If you do not pay your debts, your bank (and other credit providers) can take action against you to recover the debt (known as enforcing the debt). However, the law – the National Consumer Credit Protection Act 2009 (NCCP 2009) – requires that banks take certain steps before they undertake enforcement. This process gives you the opportunity to pay, or dispute, the arrears.
Under Section 88 of the National Credit Code (Schedule 1 to the NCCP 2009) your bank cannot begin enforcement proceedings against you until:
- You, and your guarantor (if applicable), have been given a section 88 default notice giving you a period of at least 30 days from the date of the notice to remedy the default; and
- You have not remedied the default in that period.
To be in default means you have not met your obligations under the credit contract, for example, you have missed a repayment or not complied with other terms of your contract e.g. insurance.
Arrears means the unpaid (outstanding) amount that you owe your credit provider.
To remedy the debt means that you pay back the arrears (and make your normal repayments) or legal action has been taken to recover the debt, for example, repossession or sale of the underlying security.
Security means an asset e.g. a car or property, used to secure the loan which can be accessed by the credit provider to repay arrears if you do not meet your obligations.