In relation to consumer credit contracts, under section 88 of the Code, the credit provider cannot issue legal proceedings or repossess or take any other enforcement action unless and until:
the debtor has defaulted (i.e. is behind in payments);
the credit provider has given or posted a default notice to the last known address of both the debtor and any guarantor; and
the account remains in default after the expiration of the notice period, which must be at least 30 days.
Once the client gets the notice, there is at least 30 days (unless the default notice specifies a longer period) to consider options, including rectifying the default, applying for a hardship variation or postponement of enforcement or negotiating another outcome with the creditor.
The default notice must be clearly labelled as a default notice and must specify:
the action necessary to remedy the default;
a period for remedying the default;
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;
that repossession and sale of mortgaged property may not extinguish the debtor’s liability;
the information prescribed by the NCCP Regulations about the debtor’s right to:
make an application to the credit provider for a hardship variation under section 72 of the Code; or
negotiate with the credit provider under section 94 of the Code (application to creditor for postponement of enforcement pending negotiation); or
make an application to the court under section 74 of the Code (hardship variation ordered by the court) and section 96 of the Code (order of postponement by the court);
the information about:
the approved external dispute resolution scheme of which the credit provider is a member; or
the debtor’s rights under that scheme;
that, if a subsequent default of the same kind occurs during the remedy period, enforcement proceedings can proceed without further notice if it is not remedied within the period;
that, under the Privacy Act 1988 (Cth), the debt may be included in a credit reporting agency’s credit information file about the debtor if:
the debt remains overdue for 60 days or more; and
the credit provider has taken steps to recover all or part of the debt; and
any other information prescribed by the NCCP Regulations.
The default notice must substantially meet the pro forma notice requirements in Form 12 in the NCCP Regulations.
These pre-conditions do not apply if the credit provider proves certain grounds, including that there are reasonable grounds for believing that the mortgaged goods have been or will be concealed, damaged or disposed of; it cannot find the debtor despite reasonable efforts; or a court allows the credit provider to repossess (section 88(5) of the Code).
If your client has received a compliant default notice, you need to find out what the date of the notice is and act within the notice period (most likely 30 days) to avoid commencement of proceedings or repossession.