. The notice has its own deadline, which depends on the kind of contract:
- For a continuing credit contract, where the entry appears on a statement of account showing a date for payment, on or before that date.
- For another credit contract with statements of account, within 30 days after the borrower receives the statement in which the amount is first shown.
- For a contract where a statement of account for the period the disputed amount relates to is neither required nor given, not later than 3 months after the day the contract ends.
The lender then explains in writing, in reasonable detail, how the liability arises. If it agrees with the borrower about the amount instead, it can give a written notice of the agreed liability. Either way, it must not begin enforcement on a default arising from the disputed amount for 30 days from that written reply.
Either side may then ask a court to decide. If the court is satisfied the liability is genuinely disputed, it may determine the matters in dispute. If the application is made within 30 days after the explanation, the lender must not begin enforcement on that default without the court’s leave. The Code attaches a criminal penalty of 50 penalty units to each of those two holds on enforcement.
5.4When the whole deal was unjust
Section 76 reaches further than one entry. Its first subsection reads:
“(1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.”
National Credit Code, section 76
Three people can ask: the borrower, the person who gave the security, and a guarantor. The test looks back to the time the deal was made or changed. The court is not to count injustice arising from circumstances that were not reasonably foreseeable at that time, and in deciding whether to grant relief it may consider how the parties have behaved since. There is a time limit: section 80 says such an application “may not be brought under this Division more than 2 years after the relevant credit contract is rescinded or discharged or otherwise comes to an end”.
A guarantor has a place in the hardship route too. When a borrower asks a court under section 74 to change a contract after a hardship notice, the court must first allow the applicant, the lender and any guarantor a reasonable opportunity to be heard. That route is in hardship and changing the terms.
5.5Complaints, before courts
A court is not the only place an amount can be tested. ASIC’s guidance on internal dispute resolution says a consumer does not have to use the word “complaint” or put it in writing for the lender’s complaint process to apply. As a general rule, the lender must respond no later than 30 calendar days after receiving it, or within 21 calendar days where the complaint involves a default notice.
After that, the Australian Financial Complaints Authority is a dispute resolution scheme for disputes with financial firms, and Moneysmart says schemes of its kind hear complaints for free. The National Debt Helpline adds that such schemes can decide on repayment arrangements where there is financial hardship. What a dispute there does to enforcement is in after the asset is taken.