(d) the credit provider’s reasonable enforcement expenses;
(e) the expenses reasonably incurred by the credit provider in connection with the possession and sale of the mortgaged goods.
Notice of amount credited and other matters
(9) The credit provider must give the debtor or mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale, the amount credited to the debtor or mortgagor and the amount required to pay out the credit contract or the amount due under the guarantee.
Offence—credit provider
(10) A credit provider that contravenes a requirement of this section commits an offence.
Criminal penalty: 50 penalty units.
Strict liability offence
(11) Subsection (10) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
86 Compensation to debtor or mortgagor
(1) The court, on application by the debtor or mortgagor, may order a credit provider to credit the debtor or mortgagor with a payment, fixed by the court, exceeding the net proceeds of sale if it is not satisfied that the credit provider sold the goods as soon as reasonably practicable (or at such other time as the credit provider and debtor or mortgagor agreed) for the best price reasonably obtainable.
(2) On application by the debtor or mortgagor, the mortgagee under any prior mortgage to which the goods are subject or the mortgagee under any subsequent mortgage of which the credit provider has notice, the court, if not satisfied that the credit provider complied with section 85, may make an order requiring the credit provider to compensate the debtor or mortgagor or the relevant mortgagee for any loss suffered as a result.
(3) The onus of proving that section 85 was complied with is on the credit provider.
Subdivision B—Ending of reverse mortgage by credit provider receiving value of reverse mortgaged property
86A Application of this Subdivision
(1) This Subdivision applies in relation to a credit contract for a reverse mortgage and a mortgage securing the debtor’s obligations under the contract if:
(a) the debtor’s accrued liability (whether or not due and payable) under the contract is more than the amount (the adjusted market value) worked out under subsection (2) for the reverse mortgaged property; and
(b) the credit provider receives an amount at least equal to the adjusted market value for the reverse mortgaged property either:
(i) as a payment accepted from the debtor under the credit contract; or
(ii) as proceeds of the sale by the credit provider of the reverse mortgaged property.
(2) The adjusted market value for the reverse mortgaged property is the amount worked out by:
(a) working out the market value of the property in accordance with the regulations (if any); and
(b) adjusting that value in accordance with the regulations (if any).
Regulations for the purposes of paragraph (b) may prescribe different adjustments to be made in different circumstances.
86B Discharge of debtor’s obligations under credit contract and discharge of mortgage
(1) The debtor’s obligations under the credit contract are discharged by force of this subsection.
(2) The mortgage securing those obligations is discharged by force of this subsection.
Note: This section does not apply in some cases: see section 86E.
86C Credit provider must pay debtor excess of receipt over adjusted market value for reverse mortgaged property
If the amount received by the credit provider exceeds the adjusted market value for the reverse mortgaged property, the credit provider must pay the excess to the debtor.
Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124.
Note 2: This section does not apply in some cases: see section 86E.
86D Credit provider must not demand or accept further payments
(1) The credit provider must not:
(a) purport to require payment under the credit contract; or
(b) accept a payment purportedly under the credit contract.
Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124.
Note 2: This section does not apply in some cases: see section 86E.
(2) To avoid doubt, subsection (1) does not apply to the payment (if any) that is described in subparagraph 86A(1)(b)(i) and caused this Subdivision to apply.
86E Cases in which sections 86B, 86C and 86D do not apply
Sections 86B, 86C and 86D do not apply if:
(b) the debtor engaged in fraud, or made a misrepresentation, relating to the reverse mortgage before, at or after the time the credit contract was made; or
(c) circumstances prescribed by the regulations exist.
86F Relationship between this Subdivision and other provisions
This Subdivision does not limit any of the other provisions of this Division.
Subdivision C—Notice of first default in payment
87 One‑off notice to be given of first default in payment
Which defaults does this section apply to?
(1) This section applies if:
(a) a debtor authorises payment of an amount for a credit contract (other than a low cost credit contract) by direct debit; and
(b) default occurs; and
(c) it is the first occasion the default occurs.
(1A) This section also applies if:
(a) a debtor under a low cost credit contract is in default in relation to the payment of an amount under the contract; and
(b) it is the first occasion when the debtor is in default in relation to such a payment.
Offence
(2) The credit provider must give the debtor, and any guarantor, a notice, complying with this section, within 14 days of the default occurring.
Criminal penalty: 50 penalty units.
(3) The notice must contain the information prescribed under the regulations.
(4) Subsection (2) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
Other notice requirements not affected
(5) This section does not affect any other requirement under this Code to give a notice.
Division 2—Enforcement of credit contracts, mortgages and guarantees
88 Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor
Enforcement of credit contract
(1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:
(a) the debtor is in default under the credit contract; and
(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period; and
(d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the debtor;
(ii) a practising lawyer representing the debtor;
(iii) a person with a power of attorney relating to the debtor’s financial affairs.
Criminal penalty: 50 penalty units.
Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94.
Enforcement of mortgage
(2) A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless:
(a) the mortgagor is in default under the mortgage; and
(b) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period.
(d) if the mortgage secures an obligation under a credit contract for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the mortgagor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the mortgagor;
(ii) a practising lawyer representing the mortgagor;
(iii) a person with a power of attorney relating to the mortgagor’s financial affairs.
Criminal penalty: 50 penalty units.
Note: If a mortgagor has given a credit provider a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see section 94.
Default notice requirements
(3) A default notice must contain a prominent heading at its top stating that it is a default notice and specify:
(a) the default; and
(b) the action necessary to remedy the default; and
(c) a period for remedying the default; and
(d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property may begin if the default has not been remedied; and
(e) that repossession and sale of mortgaged property may not extinguish the debtor’s liability; and
(f) the information prescribed by the regulations about the debtor’s right to:
(i) give a hardship notice under section 72; or
(ii) give a postponement request under section 94; or
(iii) make an application to the court under sections 74 and 96; and
(g) the information prescribed by the regulations about:
(i) the AFCA scheme; and
(ii) the debtor’s rights under that scheme; and
(h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and
(i) that, under the Privacy Act 1988, a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and
(j) any other information prescribed by the regulations.
Combined notices
(4) Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor.
When default notice not required
(5) A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if:
(a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or
(b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or
(c) the court authorises the credit provider to begin the enforcement proceedings; or
(d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property.
Non‑remedial default
(6) If the credit provider reasonably believes that a default is not capable of being remedied:
(a) the default notice need only specify the default; and
(b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice.
(7) Subsections (1) and (2) are offences of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
Some defaults are not a basis for a default notice
(7A) So far as a notice purporting to be a default notice relates to an alleged default under a credit contract for a reverse mortgage that is an event described in subsection 18A(3), the notice is not a default notice for the purposes of any of the following provisions:
(a) subsections (1) and (2) of this section;
(b) section 93.
Note: This has the effect that:
(a) if the credit provider begins enforcement proceedings relating to the alleged default the credit provider will contravene subsection (1) or (2) of this section (unless subsection (5) of this section applies); and
(b) section 93 will affect the operation of an acceleration clause on the basis of the alleged default.
(7B) To avoid doubt, subsection (7A) does not affect the status of the notice as a default notice for the purposes of section 89, 94 or 95.
Other law about mortgages not affected
(8) This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section.
Note: By virtue of subsection 183(2), a notice may contain information required to be given under other legislation or be included in a notice given under other legislation.
89 Defaults may be remedied
(1) If a default notice under section 88 states that the credit provider intends to take action because the debtor or mortgagor is in default under the credit contract or mortgage, the debtor, mortgagor or guarantor may remedy the default within the period specified in the notice, and the contract or mortgage is then reinstated and any acceleration clause cannot operate.
(2) A debtor, mortgagor or guarantor does not remedy the default if, at the end of the period, the debtor or mortgagor is in default under the credit contract or mortgage because of the breach specified in the notice or because of a subsequent breach of the same type.
89A Effect of hardship notices on enforcement
(1) This section applies if:
(a) a credit provider is required to give a default notice under section 88 before beginning enforcement proceedings; and
(b) before or after the credit provider gives the default notice, the debtor gives the credit provider a hardship notice (the current hardship notice) under section 72; and
(c) either:
(i) in the 4 months before the day the current hardship notice is given, the debtor had not given the credit provider another hardship notice; or
(ii) in that 4‑month period, the debtor had given the credit provider one or more other hardship notices, but the credit provider reasonably believes that the basis on which the current hardship notice was given is materially different from the bases on which the other hardship notices were given.
(2) The credit provider must not begin enforcement proceedings against the debtor unless:
(a) the credit provider has given the debtor a notice under paragraph 72(4)(b), in response to the current hardship notice, stating that the credit provider and debtor have not agreed to change the credit contract; and
(b) the period of 14 days, starting on the day the credit provider gives the notice under paragraph 72(4)(b), has expired.
Criminal penalty: 50 penalty units.
Note: The credit provider must allow the debtor at least 30 days from the date of the default notice to remedy the default—see section 88. The 14‑day period in subsection (2) may end before, at the same time as, or after the end of the period for remedying the default specified in the default notice.
(3) However, the credit provider may take possession of mortgaged goods if the credit provider reasonably believes that:
(a) the debtor or mortgagor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission; or
(b) urgent action is necessary to protect the goods.
(4) Subsection (2) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
90 Requirements to be met before credit provider can enforce guarantee against guarantor
(1) A credit provider must not, under a guarantee, enforce a judgment against a guarantor unless:
(a) the credit provider has obtained a judgment against the debtor for payment of the guaranteed liability and the judgment remains unsatisfied for 30 days after the credit provider has made a written demand for payment of the judgment debt; or
(b) the court has relieved the credit provider from the obligation to obtain a judgment against the debtor on the ground that recovery from the debtor is unlikely; or
(c) the credit provider has made reasonable attempts to locate the debtor but without success; or
(d) the debtor is insolvent.
Criminal penalty: 50 penalty units.
(2) Subsection (1) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
91 Requirements to be met before credit provider can repossess mortgaged goods
(1) A credit provider must not, without the consent of the court, take possession of mortgaged goods if the amount currently owing under the credit contract related to the relevant mortgage is less than 25% of the amount of credit provided under the contract or $10,000, whichever is the lesser.
Criminal penalty: 100 penalty units.
(2) However, the restriction does not apply:
(a) to a continuing credit contract; or
(b) if the credit provider believes on reasonable grounds that the debtor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission or that urgent action is necessary to protect the goods.
(3) Subsection (1) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.