If you miss a loan repayment, you will be in default on your loan contract. The credit provider must follow a process prescribed in the National Credit Code to provide you with an opportunity to get the loan up to date. The credit provider must send you a default notice allowing you 30 days to fix the default. If you pay the outstanding repayment and any other repayments that fall due within this 30 day period, the credit provider cannot take any further action. However, if you do not get these payments up to date, the credit provider may take steps to repossess your car.
If the loan is secured on your car and you do not get the repayments up to date as demanded in the default notice, the credit provider can repossess your car and sell it. They do not need a court order. The proceeds of sale would then be used to pay out the loan.
If the amount owing is less than 25% of the amount of credit provided or $10,000, whichever is lesser, the credit provider will need to obtain a court order to repossess your car.
If your car is parked on residential premises, the credit provider must approach the occupier and seek written permission to be on the premises to repossess your car, unless there is already a court order authorising entry. However, if your car is on the road, the credit provider can simply tow it away. Therefore, it is advisable to leave your car on residential premises if there is a chance it will be repossessed.
You (or the occupier) will need to decide whether to consent to the credit provider taking your car. If you withhold consent, the credit provider may apply for a court order allowing it to take your car. This may increase enforcement costs. If it is inevitable that you are not going to be able to pay the loan in the future, you need to consider whether there is any benefit in withholding consent.
You still have an opportunity to get your car back, even after it has been repossessed. Within 14 days of the date that your car was repossessed, the credit provider must give you a written notice stating your car's estimated value, any enforcement expenses and a statement of your rights and obligations. The credit provider cannot sell your car for 21 days from the date of this notice. If you pay the arrears and all enforcement expenses within this 21 day period (and any other payments that fall due), or pay out the loan in full, the credit provider must return your car to you.
Alternatively, if you know someone who is willing to buy your car for the estimated value or greater, the credit provider must offer to sell them your car upon receiving a written offer to buy during the 21 day notice period. You may still owe the credit provider a debt even if you introduce a buyer.
If you do not pay the arrears and enforcement expenses within 21 days of the notice after repossession, the credit provider must sell your car as soon as possible for the best price reasonably obtainable. Generally, a trade in value would be deemed sufficient. You can challenge the sale price the credit provider accepted for your car, however you would need evidence of your car's value, such as photographs, photocopies of service books and a valuation. It is a good idea to gather this information prior to repossession.
If there is any money still owing to the credit provider after the sale proceeds have been applied to your loan, a demand for payment of this amount will generally be made. This is often referred to as a shortfall debt.
If you are struggling to meet repayments, you have the right to apply for a hardship variation. Under the National Credit Code, if you have reasonable cause to be unable to meet your repayments (due to illness, unemployment or other reasonable cause) the credit provider can vary the loan contract in a number of ways, including reducing or postponing repayments and extending the period of the contract. You should make your application for a hardship variation in writing, setting out your reasons and proposed changes to the repayments. The credit provider must respond within 21 days of the hardship variation application, stating whether or not they agree to the change in repayments.
As part of its licence requirements, your credit provider must be a member of either the Financial Ombudsman Service (FOS) or the Credit and Investments Ombudsman (CIO). These are free, independent External Dispute Resolution Schemes (EDR Schemes) that resolve disputes between consumers and credit providers. If you are not satisfied with the credit provider’s response, you can apply to FOS or CIO to resolve your dispute.