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Privacy fact sheet 35: When can a default be included in your credit report

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May 2014

Credit reporting ‘know your rights’ series no. 10

This fact sheet is the tenth in a series that outlines what you need to know about how your personal information can be handled in the Australian consumer credit reporting system. It contains information about when a default can be included in your consumer credit report. There are lots of technical terms used in the credit reporting system and we refer to some of those terms in this series. You can find more information about these terms in no. 2 (Privacy fact sheet 27) of this series.

What is a default?

A default occurs when you are 60 days overdue in making a consumer credit payment.

Importantly, a default can only be included in your consumer credit report if it relates to an overdue payment of $150 or more.

If your consumer credit report contains information about a payment that has been overdue for at least 60 days but that is less than $150, you should request to have that information removed from your consumer credit report (for more information about how to make a correction request, see no. 7 (Privacy fact sheet 32) in this series).

Statute barred debts

A credit provider cannot give a credit reporting body (CRB) information about an overdue payment that a credit provider can no longer demand that you pay (this means that the credit provider is prevented by a Statute of Limitations from enforcing the debt).

Will you be notified before a default is included in your credit report?

Yes. A credit provider must send you two separate notices before it can give a CRB information about a default for inclusion in your consumer credit report.

Those notices are:

Notice 1: A written notice informing you of the overdue payment and requesting that you pay the amount outstanding.

Notice 2: A written notice informing you that if you do not pay the overdue amount the credit provider intends to give information about the default to a CRB.

When will you receive the notices?

The first notice can be sent as soon as the payment becomes overdue.

A credit provider must wait 30 days after sending the first notice before it sends the second notice.

Each of these notices may be included with notices required by other legislation as long as the 30 days separation is maintained.

Where will the credit provider send those notices?

A credit provider is required to send those notices to your last known address. This might involve:

  • sending the notices via post to a physical address, such as your place of residence, or
  • sending the notices electronically to an email address.

It is your responsibility to ensure that credit providers have your current address details. This means that, if your contact details change (for example, if you move house or open a new email account) you should contact all of your credit providers and provide them with your new address details.

That said, when deciding whether to use a postal or email address, a credit provider should consider how it usually communicates with you.

For example, if your credit provider usually sends your bill or account statement via email, the provider should, where possible and if the law allows, use that email address to notify you about an overdue payment.

If a credit provider has evidence that suggests that your last known address details are no longer current, the provider should take reasonable steps to ascertain new contact details before issuing a notice.

When you contact your credit providers to up-date your details, you should make a record of the time and date and the name of the person you spoke to.

When can a default be included in your credit report?

A credit provider cannot give a CRB information about a default until the payment has been outstanding for at least 60 days.

A credit provider must have sent you both notices detailed above before listing your default. Importantly, a credit provider must wait at least 14 days after issuing you with the second notice before disclosing the default to a CRB for inclusion in your consumer credit report. This minimum 14 day period is to give you one final opportunity to pay the overdue amount.

Is there a time-limit on when a credit provider can list your default?

Yes, a credit provider cannot wait more than 90 days after issuing you with the second notice to list the default.

If the credit provider does not disclose the default to a CRB within that 90 day period, it must send you another notice informing you of its intention to list the default. The credit provider must then wait at least another 14 days before disclosing the default to a CRB for inclusion in your consumer credit report.

What amount will be listed in your credit report as a default?

The amount listed as a default in your consumer credit report must not be more than:

  • the amount specified in the notice of intention to list the default
  • plus any interest and fees that have accrued in relation to that overdue payment, and
  • minus any payments that the credit provider has received between the time the credit provider sent that notice, and the time the default was listed.

Importantly, if the amount overdue falls below the $150 threshold as a result of any payments made by you before the credit provider lists the overdue amount as a default, the credit provider is not permitted to list the default.

Interest and fees

An amount listed as a default in your consumer credit report can include any fees and interest that have accrued as a result of that amount being overdue. This helps ensure that you are aware of the amount that you must pay to bring your consumer credit payments up-to-date.

Can the amount of your default be updated by a credit provider?

Once an overdue payment is included in your consumer credit report as a default, the amount of the default cannot be changed to reflect subsequent payments or further missed payments.

This means that if you subsequently miss another payment in relation to the same credit account, the later missed payment must be listed as a separate default.

Updating a default to reflect interest and fees

The amount of a default can be adjusted to reflect interest, fees and other charges that have accrued as a result of the overdue payment. This helps ensure that you are aware of the amount that you must pay to bring your consumer credit payments up-to-date (see below for more information about the meaning of interest, fees and other charges).

What if you pay the overdue amount?

If you pay before the default is listed

If you pay the whole overdue amount (including any interest, fees and other charges) before it is listed as a default on your consumer credit report, a credit provider must not list the default.

If you pay part of the overdue amount before it is listed as a default, a CRB can only list a default if the amount that is still overdue is at least $150.

If you pay after the default is listed

If you pay the whole overdue amount after it is listed as a default, the credit provider must inform the CRB. The CRB will then include a statement next to the default indicating that you have paid. However, the default will not be removed from your consumer credit report until the retention period has expired.

If you pay part of the overdue amount after it is listed as a default, a credit provider will not inform the CRB. You must pay the full amount outstanding before a statement that you have paid can be included in your consumer credit report.

What do ‘interest fees and other charges’ include?

A default can only be updated to reflect the accumulation of interest, fees and other charges where they are owing as a result of the overdue payment. This is intended to capture incidental charges and fees, such as daily interest charges that continue to apply to the overdue amount
while it remains unpaid.

Acceleration of the entire liability and early termination fees

Acceleration: In some circumstances, a contract for consumer credit (for example, some mortgage contracts) will include a clause that requires you to pay the entire amountof the loan if you miss a certain number of payments.

Early termination fees: ETFs are charged for early release from fixed term credit contracts. ETFs can be charged for all types of credit contracts, but are most commonly charged in relation to mobile telephone and internet services.

If either of these situations occur and you don’t pay that amount, a credit provider might disclose that information to a CRB for inclusion in your consumer credit report as a default.

If this occurs, any defaults that were previously recorded in your consumer credit report that relate to the same credit account must be removed. This ensures that you do not have more than one default relating to the same overdue amount recorded in your consumer credit report (i.e. once as a single overdue payment and separately as part of an 'accelerated' or ETF amount).

For further information

telephone: 1300 363 992
email: enquiries@oaic.gov.au
write: GPO Box 5218, Sydney NSW 2001
Or visit our website at www.oaic.gov.au