Consumer credit hardship relief

Under section 66 of the Consumer Credit Code "a debtor who is unable reasonably, because of illness, unemployment or other reasonable cause, to meet the debtor’s obligations under a credit contract and who reasonably expects to be able to discharge the debtor’s obligations if the terms of the contract were changed in a manner set out in subsection (2) may apply to the credit provider for such a change."

Under subsection (2) , a debtor can request to extend the term of the loan (and reduce the repayments) without any change to the interest rates or for payments to be postponed or a combination of both.

The Code and Regulations sets a hardship threshold above which section 66 does not apply. From 9 September 2008 the threshold is $368,390. Section 66 relief and the debtor’s right to apply for a stay of enforcement proceedings therefore applies to loans up to that amount.

Lenders must take hardship requests seriously: under section 68, if the credit provider does not change the credit contract in accordance with the application, the debtor may apply to the Court to change the terms of the credit contract.

Under section 88 if the debtor, mortgagor or guarantor is unable to negotiate a postponement, the debtor, mortgagor or guarantor may apply to the Court for a postponement. The Court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the credit contract or mortgage until the application has been determined.

Further, unreasonable conduct by the lender could lead to a declaration of unjust conduct.

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