According to the Reserve Bank of Australia, we as a nation love our credit to such an extent, that Aussies as a whole owe a whopping $49.3 billion on credit. To put the figure in perspective, the average person on credit now owes $3321 each. So extracting the very scary figures from the Reserve Bank, we can also probably assume that many Australians probably have credit debts which are larger than what they actually earn. Yikes! In contrast, there may also be some people who cannot repay their credit contracts due to genuine hardship, such as illness, unemployment or some other legitimate mishap that may be considered as a reasonable cause. If a borrower is indeed experiencing hardship and is finding it difficult to repay their debts: what are the options? Furthermore, what if a person is struggling to repay their debts because the credit contract or mortgage loan is unjust? What then?
Whenever someone finds themselves in a situation where the credit contract becomes burdensome, there are some options that are available, and we’ll explore them in this article.
Credit contracts and hardship
As great as life is, some of us at some stage may unfortunately experience serious illness, or find ourselves being laid off from work. Sadly, our credit contracts we still need to be paid, even if we are undergoing personal hardship that may prevent us from meeting our financial obligations. So what are the options in such a circumstance? Well, a person may be able to request an extension to the period of payment, reduce the amount to be repaid, or postpone repayments altogether if there is reasonable cause.
Anyone who wishes to seek an alternative arrangement in the repayment of their credit, must firstly cite a reason for a change in the conditions to the credit provider. After a request has been submitted, under the requirements of s 72(3) of the National Consumer Credit Protection Act (the Act), the credit provider must inform the person via a written notice within 21 days, on whether or not the provider has accepted the changes to the credit contract, and if the provider decides to reject the request for a adjustment, must then:
• provide the name of an approved external resolution scheme in which the credit provider is a member
• outline the borrower’s rights under the scheme
• provide reasons for not approving the change in the credit contract.
Alternatively, if a credit provider does agree to a change in the credit contract, they then must no later than 30 days after the date of the agreement, supply the debtor, as well as any guarantor, written notice setting out:
• any particulars in relation to the change of the credit contract
• any information required by the regulations.
Unjust credit contracts
If a person can prove that at the time of entering into a credit contract that the guarantee or mortgage was unjust, unconscionable, harsh, or oppressive, the courts may decide to reopen the transaction, and make an adjustment to the rights and obligations under the credit contract. Some of the actions a court may take if the decision is made to reopen the transaction can include, extending the time period for repayment, reducing the amount needed to be repaid, as well as postponing the payments owed by the borrower in the credit contract.
However, the person must satisfy the courts that the credit contract was unjust, unconscionable, harsh or oppressive in order for the transaction to be reopened.
Unfortunately, some of us may experience personal difficulties and hardships that are beyond our control, and which may result in us struggling to repay our credit contracts. If anyone is experiencing any issues in terms of their credit and need help, always seek the appropriate legal assistance.