Your rights after signing a credit contract
Information on protection for consumers under the Code
The Consumer Credit Code provides some level of protection if something unexpected should happen that affects your ability to repay your loan or if the contract is "unfair".
Listed below are some typical concerns and how the code may help.
Q. Can I get out of a loan after I have signed it?
A. If you have only signed an offer to borrow, you can withdraw that offer before the lender accepts it. Upon the lender's acceptance of an offer to borrow, you will not generally be able to get out of the loan.
Q. Who can change a loan contract?
A. There are different ways that a loan contract can be changed:
- Changes by the lender
If the contract allows and the legal requirements for giving notice are followed, lenders can make changes to the contract, such as varying the interest rate or repayments.
- Changes by the borrower
You can ask your lender to agree to change the loan contract. If the lender agrees, the lender should give you a notice showing details of any agreed changes.
If you are unable to repay your loan because you are suffering hardship, such as if you are sick or unemployed, you may be able to get your lender to agree to change your contract. You can contact Consumer Protection for help in dealing with the lender. If you and your lender still cannot agree, you may be able to make an application to the State Administrative Tribunal for an order to vary the contract.
Q. What is a guarantor?
A. A guarantor is someone (for example, a parent or relative) who signs a contract, called a guarantee, with a lender. The guarantor promises to repay the loan if the borrower is unable to pay.
Generally, lenders ask for a guarantor where they believe there is a greater than average risk that the borrower may not be able to make their repayments on the loan.
The guarantor may be asked to list assets, such as a family home, to provide as security for the guarantee. If the borrower is unable to repay the loan, the lender can take possession of, and sell, any of the assets owned by the guarantor that have been listed to repay the debt.
The Consumer Credit Code outlines rules to ensure that guarantors are made fully aware of their potential obligations when signing a guarantee. Guarantors should be given an information notice headed 'Things You Should Know About Guarantees'. Guarantors should also be given a copy of the contract or proposed contract.
In Western Australia, a guarantor can withdraw their guarantee at any time before credit has been provided.
Q. What should I do if I'm late making repayments and the lender threatens legal action?
A. If this happens, the most important thing to remember is to be upfront and honest with the lender. If you explain the problem, you may be able to come to an arrangement with the lender. In most cases, the lender must give you 30 days notice before it can take legal action, which will give you some time to seek advice from a lawyer or financial advisor.
If you become ill, unemployed or experience genuine hardship, Consumer Protection may be able to assist you to come to an arrangement with the lender to help you meet your obligations.
Q Where can I get more help with loans?
A. If you have a dispute that you are unable to resolve with the lender, are experiencing genuine hardship with your loan or you think that your contract does not comply with the Code, consider doing the following.
- Ring Consumer Protection on 1300 30 40 54.
- Seek independent advice from a lawyer or financial counsellor.