Default, hardship, collections and dispute resolution
Domain focus
Default, hardship, collections and dispute resolution tests how you respond when a borrower cannot pay, within the CCCFA and fair-conduct standards.
Core rules
- Default occurs when a payment is missed or another contractual trigger is met; the lender must follow the contract and statutory notice requirements before enforcement.
- Hardship: a borrower may apply for a variation because of illness, injury, loss of employment, family breakdown or other reasonable cause. The lender must consider the application, may request financial information, and must respond within statutory timeframes.
- During a hardship application, the lender should not take enforcement action without following the required process.
- Collections must be fair and not oppressive; harassment and misleading threats are prohibited.
- Disputes go first through the lender's internal complaints process, then the external dispute resolution scheme.
Worked example
A borrower loses their job and asks to reduce repayments for three months. The lender immediately issues a repossession notice. Reasoning: the hardship application must be assessed first; enforcement before considering it risks breaching CCCFA obligations and the dispute scheme may award compensation. A better response is to request a budget, consider a temporary variation, and record the decision.
Traps
- Confusing arrears with legal default and skipping required notices.
- Ignoring a hardship request because the borrower is already in arrears.
- Using pressure or threats in collections.
- Failing to tell the borrower about the dispute scheme.