Resolving your dispute with the bank or credit provider
This section has general information about resolving a dispute about a consumer credit debt with a bank or other credit provider ('lender').
If you are worried about paying your home loan or have fallen behind with your loan repayments, see the Guided Pathway - Mortgage Stress.
Internal dispute resolution (IDR)
If you have a consumer credit debt and you are having problems paying your loan, it's important to act quickly.
You should contact your lender directly to find out about their IDR complaint process, or check their website for this information. You may need to send a letter or fill out a form.
The lender must respond to you in writing within 21 days of receiving your complaint.
If your complaint is not resolved within a set time frame or if you do not agree with your lender's decision, you can lodge the Australian Financial Complaints Authority (AFCA), which is the external dispute resolution (EDR) scheme.
For more information, go to the AFCA website.
Requesting a hardship variation is a type of IDR. You can contact your lender and ask them to temporarily change your repayment arrangement. This is called an application for 'financial hardship', 'hardship variation' or 'hardship notice'. You can apply for a hardship variation over the phone or in writing.
When you apply for a hardship variation, you will need to:
- give details of your account name and number
- explain your circumstances and why you are having problems paying your loan
- negotiate to reduce or postpone your repayments.
After sending your request for a hardship variation, your lender must consider your application and respond to you in writing within 21 days to inform you of their decision. If your lender requests further information, you must provide it within 21 days.
If your lender does not accept your application for a hardship variation, you can apply to the external dispute resolution (EDR) scheme, the Australian Financial Complaints Authority (AFCA). If you apply to AFCA, your lender must stop taking any action against you.
From 1 July 2022, your credit report will show if you have a hardship arrangement in place. This information will stay on your credit report for 12 months.
If you have received a statement of claim from your lender, you should get urgent legal advice.
External dispute resolution (EDR)
An external dispute resolution (EDR) scheme is a free, independent service for resolving disputes between consumers and credit providers. It is an alternative to going to court, which can be expensive.
From 1 November 2018, AFCA is the sole EDR scheme.
You can lodge a dispute with AFCA:
- if you are unable to resolve your dispute with your lender
- if you have been served with a statement of claim or are aware of a default judgment being enforced against you.
If you lodge a dispute with AFCA, your lender must stop taking any action against you. You should get legal advice before making a complaint to AFCA.
Time limits to apply to AFCA
The time limits to lodge a complaint with AFCA vary depending on the type of complaint.
If your complaint relates to changing your credit contract because of financial hardship or some unfair conduct by the lender under the national credit laws, you must generally make a complaint within:
- two years after a written response from the lender's IDR complaint process
- two years after the termination of the credit contract, whichever is later.
In all other situations (besides superannuation related complaints), you can lodge a complaint within two years after a written response from the lender's IDR complaint process, or six years from the date when you first became aware of the problem, whichever is earlier.
If you have been served with a statement of claim or a default judgment, you should get urgent legal advice.
Types of complaints considered by AFCA
AFCA can handle complaints about superannuation, banking, credit cards, mortgages, general and life insurance, financial planning and investment advice. For example, you can apply to AFCA if:
- your goods were repossessed by your lender without a default notice
- your lender has refused your application for a hardship variation
- your lender gave you an unsuitable loan
- you have been served with a statement of claim for a consumer credit debt and you want to apply for financial hardship
- your lender has incorrectly listed a default on your credit file.
AFCA can consider consumer credit complaints about credit providers for claims up to $1 million. Compensation is limited to $500,000. You should get legal advice to see if you are entitled to compensation.
Applying to AFCA
You can lodge a dispute with AFCA by:
- applying online
- submitting a complaint by email, fax, letter or phone.
Your application should include:
- your name and your contact details
- the details of your representative (if you have one) and information about if they will be getting money for helping you
- the name and contact details of your lender
- details of the service you received from your lender (for example, a policy or account number)
- details of the complaint and any attempts you made to resolve the complaint with your lender
- the outcome you are seeking and details of any financial loss you have suffered
- photocopies of supporting documents (for example, loan documents, letters from your lender, account statements and reports).
Decisions made by AFCA
If your application has been accepted, AFCA will contact your lender and try to resolve the dispute through negotiation and conciliation.
If the dispute cannot be resolved by agreement, AFCA will make a decision. If you agree to AFCA's decision, it will become binding on your lender. If you do not accept the decision, you should get legal advice.
For more information, go to the AFCA website.
Case study – Ayla's credit card debts
Ayla owes $8,000 on her credit card. She has been struggling to pay the minimum monthly repayments and received a default notice from her bank. Ayla contacted AFCA for help.