The Law Handbook 2024

Chapter 5.8: Mortgages, consumer leases and other finance products 441 Step 2: If the application is rejected by the credit provider, apply to a dispute resolution scheme If the credit provider rejects an application under section 72 of the NCC (as it then was) or does not respond to the application within 21 days, the debtor can apply to the dispute resolution scheme of which the credit provider is a member for assistance in resolving the dispute. The debtor can also apply to a court for an order under section 74 of the NCC (as it then was) that the credit provider change the contract in one of the ways set out in section 72(2) of the NCC (as it then was). An application under section 74 can only be made if the debtor has already applied to the credit provider for the change under section 72. Hardship application process – contracts entered into on or after 1 March 2013 The following steps outline the process for a debtor’s hardship application for contracts entered into on or after 1 March 2013. Step 1: Apply to the credit provider for hardship Even though a hardship notice may be given verbally or in writing, it is advisable to give it in writing. The debtor only needs to consider that they would be unable to meet their obligations under the contract and inform the credit provider of their inability tomeet the obligations (s 72(1) NCC). The notice does not have to comply with any other form requirements. Credit providers must respond to an outstanding hardship application before commencing enforce­ ment action (s 89A(2) NCC). It is advisable to lodge a complaint with the relevant dispute resolution scheme (AFCA) at the same time as applying to the credit provider for hardship if the matter is urgent because legal action has been threatened or a default notice has been served. Step 2: Supply further information to the credit provider (if requested) The credit provider may (verbally or in writing), within 21 days after receiving the hardship notice, ask the debtor to provide specified information about: a whether the debtor would be unable to meet their obligations under the contract (s 72(2)(a) NCC); and b how to change the contract if the debtor is or will be unable to meet those obligations (s 72(2)(b) NCC). A request for further information must only be made by a credit provider if the information is genuinely needed to allow a final decision to be made and must not unreasonably delay the process. The debtor must supply the requested information within 21 days of the date of the credit provider’s notice requesting the information (s 72(2), (3) NCC). Step 3: Wait for the credit provider’s reply The credit provider must provide a response to the hardship request within 21–28 days (under s 72(5) NCC) advising either that: a the credit provider and the debtor have agreed to change the credit contract (s 72(4)(a) NCC); or b the credit provider and debtor have not agreed to change the contract and if so: – the reasons why they have not agreed; – the name and contact details of the dispute resolution scheme of which the credit provider is a member; and – the debtor’s rights under that scheme (s 72(4) (b) NCC). If the credit provider and debtor agree to change the contract, the credit provider must give the debtor a notice detailing the changes to the credit contract (s 73(1) NCC). The notice must be provided within 30 days from the date of the agreement to change. Credit providers are exempted until 1 March 2022 from the notice provisions where they agree to provide a variation to a contract. ASIC Class Order 14/41 provides that: • credit providers are exempt from the obligation in section 72(4)(a) of the NCC to give notice that a variation has been agreed; and • credit providers are exempt from the obligation in section 73(1) of the NCC to give details of the variation agreed, but only where the variation is an agreement to defer or reduce the obligations of a debtor for a period of 90 days or less. Credit providers may be required by paragraphs 177 and 178 of the Banking Code to provide notice of a decision to provide hardship assistance and confirm the details or the arrangements in all cases.