Solving disputes with creditors


Make a complaint to the creditor

Every credit licensee must have a process to handle complaints (s 47(j) National Consumer Credit Protection Act 2009 (Cth) (“NCCP Act”)).

A consumer should first complain to the creditor. If that fails, in order to produce a reasonable outcome, a complaint can be made to a dispute resolution scheme.

External dispute resolution (ombudsman services)

A credit licensee must be a member of an ombudsman external dispute resolution (EDR) service. The Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) are the two ombudsman services.

For consumers, complaining to FOS or CIO is free. Although their rules differ, both services are intended to provide an easily accessible method for unrepresented consumers to have their disputes heard and determined by a fair and independent decision-maker. Decisions made by FOS or CIO are binding on the creditor but not on the consumer. If the consumer doesn’t agree with the decision, they can take their case to a court (seeGoing to court”).

To find out whether your credit provider is a member of FOS or CIO, or to lodge a dispute (disputes can be lodged online with both services), contact FOS or CIO directly.

Under both the Terms of Reference of the Financial Ombudsman Service and the Rules of the Credit Ombudsman Service, once a dispute is lodged, the member credit provider must not (unless FOS or CIO agrees in writing):

commence legal proceedings against the consumer in relation to any aspect of the dispute;

continue legal proceedings it had already commenced when the dispute was lodged except to the minimum extent necessary to preserve its legal rights; or

take any action to recover a debt that is the subject of a dispute, protect assets securing the debt or assign the debt while FOS or CIO is dealing with the dispute.

Going to court

Disputes arising in Victoria under the NCCP Act can be dealt with by the Federal Court or the Federal Circuit Court, or the Supreme, County or Magistrates’ Court of Victoria.

For some applications under the National Credit Code (NCC), the applicant can choose to have their proceeding dealt with as a “small claims proceedings” in the Magistrates’ or Federal Circuit Court. Small claims proceedings are conducted in a more informal manner, without regard to legal forms and technicalities, and without lawyers (except with the court’s permission). In addition, there is a presumption in small claims proceedings that the court will not award legal costs against the unsuccessful party.

The details of the national jurisdictional framework are set out at division 2 of part 4–3 of the NCCP Act. Section 199 lists causes of action that may be brought within the small claims jurisdiction.

Given the broad jurisdiction of EDR schemes to deal with consumer credit disputes, it is unusual for a consumer to issue or defend proceedings in a court when EDR is available (seeExternal dispute resolution (ombudsman services)”).