Welcome to Sisters In Law, news.com.au’s weekly column solving all of your legal problems. This week, our resident lawyers and real-life sisters Alison and Jillian Barrett from Maurice Blackburn help someone being chased for repayments after borrowing from a loan company.
I’m a single mum with three kids and I really wanted to give them the best Christmas as last year was so hard on us all. I couldn’t get a bank loan so I borrowed money from one of the ‘same-day loan’ companies you see advertised on TV. I got wrapped up in the excitement and ended up spending over $10,000 all up. Now the reality has set in and I can’t make the repayments. I’m really worried as the company has been in touch saying that if I don’t start paying up it will be deferred to a collection agency. I’m terrified of someone coming to the door and taking away all of the kids’ Christmas presents. What are my rights? – Helen, NT
We can assure you that a lender is not legally allowed to turn up at your door and take away your children’s Christmas presents the minute you do not make a loan repayment.
There are certain legal steps – and sometimes debt recovery proceedings – that must be followed before a lender can do things like deduct money from your wages or sell your assets to recover the money loaned to you.
The loan agreement you signed will have outlined the terms of the credit, including things like fees and charges, interest rates, repayments and whether there was security against the loan.
Without seeing the terms of the loan agreement, we can’t provide you with specific advice. However, we can give you some general advice that applies to most people in your situation.
The first thing you should do is read and understand the loan agreement and importantly, all of the fine print. This will detail your rights and obligations under the loan and what happens when you don’t meet the loan repayments.
Often the best option in this situation is to be proactive and contact the lender in an attempt to come to an agreement about the repayment of the loan. This may be a payment plan of smaller repayments over a longer period of time.
A common clause found in loan contracts relates to security over the loan. A lender often expects you to list certain assets on the loan documents as security, for example, this may be a car.
If you were unable to meet the repayments, the lender can sell any assets you listed on the loan agreement as security.
To do this, national laws say they need to send you a ‘default notice’ that outlines how much money you are behind on the loan, and give you 30 days to get up to date with your repayments.
If you receive a default notice like this or the lender is threatening to take you to court, you should act quickly following the steps outlined below.
If your circumstances have changed since taking out the loan, meaning you now can’t meet the repayments, national laws give you the right to apply for a hardship variation under the loan.
Financial hardship can be caused by a large variety of reasons, for example illness, loss of employment or family breakdown.
In this situation you can ask the lender for any type of variation to the repayments.
You should do this in writing and give details about what has caused the hardship, your current income and expenses and what repayments you can afford and when.
When you are negotiating this change to your repayment, it is in your best interests if you continue to pay something towards the loan, even if it is only a minimal amount, as this shows your intentions to repay the loan.
If the lender does not agree to the change they need to detail the reasons why and outline your rights, which will be to lodge a dispute with the lender’s dispute resolution team and lodge a complaint with the Australian Financial Complaints Authority.
If you don’t have any reasons for financial hardship and realistically you could not afford the repayments when you received the loan, you should get legal advice immediately.
Lenders have a legal obligation to assess your financial position to ensure you can pay the repayments without any substantial hardship. If they didn’t do this properly and you should have never been given the loan, they may have breached the law.
If it eventuates that you don’t get up to date with the repayments, come to an agreement with the lender or lodge a complaint, the lender can then apply to court.
In the Northern Territory, debt recovery claims for amounts over $10,000 need to be brought by the lender in the local court.
The lender might ask the court to order you to:
– Explain your financial situation and provide any supporting documentation
– Pay a regular amount directly from any wages
– Provide some of your assets to the lender so they can sell them to reduce the size of your loan.
Usually, any Centrelink benefits, assets that are essential to your household and personal items cannot be taken from you.
If a court order like this is made against you it will likely affect your credit rating and you may also be required to pay the lender’s costs of bringing the legal action.
There are free financial counselling services available who will be able to assist you further.
This legal information is general in nature and should not be regarded as specific legal advice or relied upon. Persons requiring particular legal advice should consult a solicitor.
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